TIANYIN PHARMACEUTICAL CO., INC. - FORM 10-Q/A

Attached files

file	filename
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER REQUIRED BY RULE 13A-14/15D-14(A) UNDER THE EXCHANGE ACT - TIANYIN PHARMACEUTICAL CO., INC.	f10q0910a1ex31i_tianyin.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - TIANYIN PHARMACEUTICAL CO., INC.	f10q0910a1ex32i_tianyin.htm
EX-31.2 - CERTIFICATION OF CHIEF ACCOUNTING OFFICER REQUIRED BY RULE 13A-14/15D-14(A) UNDER THE EXCHANGE ACT - TIANYIN PHARMACEUTICAL CO., INC.	f10q0910a1ex31ii_tianyin.htm
EX-32.2 - CERTIFICATION OF ACTING CHIEF ACCOUNTING OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - TIANYIN PHARMACEUTICAL CO., INC.	f10q0910a1ex32ii_tianyin.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No.1)

(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, 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

Tianyin Pharmaceutical Co., Inc.

(Exact name of registrant as specified in its charter)

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

23rd Floor, Unionsun Yangkuo Plaza

No. 2, Block 3, Renmin Road South

Chengdu, P. R. China, 610041

+0086-028-86154737

(Address, including zip code, and telephone number,

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 45 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	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

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 12, 2010, we are authorized to issue up to 50,000,000 shares of Common Stock, par value US$.001 per share and 10,000,000 shares of Series A Preferred Stock, of which 27,986,026 and 1,360,250 respectively are currently issued and outstanding.

EXPLANATORY NOTE

We are filing this Form 10-Q/A for the period ended September 30, 2010 (“Amended Report”) to correct an error in applying FASB Accounting Standards Codification Topic 815-40-15, "Derivatives and Hedging - Contracts in Entity's Own Equity" ("ASC 815-40") by Tianyin Pharmaceutical Co., Inc. (the “Company” or “TPI”) as of September 30, 2009, which would have resulted in the Company classifying and recognizing its Series A and Series B warrants previously issued by the Company as a liability rather than as stockholders' equity. This Amended Report is being filed to amend the disclosures affected by the corrected application of ASC 815-40. This Amended Report may not reflect events occurring after the filing of the Form 10-Q on November 12, 2010, nor does it modify or update those disclosures presented therein, except with regard to the modifications described in this Explanatory Note. As such, this Amended Report continues to speak as of November 12, 2010. Accordingly, this Amended Report should be read in conjunction with the Original Report and our other reports filed with the SEC subsequent to the filing of our Original Report, including any amendments to those filings.

In addition, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as a result of this Amended Report, the certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed and furnished, respectively, as exhibits to the Original Report have been re-executed and re-filed as of the date of this Amended Report and are included as exhibits hereto.

PART I- FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Tianyin Pharmaceutical Co., Inc.

We have reviewed the accompanying consolidated balance sheet of Tianyin Pharmaceutical Co., Inc. (the “Company”) as of September 30, 2010, and the related consolidated statements of operations and comprehensive income for the three months ended September 30, 2010 and 2009, and cash flows for the three months ended September 30, 2010 and 2009. These consolidated financial statements are the responsibility of the Company's management.

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

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

We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the balance sheet of Tianyin Pharmaceutical Co., Inc. as of June 30, 2010, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated September 24, 2010, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of September 30, 2010, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

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

Parsippany, New Jersey

November 12, 2010

(Except for Note 1, 9, 15, 17 and 18 as to which the date is August 22, 2011)

TIANYIN PHARMACEUTICAL CO., INC.

Consolidated Balance Sheets

	September 30,			June 30,
	2010			2010
Assets	(restated)			(restated)
Current assets:
Cash and cash equivalents	$	26,889,203		$	27,009,066
Accounts receivable, net of allowance for doubtful accounts of $427,939		9,171,877			8,185,240
and $421,079 at September 30, 2010 and June 30, 2010, respectively
Inventory		5,218,254			3,588,824
Advance payments		389,220			382,980
Loans receivable		299,400			294,600
Other current assets		172,189			77,283
Total current assets		42,140,143			39,537,993

Property and equipment, net		17,023,433			14,968,822

Intangibles, net		15,297,911			15,232,286

Total assets	$	74,461,487		$	69,739,101

Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	1,523,622		$	1,715,781
Accounts payable – construction related		1,131,717			2,248,849
Short-term bank loans		1,497,000			1,473,000
VAT taxes payable		583,630			658,312
Income taxes payable		916,459			861,614
Other taxes payable		59,801			19,564
Dividends payable		54,857			72,995
Other current liabilities		597,665			429,135
Total current liabilities		6,364,751			7,479,250

