UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2010

[] 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: 000-53213

SINOCOM PHARMACEUTICAL, INC

 (Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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.  [ X ] Yes   [ ] No

Indicate by check mark whether the registrant is a large accelerated 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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

          [   ] Yes   [ X ] No

As of March 31, 2010, the Issuer had 71,416,660 shares of common stock issued and outstanding.

PART I-FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

The consolidated financial statements of Sinocom Pharmaceutical, Inc. (the "Company" or the “Registrant), a Nevada corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission.  Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal years ended December 31, 2009 and 2008, and notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the Securities and Exchange Commission on March 31, 2010.

2

SINOCOM PHARMACEUTICAL, INC

CONSOLIDATED FINANCIAL STATEMENTS

PERIOD ENDED MARCH 31, 2010

3

4

5

6

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

7

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

8

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Note 1 - ORGANIZATION

Sinocom Pharmaceutical, Inc. (“Sinocom” or “Company”) was formed on September 13, 2007 in the State of Nevada.  The Company was originally incorporated as Tiger Acquisitions, Inc. and changed its name to Sinocom on February 26, 2009.  Through a Share Exchange, Rolling Rhine Holdings, Ltd and its wholly- owned subsidiaries, China Zhongxi Yao Group Ltd and Anqing Zhongxi Yao Ltd, became wholly-owned subsidiaries of the Company.  Rolling Rhine was incorporated in December 2007, under the laws of the British Virgin Islands as a holding company for the purposes of owning 100% of China Zhongxi Yao Group Ltd.  Rolling Rhine formed China Zhongxi Yao Group Limited, a Hong Kong company, for the purpose of owning 100% of the stock of Anqing Zhongxi Yao Ltd.  Anqing Zhongxi Yao Ltd, formed in December 1997, is organized under the laws of the People’s Republic of China (“PRC”).   

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company's functional currency is the Chinese Renminbi, however, the accompanying consolidated financial statements have been translated and presented in United States Dollars.

In 2008, Rolling Rhine and its wholly-owned subsidiary, China Zhongxi Yao Group Limited, entered into and consummated an agreement and plan of merger with Anqing Zhongxi Yao Ltd, a PRC corporation.  Rolling Rhine Holdings Limited was the surviving entity.  In substance, the agreement is a recapitalization of Anqing Zhongxi Yao Ltd’s capital structure.

On January 20, 2009, Sinocom entered into an Exchange Agreement with Rolling Rhine Holdings, Ltd and its shareholders.  Upon the closing of the Share Exchange on February 20, 2009, the shareholders of Rolling Rhine delivered 300,000 shares of common stock of Rolling Rhine, representing all of its issued and outstanding common stock to Sinocom in exchange for 67,131,660 shares of common stock of Sinocom.

The Share Exchange is being accounted for as a “reverse merger” since the stockholders of Rolling Rhine own a majority of the outstanding shares of Sinocom’s common stock immediately following the Share Exchange.  Under accounting principles generally accepted in the United States, the share exchange is considered to be a capital transaction in substance, rather than a business combination. Thus the share exchange is equivalent to the issuance of stock by Rolling Rhine for the net monetary assets of Sinocom, accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the share exchange was identical to that resulting from a reverse acquisition, except no goodwill was recorded. Under reverse takeover accounting, the post reverse acquisition comparative historical financial statements of the legal acquirer, Sinocom, are those of the legal acquiree, Rolling Rhine, which is considered to be the accounting acquirer, and thus represent a continuation of the financial statements of Rolling Rhine. Share and per share amounts stated have been retroactively adjusted to reflect the merger. The accompanying financial statements present the historical financial condition, results of operations and cash flows of the operating company prior to the recapitalization.

9

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Translation Adjustment

As of March 31, 2010 and December 31, 2009, the accounts of the Company were maintained, and its financial statements were expressed, in Chinese Yuan Renminbi (“CNY”). Such financial statements were translated into U.S. Dollars (“USD”) in accordance with the Foreign Currency Matters Topic of the FASB Accounting Standards Codification (“ASC 830”), with the CNY as the functional currency. According to ASC 830, all assets and liabilities were translated at the current exchange rate, stockholders’ equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the FASB Accounting Standards Codification (“ASC 220”), as a component of shareholders’ equity.  Transaction gains and losses are reflected in the income statement.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties

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, 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.

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.

10

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. At March 31, 2010 and December 31, 2009, there were no contingencies which required a loss provision.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits and certificates of deposit.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable.   Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.  Reserves are recorded primarily on a specific identification basis.  There were no allowances for doubtful accounts as of March 31, 2010 and December 31, 2009, respectively.

Inventories

Inventories are valued at the lower of cost (determined on a weighted average basis) or market. As of March 31, 2010 and December 31, 2009, inventory consisted of finished goods valued at $2,416,201 and $2,120,516, respectively.

Property, Plant & Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

 At March 31, 2010 and December 31, 2009, Property, Plant & Equipment consist of the following:

The depreciation expense was $16,797 and $23,611 for the three months ended March 31, 2010 and 2009, respectively.

11

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Intangible Assets

Intangible assets are amortized using the straight-line method over their estimated period of benefit. Management evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. No impairments of intangible assets have been identified during any of the periods presented. All of the Company’s intangible assets are subject to amortization with estimated lives of:

As of March 31, 2010 and December 31, 2009, the components of finite-lived intangible assets are as follows:

Amortization expense was $138,169 and $0 for the three months ended March 31, 2010 and 2009, respectively.

The estimated future amortization expenses related to intangible asset as of March 31, 2010 are as follows:

Long-Lived Assets  

Effective January 1, 2002, the Company adopted the Property, Plant, and Equipment Topic of the FASB Accounting Standards Codification (“ASC 360”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations for a Disposal of a Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of March 31, 2010, there were no significant impairments of its long-lived assets.

12

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Fair Value of Financial Instruments

The Financial Instrument Topic of the FASB Accounting Standards Codiciation (“ASC 825” requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with the Revenue Recoginition Topic of the FASB Accounting Standards Codification (“ASC 605”). Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

Stock-Based Compensation

The company accounted for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating expected dividends. In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be impacted. SFAS No. 123(R) was superseded by the Compensation – Stock Compensation Topic of the FASB Accounting Standards Codification (“ASC 718”).

Advertising

Advertising expenses consist primarily of costs of promotion for corporate image and product marketing and costs of direct advertising. The Company expenses all advertising costs as incurred.   

Income Taxes

The Statement of Financial Accounting Standards, No. 109, “Income Taxes” requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred taxes to the amount expected to be realized.

In July 2006, the FASB released FASB interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109,” (FIN No. 48).  FIN No. 48 clarifies the accounting and reporting for uncertainties in income tax law.  This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.  This Statement is effective for fiscal years beginning after December 15, 2006. As a result of implementing FIN No. 48, there have been no adjustments to the Company’s financial statements. SFAS No. 109 and FIN No 48 were superseded by the Income Taxes Topic of the FASB Accounting Standards Codification (“ASC 740”) in September 2009.

13

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Basic and Diluted Earnings per Share

Earnings per share are calculated in accordance with the Earnings Per Share Topic of the FASB Accounting Standards Codification (“ASC 260”). Net income per share for all periods presented has been restated to reflect the adoption of ASC 260. Basic net income per share is based upon the weighted average number of common shares outstanding. Diluted net income per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Statement of Cash Flows

In accordance with the Statement of Cash Flows Topic of the FASB Accounting Standards Codification (“ASC 230”), cash flows from the Company’s operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of whom are in China. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Recent Accounting Pronouncements

The Derivatives and Hedging Topic of the FASB Accounting Standards, Codification (“ASC 815”) permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Company’s first fiscal year that begins after September 15, 2006.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment to FASB Statement No. 140.” SFAS No. 156 requires that an entity recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a service contract under certain situations. The new standard is effective for fiscal years beginning after September 15, 2006. SFAS No. 156 was superseded by the Transfer and Servicing Topic of the FASB Accounting Standards

14

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Codification (“ASC 860”). The adoption of this new standard did not have a material impact on the Company’s financial position, results of operations or cash flows.

In September, 2006, FASB issued SFAS No. 157, “Fair Value Measurements.”  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements.  This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute.  Accordingly, this Statement does not require any new fair value measurements.  However, for some entities, the application of this Statement will change current practice.  This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  SFAS No. 157 was superseded by the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification (“ASC 820”). The adoption of this Statement had no material impact on the Company’s results.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB 108”).  SAB 108 was issued to provide interpretive guidance on how the effects of the carryover reversal of prior year misstatements should be considered in quantifying a current year misstatement. The provisions of SAB 108 are effective for the Company for its December 31, 2006 year-end.  The adoption of SAB 108 had no impact on the Company’s consolidated financial statements.