Warrants liability		5,006,889			4,733,872
Total liabilities		11,371,640			12,213,122

Equity
Stockholders’ equity:
Common stock, $0.001 par value, 50,000,000 shares authorized,		27,986			27,326
27,986,026 and 27,371,526 shares issued and outstanding at
September 30, 2010 and June 30, 2010, respectively
Series A convertible preferred stock, $0.001 par value 1,360,250 shares		1,360			1,360
issued and outstanding at September 30, 2010 and June 30, 2010,
Respectively
Additional paid-in capital		26,314,898			25,046,388
Statutory reserve		3,732,883			3,732,883
Treasury stock		(111,587	)		(111,587	)
Retained earnings		28,880,566			25,530,906
Accumulated other comprehensive income		3,797,958			2,845,076
Total stockholders’ equity		62,644,064			57,072,352

Noncontrolling interest		445,783			453,627

Total equity		63,089,847			57,525,979

Total liabilities and equity	$	74,461,487		$	69,739,101

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

TIANYIN PHARMACEUTICAL CO., INC.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended
	September 30,
	2010			2009
	(restated)			(restated)
Sales	$	21,950,814		$	13,405,203

Cost of sales		11,139,689			6,349,227

Gross profit		10,811,125			7,055,976

Operating expenses:
Selling, general and administrative		5,987,226			4,117,766
Research and development		257,975			192,490
Total operating expenses		6,245,201			4,310,256

Income from operations		4,565,924			2,745,720

Other income (expenses):
Interest income (expense), net		9,206			(9,560	)
Change in Fair Value of warrants		(273,017	)		(5,176,646	)
Other expenses		-			(39,502	)
Total other income (expenses)		(263,811	)		(5,225,708	)

Income before provision for income taxes		4,302,113			(2,479,988	)

Provision for income taxes		905,439			509,936

Net income		3,396,674			(2,989,924	)

Less: Net loss attributable to noncontrolling interest		(7,844	)		(2,526	)

Net income attributable to Tianyin Pharmaceutical Co., Inc.		3,404,518			(2,987,398	)

Basic earnings per share	$	0.12		$	(0.16	)
Diluted earnings per share	$	0.11		$	(0.11	)

Weighted average number of common shares outstanding
Basic		27,891,488			19,735,790
Diluted		29,945,191			27,516,458

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

TIANYIN PHARMACEUTICAL CO., INC.

Consolidated Statements of Comprehensive Income (Unaudited)

	For the Three Months Ended September 30,
	2010		2009
	(Restated)		(Restated)

Net income		3,396,674		(2,989,924	)

Other comprehensive income
Foreign currency translation adjustment		952,882		35,857

Comprehensive income	$	4,349,556	$	(2,954,067	)

Less: comprehensive income attributable to noncontrolling interest		211,319		5,721

Comprehensive income attributable to Tianyin Pharmaceutical Co., Inc.	$	4,138,237	$	(2,959,788	)

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

TIANYIN PHARMACEUTICAL CO., INC.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended
	September 30,
	2010			2009
	(restated)			(restated)
Cash flows from operating activities:
Net Income	$	3,396,674		$	(2,989,924	)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		314,116			197,037
Change in Fair Value of warrants		273,017			5,176,646
Share-based payments		1,269,170			512,209
Loss on disposal of fixed assets		-			39,502
Changes in current assets and current liabilities:
Accounts receivable		(843,012	)		(1,492,362	)
Inventory		(1,552,067	)		126,979
Other current assets		(93,032	)		419,905
Accounts payable and accrued expenses		(189,572	)		183,242
Accounts payable – construction related		(1,139,900	)		-
VAT taxes payable		(111,405	)		16,025
Income tax payable		40,316			19,054
Other taxes payable		66,462			(433	)
Dividends payable		(18,138	)		-
Other current liabilities		133,153			33,582
Total adjustments		(1,850,892	)		5,231,386

Net cash provided by operating activities		1,545,782			2,241,462

Cash flows from investing activities:
Additions to property and equipment		(1,922,700	)		(525,965	)
Additions to intangible assets – drug		-			(1,891,269	)
Loan receivable		-			(293,220	)

Net cash used in investing activities		(1,922,700	)		(2,710,454	)

Cash flows from financing activities:
Additional paid-in capital		-			2,534,581
Contribution from minority shareholders		-			439,830
Dividends paid		(54,857	)		(499,331	)

Net cash provided by (used in) financing activities		(54,857	)		2,475,080

Effect of foreign currency translation on cash		311,912			(5,435	)

Net increase (decrease) in cash and cash equivalents		(119,863	)		2,000,653

Cash and cash equivalents – beginning		27,009,066			12,352,223

Cash and cash equivalents – ending	$	26,889,203		$	14,352,876

Supplemental schedule of non cash activities
Advance payments exchanged for intangible assets – drug	$	-		$	425,169