In February, 2007, FASB issued SFAS 159, ‘The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.”  This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments.  This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. SFAS No. 159 was superseded by the Financial Instruments Topic of the FASB Accounting Standards Codification (“ASC 825”). The adoption of this Statement had no impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-Controlling Interests in Consolidated Financial Statements.”  This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  SFAS No. 160 is effective for the Company’s fiscal year beginning October 1, 2009. SFAS No. 160 was superseded by the Consolidation Topic of the FASB Accounting Standards Codification (“ASC 810”). Management is currently evaluating the effect of this pronouncement on financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.”  The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows.  It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  

The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133: and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows.  SFAS No. 161 was superseded by the Derivative and Hedging Topic of the

15

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

FASB Accounting Standards Codification (“ASC 815”). Management is currently evaluating the effect of this pronouncement on financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.”  This Statement will provide a framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities.  With the issuance of SFAS No. 162, the GAAP hierarchy for nongovernmental entities will move from auditing literature to accounting literature. SFAS No. 162 was superseded by the Generally Accepted Accounting Principles Topic of the FASB Accounting Standards Codification (“ASC 105”).

In June 2008, the FASB ratified EITF No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF No. 07-5”). EITF No. 07-5 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF No. 07-5 is effective for fiscal years beginning after December 15, 2008. We adopted EITF No. 07-5 effective January 1, 2009. EITF No. 07-5 was superseded by the Derivatives and Hedging Topic of the FASB Accounting Standards Codification (“ASC 815”). The adoption of ASC 815 has no impact on our financial statements.

In April 2009, the Financial Accounting Standards Board (“FASB”) issued the following new accounting standards:

16

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

These standards are effective for periods ending after June 15, 2009. We are evaluating the impact that these standards will have on our consolidated financial statements.

In June 2009, the FASB issued amended standards for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether

a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards are effective for us beginning in the first quarter of fiscal year 2010 and we are currently evaluating the impact that adoption will have on our consolidated financial statements.

In June 2009, the FASB issued ASC 855 (previously SFAS No. 165, Subsequent Events), which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or available to be issued. It is effective for interim and annual periods ending after June 15, 2009. There was no material impact upon the adoption of this standard on the Company’s consolidated financial statements.

On July 1, 2009, the Company adopted Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168 - The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01 re-defines authoritative GAAP for nongovernmental entities to be only comprised of the FASB Accounting Standards CodificationTM (“Codification”) and, for SEC registrants, guidance issued by the SEC.  The Codification is a reorganization and compilation of all then-existing authoritative GAAP for nongovernmental entities, except for guidance issued by the SEC.  The Codification is amended to effect non-SEC changes to authoritative GAAP.  Adoption of ASU No. 2009-01 only changed the referencing convention of GAAP in Notes to the Condensed Consolidated Financial Statements.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009. There was no material impact upon the adoption of this standard on the Company’s consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Company’s fiscal year 2012); early adoption is permitted.  The Company is currently evaluating the impact of adoption.

17

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.

Note 3 – TRADE DEPOSITS AND ADVANCES

Trade deposits represents amount held by pharmacy agencies. As of March 31, 2010 and December 31, 2009, the Company had paid $4,834,541and $0 as trade deposits respectively.

Note 4 – DUE TO RELATED PARTY

The Company has payables due to a related party.  As of March 31, 2010 and December 31, 2009, due to related party were $117,839 and $0, respectively.  

Note 5 – COMPENSATED ABSENCES

Regulation 45 of the local labor law of the People’s Republic of China (“PRC”) entitles employees to annual vacation leave after 1 year of service.  In general, all leave must be utilized annually, with proper notification.  Any unutilized leave is cancelled.

Note 6 - INCOME TAXES

Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) through December 31, 2007 is at a statutory rate of 33%, which is comprised of 30% national income tax and 3% local income tax.  As of January 1, 2008, the EIT is at a statutory rate of 25%.

The following is a reconciliation of income tax expense for the three months ended March 31, 2010 and 2009:

Due to the uncertainty surrounding the realization of the favorable U.S. tax attributes in future tax returns, we continue to record a full valuation allowance against our otherwise recognizable U.S. net deferred tax assets as of March 31, 2010 and December 31, 2009.