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

Note 1 – Organization and Nature of Business

Tianyin Pharmaceutical Inc. (the “Company” or “TPI”), formerly Viscorp, Inc, a public shell company as defined in Rule 12b-2 of the Exchange Act of 1934, was established under the laws of Delaware on August 20, 2002. The accompanying consolidated financial statements include the financial statements of TPI and its subsidiaries. TPI’s primary business is to develop, 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 (the “Share Exchange”). To accomplish the Share Exchange, 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 the time of closing. Following the Share Exchange, Viscorp changed the name to Tianyin Pharmaceutical Inc. The transaction was regarded as a reverse merger whereby Raygere was considered to be the accounting acquirer as its shareholders retained control of TPI 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 date of the Share Exchange, 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 Special Administrative Region 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 of 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 TPI in July 2007.

In June 2009, TPI invested $723,500 to establish a wholly-owned trading subsidiary, Tianyin Medicine Trading Co., Ltd (“Tianyin Medicine Trading” or “TMT”) for sales and distribution of medicine produced by TPI. As of December 31, 2010, the financial results of TMT are consolidated into the consolidated financial statements presented herein.

On August 21, 2009, Sichuan Jiangchuan Pharmaceutical Co., Ltd (“Jiangchuan” or “JCM”) was established by TPI, Sichuan Mingxin Pharmaceutical and an individual investor with raw material pharmaceutical production as its major business. Total registered capital of JCM is $2,934,000, of which TPI accounts for 77%. As of December 31, 2010, registered capital of $1,173,600 has been invested and the results of JCM are consolidated into the consolidated financial statements presented herein.

Note 9 – Income Taxes

Raygere is incorporated in the British Virgin Islands. Under the corporate tax laws of the British Virgin Islands, Raygere is not subject to tax on income or capital gains.

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 a preferential tax treatment as a direct result of opening a production facility in Western China in Sichuan Province. The applicable reduced preferential state Enterprise Income Tax (“EIT”) rate under this policy was 15% until December 31, 2010 and increased to 25% on January 1, 2011. The Company’s TMT subsidiary and JCM partnership, both domestic invested companies, also are taxed at the 25% rate.

As a result of our requirement to restate certain financial results as further described in Footnote 17 below, we have determined that the PRC FEIT law does not require a non-cash gain and/or loss due to fair value changes in the value of warrants to trigger a taxable event. Therefore, we believe that the non-cash gains and/or losses attributed to the reclassification of our warrants should not change the effective tax treatment of our income tax provisions.

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 did not recognize any benefits in the financial statements for nine months ended March 31, 2011.

Note 15 – Earnings Per Share

The Company presents earnings per share (“EPS”) on a basic and diluted basis. Basic earnings per share have been computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted earnings per share has been computed by dividing net earnings plus convertible preferred dividends and interest expense (after-tax) on convertible debt by the weighted average number of common shares outstanding including the dilutive effect of equity securities. The weighted average number of common shares calculated for Diluted EPS excludes the potential common stock that would be exercised under the options and warrants granted to officers because the inclusion of the potential shares from these options and warrants would cause an antidilutive effect by increasing the net earnings per share.

	Three Months Ended September 30,
	2010 (Restated)		2009 (Restated)
Net income attributable to Tianyin Pharmaceutical Co., Inc.	$	3,404,518	$	(2,987,398	)
(numerator for diluted income per share)
Less: Dividend attributable to preferred stockholders		54,857		233,683

Net income attributable to common stockholders		3,349,661		(3,221,081	)
(numerator for basic income per share)

Weighted average common shares
(denominator for basic income per share)		27,891,488		19,735,790

Effect of diluted securities:
Convertible preferred stock		1,276,464		5,504,890
Warrants		777,239		2,275,778

Weighted average common shares
(denominator for diluted income per share)		29,945,191		27,516,458

Basic net income per share	$	0.12	$	(0.16	)
Diluted net income per share	$	0.11	$	(0.11	)

Note 17 – Restatements of 2010 And 2009 Financial Statements

The Company re-evaluated the accounting for its Series A and B warrants (the "Warrants") issued in conjunction with the financing on January 16 and 25, 2008 pursuant to FASB ASC 815-40 and determined that due to certain down round protection clauses, the Warrants could not be indexed to its own stock and as such, should be classified as liability, rather than equity, which would result in a non-cash, non-operational gain or loss. Therefore, the Company restated the consolidated financial statements for the quarters ended September 30, 2010, December 31, 2010 and March 31, 2011 and the comparative prior periods. The Company will also make corresponding revisions to its financial statements for the fiscal year ended June 30, 2010 in the Form 10-K for the fiscal year ended June 30, 2011. The anti-dilutive clauses in the warrants were removed on January 14, 2011.