Note 7 – COMMITMENTS & CONTINGENCIES

The Company has entered into a land lease for 50 years through April 30, 2059. Terms of lease call for 5 payments at the beginning of each ten year period.  The total minimum obligation under the lease total $ 7,228,825 with second payment due May 1, 2019. Any breach by either party to the lease calls for a penalty payment of approximately $146,283 plus any economic loss incurred. The first payment has been capitalized

18

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

and is being amortized over ten years. Amortization expense for the three months ended March 31, 2010 and 2009 totaled $36,622 and $0, respectively.

Note 8 – STATUTORY RESERVE

In accordance with the laws and regulations of the PRC, a wholly-owned Foreign Invested Enterprises income, after the payment of the PRC income taxes, shall be allocated to the statutory surplus reserves and statutory public welfare fund. Prior to January 1, 2006 the proportion of allocation for reserve was 10 percent of the profit after tax to the surplus reserve fund and additional 5-10 percent to the public affair fund. The public welfare fund reserve was limited to 50 percent of the registered capital.  Effective January 1, 2006, there is now only one fund requirement. The reserve is 10 percent of income after tax, not to exceed 50 percent of registered capital.

Statutory Reserve funds are restricted for set off against losses, expansion of production and operation or increase in register capital of the respective company. Statutory public welfare fund is restricted to the capital expenditures for the collective welfare of employees. These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of March 31, 2010 and December 31, 2009, the Company had allocated $7,617,885 and $7,617,885, respectively, to these non-distributable reserve funds.

Note 9 - OTHER COMPREHENSIVE INCOME

Balances of related after-tax components comprising accumulated other comprehensive income, included in stockholders’ equity, at March 31, 2010 and December 31, 2009, are as follows:

Note 10 - CURRENT VULNERABILITY DUE TO CERTAIN RISK FACTORS

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, 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.

19

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Note 11 – MAJOR CUSTOMERS AND CREDIT RISK

No customer accounted for more than 10% of accounts receivable at March 31, 2010 and December 31, 2009.  No customer accounted for greater than 10% of sales for the three months ending March 31, 2010 and 2009.  No vendor accounted for more than 10% of purchases for the three months ending March 31, 2010 and 2009. At March 31, 2010 and December 31, 2009, no vendor accounted for more than 10% of accounts payable.

Note 12 – RELATED PARTY TRANSACTIONS

Facility swap

The Company did a facility swap with its CEO on August 20, 2008. Under the facility swap agreement, the Company agrees to swap all the benefits and costs associated with its office building with those of a warehouse and an office building owned by the CEO. The agreement will expire on July 31, 2019.

Inter-company loans

There are inter-company loans without any interest payable between parent companies and subsidiaries. The loans payable to Sinocom from China Zhongxiyao and Rolling Rhine Holdings Limited as at March 31, 2010 are $11,837,630 and $320,167 respectively. The loan payable to China Zhongxiyao Limited from Anqing Zhongxiyao Limited as at March 31, 2010 is $3,244,577. The loan payable to Rolling Rhine Holdings Limited from China Zhongxiyao Limited as March 31, 2010 is $478,525.

Note 13 – SERIES A CONVERTIBLE PREFERRED STOCK

Between May 29, 2007 and June 4, 2007, the Company raised $725,000 from two investors in a private placement of its Series A Convertible Preferred Stock at a purchase price of $10.00 per unit, for a unit consisting of one share of Preferred Stock and one Warrant.

On October 28, 2009, the Company entered into a Series A Preferred Stock Purchase Agreement (the” Agreement”) with key shareholders and some investors. The Company authorized and issued to Investors $15,000,000 of the Company’s convertible, redeemable Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”) at a price of $0.9465 per share. The Preferred shares are convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) constituting 18.16% of the outstanding shares of Common Stock of the Company, determined on a fully-diluted basis.  The company incurred offering cost of $2,185,286, which are subtracted from the total proceeds and against additional paid in capital.

Holders of Series A Preferred Stock will be entitled to receive cash dividends, which will accrue at the rate of 5.0% per annum for the twelve month period following the issue date and at the rate of 10.0% per annum for each twelve month period thereafter.  The Series A Preferred Stock ranks, with respect to dividend rights and rights upon liquidation, senior to the Company’s common stock. The company paid dividend in amount of $184,932 for the three months ended March 31, 2010 and $57,534 through December 31, 2009, respectively

Assuming a valuation of $0.969 per share and the conversion of the Series A Preferred Stock into 15,847,099 shares of common stock at an effective conversion price of approximately $0.9465 per share which is obtained by dividing the amount to be allocated to the BCF by the 15,847,099 common shares, pro forma net income per common share would be:

20

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(unaudited)

Management estimated a valuation of $0.9690 per share by using the Discounted Cash Flow (DCF) Method with the following assumptions.

The DCF method resulted in a value of approximately $11265 million, discounted by the 25% DLOM resulted in an adjusted value of approximately $84.5 million, then divide by the 15,847,099 common shares assuming the conversion of preferred stock to arrive at the value of approximately $0.969 per share.

The Company has previously recorded this deemed dividend at December 31, 2009.

Note 14 – SUBSEQUENT EVENTS

For the three months ended March 31, 2010, the Company has evaluated subsequent events for potential recognition and disclosure through May 19, 2010, the date of the financial statement issuance.

21

ITEM 2.

 MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS," "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Overview

Sinocom Pharmaceutical, Inc (sometimes hereinafter referred to as “We,”  “Us,” “Our,” or the “Company”) is a Chinese pharmaceutical company engaged in the two complimentary businesses of wholesale distribution of pharmaceuticals and medical supplies, and cultivation and sale of natural herbs. The business involving wholesale distribution of pharmaceuticals and medical supplies was commenced in 1986 as a state-owned enterprise by a predecessor of the Company. The Company commenced operations in 1997 when the state-owned predecessor company was privatized.  These operations currently involve distribution of a portfolio of over 6,200 types of western pharmaceuticals, medical supplies and processed Chinese herbs, to over 4,300 customers including hospitals, clinics, drug stores and sub-distributors covering nine provinces in southeastern China.   The business segment relating to cultivation of natural herbs was commenced by the Company in 2004.  It currently involves ten main species of herbs which are cultivated by approximately 10,000 individual farmers on a plantation base of approximately 15.1 million square meters located primarily in the Da Bie mountain region of Anhui province, PRC.    

Our business operations are based in Anqing, Anhui Province, PRC, and all operations are currently conducted through our wholly-owned subsidiary, Anqing Zhongxi. Yao, Ltd., a PRC corporation.  

History

The Company was incorporated in the State of Nevada on September 13, 2007, under the name Tiger Acquisitions, Inc.  It was organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation.

On February 26, 2009, the Company changed its name to Sinocom Pharmaceutical, Inc.

On February 20, 2009, the Company completed a share exchange transaction with Rolling Rhine Holdings, Ltd., a British Virgin Islands corporation (“Rolling Rhine”), pursuant to which the shareholders of

22

Rolling Rhine transferred 300,000 shares of Rolling Rhine, representing all of the issued and outstanding shares of common stock in Rolling Rhine, to the Company in exchange for the issuance of an aggregate of 67,131,660 shares of the Company’s common stock.  As a result of the share exchange transaction, Rolling Rhine Holdings, Ltd., and its subsidiaries, China Zhongxi Yao Group Limited, and Anqing Zhongxi Yao, Ltd., became wholly-owned subsidiaries of the Company.

Rolling Rhine was incorporated in December, 2007, under the laws of the British Virgin Islands, and China Zhongxi was incorporated in December, 2007, under the laws of Hong Kong. China Zhongxi was formed for the purpose of owning 100% of the capital stock of Anqing Zhongxi, and Rolling Rhine was formed as a holding company for the purposes of owning 100% of the capital stock of China Zhongxi.

Corporate Structure

The Chart below depicts the Company’s current corporate structure.  The Company owns 100% of the capital stock of Rolling Rhine and has no other direct subsidiaries.  Rolling Rhine owns 100% of the capital stock of China Zhongxi and has no other direct subsidiaries. China Zhongxi owns 100% of the capital stock of Anqing Zhongxi and has no other subsidiaries.  

↓ 100%  

↓ 100%

↓ 100%

Industry Overview

Pharmaceutical Distribution

In China, the business sector of distribution of pharmaceutical products is highly fragmented, with over 9,000 separate distributors in operation in 2007.  Because of this fragmentation, the three largest pharmaceutical distributors in China accounted for only approximately 20% of the market, and the ten largest distributors accounted for only approximately 35% of the market. The fragmentation of the industry has resulted in intense competition and an inefficient supply chain for distribution of most pharmaceutical products without the advanced logistics services which exist in more developed markets.

In recent years there has been a trend toward consolidation in the pharmaceutical distribution sector in China as a result of (i) intense competition from the fragmented industry, (ii) the introduction of GSP requirements, (iii) increased PRC regulatory requirements, and (iv) continuing price controls.

Since 2005, China has opened certain segments of the market for manufacture, distribution and sale of pharmaceutical products to selected foreign investors.   These foreign distributors have entered the China

23

market using advanced logistics and management systems, and have intensified the level of competition in the market in China.  

Cultivation and Sale of Natural Herbs

Traditional Chinese Medicine (TCM), including herbal treatments, has been used in China for more than 2,000 years.  Many Chinese people consider TCM’s to be safe and efficacious, while often causing fewer side effects than Western style medicine.  TCM’s are marketed both as prescriptions and over the counter, with a majority of TCM’s consisting of either a mixture of herbs, extracts from a single plant, or purified chemicals from herbs.  The latter two types are modernized TCM’s with multiple formulations.  

Approximately 60% of the herbs used in TCM are cultivated, mostly on a small scale, by individual farmers.  As a result, the market for sale of raw herbs is fragmented and competitive, and is limited to specific regions across China.  The four major markets in China for distribution of raw herbs are Anhui BoZhou, Henan YuZhou, Henan HuiXian, and Hebei AnGuo.  The largest Chinese herb market is the Anhui BoZhou market where the Company sells its herbs.  

In 2006, approximately 1,000,000 hectares of arable land in China was used for herb plantation

Current Operations

Pharmaceutical Products

We currently act as a distributor of over 6,200 Western medicine and TCM pharmaceutical products and medical supplies, and are the exclusive distributor of over 250 pharmaceutical products in the region of southeastern China where we operate. The pharmaceutical products include both over-the-counter and prescription pharmaceuticals, as well as certain medical supplies such as syringes and hospital trays.  We do not manufacture or produce any of the products we distribute. The manufacturer of each of the pharmaceutical products we distribute must follow procedures established by China’s State Food and Drug Administration (“SFDA”) in order to obtain approval for manufacture or distribution of its products in the PRC.   

Historically, TCM consisted primarily of mixtures of dried herbs and, in some cases, animal parts and minerals. These mixtures would be boiled and simmered at home to create a medicinal tea or soup. These liquid concoctions were inconvenient to prepare and take, and their dosage and quality were inconsistent due to varied methods of preparation and differences in the quality of ingredients. Despite these characteristics, we believe that consumers in China perceive TCM products to have a superior safety profile compared to western pharmaceuticals and to be more effective in treating chronic and frequently occurring illnesses. In recent decades, Chinese pharmaceutical manufacturers have applied modern production technologies to produce TCM formulated products with consistent quality and in a variety of forms such as tablets, capsules and powders, which we refer to as modernized TCM.

The following table summarizes the principal pharmaceutical products which we currently market and the medical uses of those products:   

24

Herbs

We are a distributor of unprocessed natural herbs which we sell in bulk to our customers. A portion of these herbs are purchased from third parties and a portion are grown on our own plantations located in the central plains of Yuexi County, Anqing City, Anhui Province, PRC, where the climatic and soil conditions are well suited for growing natural herbs.

Our plantations encompass approximately 15.1 million sq m of arable land. The land where our plantations are located is owned collectively by all farmers living in the surrounding area. The local Villagers’ Committees and local governments enter into leasing agreements with us on behalf of the farmers who own the land collectively and the leasing term for the land ranges from 10 years to 50 years.

The local Villagers' Committee assigns farmers to work on our plantations and we do not directly employ those farmers. We specify the types of natural herbs to be cultivated and the farmers purchase seeds and provide the labor to carry on all cultivating activities, including seeding, sowing, fertilizing, watering and harvesting.  The farmers use only organic fertilizers on our plantations.  No pesticides or chemical fertilizers are used.

The majority of work on the plantations is performed by hand, although machines have been introduced to modernize the plantation process in certain areas.  We provide the farmers with technical assistance and training including cultivation know-how and picking techniques and we also supervise the plantations to ensure the quality of its output. We purchase the natural herbs from the local farmers after they are harvested at a price which reflects their labor and raw material costs.

The herbs are harvested each year in the fall, which is 4^th quarter of the year.  Prior to harvest, our sales team informs customers regarding the schedule for harvesting and the forecast yield and accepts orders in advance. After harvest, the herbs are checked for quality and cleanliness and are then initially stored in our warehouse in the form in which they are harvested.   The herbs are sold to customers in bulk in the form in which they are harvested, and any processing work is subsequently done by the customers.  

We manage our inventory of herbs on a first-in-first-out basis.  Accordingly, in our warehouse, the herbs are separated based upon the batch in which they were purchased, and are sold to customers on the same basis.  We maintain a fleet of trucks for delivery of pharmaceutical products, and after the herbs are harvested and stored in our warehouse, we use the same trucks to complete delivery of the herbs to our customers.  In most cases, this allows us to complete delivery of the herbs to our customers within 24 hours after they leave our warehouse.  

The following table summarizes the natural herbs which we currently grow and the uses of those herbs in TCM medical uses of those products:   

25

26

Growth Strategies

Our strategies for future growth include expanding the size of our natural herb plantation in order to increase production and to broaden our market segment by introducing new types of natural herbs.  In 2010, we plan to expand our plantations to approximately 18.7 million square meters, as compared to approximately 15.1 million square meters in 2009, and to increase the number of herbs we grow from 10 to 13.  Future plans call for continuing to expand the size of our plantations to approximately 28.7 million square meters in 2013 and for increasing the number of herbs we grow to 18.

Our strategy for growth of the natural herb business also includes expanding our warehousing and distribution center and entering the complimentary business of processing natural herbs.  This will allow the Company to capitalize on synergies between its herbal business and its distribution business and provide the market opportunity to increase margins by selling herbs directly to end users instead of selling them to other processors.  These synergies include the fact that the Company’s distribution business allows it to identify TCM end users who will be potential customers for its processed herbs.  In addition, management believes it will be able to take advantage of cost savings because it will be able to use its existing employees and its existing distribution network for distribution of both pharmaceutical products and processed herbs, and will not be required to hire and train additional technical personnel to run both businesses.  Finally, management believes that entering the business of distributing TCM drugs will enable it to collect market feedback and information on the demand for TCM drugs, which will assist in its the selection of herbs to be grown on its plantation.       

Our growth strategies for the distribution business include plans to seek to expand into additional geographic areas by acquiring existing distributors with leading market position and logistic networks in other 2^nd and 3^rd tier cities, further expanding the sales and marketing team to increase coverage, and seeking to obtain exclusive national distribution rights for selected products to further enhance the Company’s margins and competitiveness.  

Results of Operation for Sinocom Pharmaceutical, Inc., for the Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009.  

Results of Operation

27

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the three month periods ended March 31, 2010 and 2009.   

Our financial statements are stated in US Dollars and are prepared in accordance with generally accepted accounting principals of the United States (“GAAP”).

Revenue

Revenue for the three months ended March 31, 2010 was $24,896,351, as compared to revenue of $19,669,619 for the three months ended March 31, 2009, an increase of $5,226,732, or approximately 26.6%.  The increase  in revenue was attributable to both the distribution of pharmaceutical products (for which revenues increased by $4,834,016, or approximately 38.4%, in the three months ended March 31, 2010 as  compared to the same period in 2009, and to sales of cultivated natural herbs (for which revenue increased by $392,716, or approximately 5.5%, in the three months  ended March 31, 2010, as compared to the same period of 2009.    The increase in revenue from sales of cultivated herbs is primarily attributable to the increasing size of our natural herbs plantation.  The increase in revenue from distribution of pharmaceutical products is primarily attributable to the higher sales and marketing effort and the results of PRC's 2009 RMB850 billion Health Reform Plan where major efforts are focused on improving medical care for the rural population (where our distribution business is).

Gross Profit

Cost of Sales increased $3,229,833, or approximately 25.0%, to $16,169,013 for the three months ended March 31, 2010,  as compared to $12,939,180  for the three months ended March 31, 2009,  primarily as a result of higher sales volume. Gross profit for the three months ended March 31, 2010,  increased  $1,996,899, or approximately 29.7%, to $8,727,338 for the three months ended March 31, 2010, as compared to $6,730,439 for three months ended March 31, 2009. The increase in gross profit is attributable to increased gross margin of $ 1,317,864 from distribution of pharmaceutical products to $4,250,973 the three months ended March 31, 2010, as compared to $2,933,109 for three months ended March 31, 2009. Gross margin from sales of cultivated herbs increased by $679,035 to $4,476,365 the three months ended March 31, 2010, as compared to $3,797,330 for three months ended March 31, 2009.

General and Administrative Expenses

For the three months ended March 31, 2010, general and administrative expenses were $1,163,890 as compared to general and administrative expenses of $728,888 for the three months ended March 31, 2009, The increase of $435,002, or approximately 60.0%, was primarily attributable higher sales promotional expenses.

Income From Operations

Income from operations increased $1,561,897, or approximately 26.0%, to $7,563,448 for the three months ended March 31, 2010, as compared to $6,001,551 for the three months ended March 31, 2009,  mainly due to higher distribution sales of pharmaceutical products, and increased cultivated herbs sales.

Net Income

The Company recorded net income of $5,563,455 for the three months ended March 31, 2010,  as compared to net income of  $4,418,050 for the three months ended March 31, 2009. The increase of $1,145,405, or approximately 25.9%, was mainly due to higher distribution sales of pharmaceutical products, and increased cultivated herbs sales.

28

Liquidity and Capital Resources

Total Current Assets & Total Assets

As of March 31, 2010, we had current and total assets of $50,931,105 and $61,368,020, respectively, as compared to current and total assets of $59,152,836 and $61,132,961, respectively, as of December 31, 2009.  The decrease in current assets from December 31, 2009 to March 31, 2010, of $8,221,731 and increase in total assets from December 31, 2009 to March 31, 2010, of $235,059 are primarily attributable to the company's increased land use rights for cultivation of natural herbs and land rights for construction of 62,000 modern warehouse in Anqing.  

Total Current Liabilities

As of March 31, 2010, we had total current liabilities of $13,688,960, as compared to total current liabilities of $18,473,992, as of December 31, 2009.  The decrease in total current liabilities of $4,785,032, or approximately 25.9%, is primarily attributable to lower accounts payable as a result of earlier payment to distribution suppliers for in order to secure better terms. We have also placed $4,834,541 trade deposits in the arrangement.  

Operating Activities

Net cash used by operating activities was $1,335,366 for the three months ended March 31, 2010, as compared net cash provided of $4,149,786 for the three months ended March 31, 2009. The decrease  of $5,485,152, or approximately 132.2%, was primarily as a result of decrease in accounts payable.

Investing Activities

Net cash used by investing activities was $8,551,704 for the three months ended March 31, 2010, as compared to nil for the three months ended March 31, 2009.  The increase of $8,551,704 was attributable to increased land use rights and modern warehouse construction in-progress.  

Financing Activities

Net cash used in financing activities was $562,067 for the three months ended March 31, 2010, as compared to nil for the three months ended March 31, 2009.  The decrease of $562,067 was attributable to cost of issuing preferred stocks in end 2009, and dividends paid to preferred stockholders.

We anticipate that the existing cash and cash equivalents on hand, together with the net cash flows generated from our business activities will be sufficient to meet our working capital requirements for our current level of operations and to sustain our business operations at the current levels for the next twelve months.  

Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Inflation

Inflation has not had a material impact on our business.

Foreign Exchange Rate Risk

29

Although the conversion of the RMB is highly regulated in China, the value of the RMB against the value of the U.S. dollar (or any other currency) may fluctuate and be affected by, among other things, changes in China’s political and economic conditions. Under the currency policy in effect in China today, the RMB is permitted to fluctuate in value within a narrow band against a basket of certain foreign currencies. China is currently under significant international pressures to liberalize this currency policy, and if such liberalization occurs, the value of the RMB could appreciate or depreciate against the U.S. dollar.

While our reporting currency is the U.S. dollar, to date all of our revenue and expenses and all of our assets are denominated in RMB.  As a result, we are exposed to foreign exchange risk because our revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of our RMB revenues and assets as expressed in our U.S. dollar financial statements will decline. The fluctuations in the exchange rate would affect our financial results translated in U.S. dollar terms without giving effect to any underlying change in our business or results of operations.

For reporting purposes, all assets and liabilities were translated at the current exchange rate, stockholders’ equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders’ equity.  Transaction gains and losses are reflected in the income statement.

ITEM 4T.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean the   controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified.  Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives.  

Changes in Internal Control over Financial Reporting

There was no change in the Company's internal control over financial reporting during the period ended March

30

31, 2010, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II-OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated. No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.

ITEM 1A. RISK FACTORS.

Not Applicable.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not Applicable

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

(REMOVED AND RESERVED)

ITEM 5.    

OTHER INFORMATION.

None.

ITEM 6.

EXHIBITS.

(a)

The following exhibits are filed herewith:

31.1

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* filed herewith

31

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.

SINOCOM PHARMACEUTICAL, INC.

By:  

/s/ XueXiang Ai, Chief Executive Officer

Date:  May 19, 2010

By:     /s/ Tuck Wing Pang, Chief Financial Officer

Date:  May 19, 2010

32