In order to determine the fair value of TPI’s warrants, the Company engaged a valuation specialist to utilize a market-oriented valuation platform, which was developed using transaction data from secondary trading markets based on empirical data. The restatement resulted in adjustments to the following financial statement line items as of and for the period indicated:

Consolidated Balance Sheets (Unaudited)

	September 30,		September 30,
	2010		2010
	(As reported currently)		(As reported originally)		Effect of change
Liabilities

Warrants liability	$	5,006,889		-		5,006,889

Total liabilities		11,371,640		6,364,751		5,006,889

Equity

Additional paid-in capital		26,314,898		30,891,906		(4,577,008	)
Retained earnings		28,880,566		29,310,447		(429,881	)
Total stockholders’ equity		62,644,064		67,650,953		(5,006,889	)

Total equity		63,089,847		68,096,736		(5,006,889	)

Consolidated Statements of Operations (Unaudited)

	For the Three Months Ended September 30,			For the Three Months Ended September 30,
	2010			2010
	(As reported currently)			(As reported originally)		Effect of change

Other income (expenses):
Change in Fair Value of warrants liability	$	(273,017	)		-		(273,017	)

Total other income (expenses)		(263,811	)		9,206		(273,017	)

Income before provision for income taxes		4,302,113			4,575,130		(273,017	)

Net income		3,396,674			3,669,691		(273,017	)

Net income attributable to Tianyin Pharmaceutical Co., Inc.		3,404,518			3,677,535		(273,017	)

Basic earnings per share	$	0.12		$	0.13		(0.01	)
Diluted earnings per share	$	0.11		$	0.12		(0.01	)

	For the Three Months Ended September 30,			For the Three Months Ended September 30,
	2009			2009
	(As reported currently)			(As reported originally)			Effect of change

Other income (expenses):
Change in Fair Value of warrants liability	$	(5,176,646	)		-			(5,176,646	)
Total other income (expenses)		(5,225,708	)		(49,062	)		(5,176,646	)

Income before provision for income taxes		(2,479,988	)		2,696,658			(5,176,646	)

Net income		(2,989,924	)		2,186,722			(5,176,646	)

Net income attributable to Tianyin Pharmaceutical Co., Inc.		(2,987,398	)		2,189,248			(5,176,646	)

Basic earnings per share	$	(0.16	)	$	0.10			(0.26	)
Diluted earnings per share	$	(0.11	)	$	0.08			(0.19	)

Consolidated Statements of Cash Flows (Unaudited)

	For the Three Months Ended September 30,			For the Three Months Ended September 30,
	2010			2010
	(As reported currently)			(As reported originally)			Effect of change
Cash flows from operating activities:
Net Income	$	3,396,674		$	3,669,691			(273,017	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:


Change in Fair Value of warrants liability		273,017			-			273,017

Total adjustments		(1,850,892	)		(2,123,909	)		273,017

	For the Three Months Ended September 30,			For the Three Months Ended September 30,
	2009			2009
	(As reported currently)			(As reported originally)		Effect of change
Cash flows from operating activities:
Net Income	$	(2,989,924	)	$	2,186,722		(5,176,646	)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:

Change in Fair Value of warrants liability		5,176,646			-		5,176,646

Total adjustments		5,231,386			54,740		5,176,646

Note 18 – Subsequent Event

On January 14, 2011, we received majority consent from 6 accredited investors (the “Investors”) to amend certain terms in the Class A Warrant and Class B Warrant that we issued pursuant to the Securities Purchase Agreement entered into by and among us and the Investors on January 25, 2008, as disclosed in the Current Report on Form 8-K that we filed on January 28, 2008. Pursuant to Section 4(e) of the Class A Warrant and Class B Warrant, the Investors had certain weighted average anti-dilution protection in the event we issue any additional shares of Common Stock at a price per share less than the Exercise Price then in effect (as those terms are defined in the Class A Warrant and Class B Warrant). We requested that the Investors amend the Class A and Class B Warrant to delete Section 4(e) thereof; in consideration thereof, the holders of the Class A Warrant and Class B Warrant shall have a right to pre-approve any Additional Issuances at a price less than the Warrant Price then in effect and to give retroactive effect to such amendment.

With regard to the Series C warrants to purchase up to 331,466 shares of our common stock at a price of $4.50 per share issued on October 27, 2009, which was recognized in our Form 10-Qs filed for December 31, 2009, March 31, 2010 and in our Form 10-K for June 30, 2010, the anti-dilution clause contained in the Series C warrants would expire on January 15, 2011, by its original terms. Furthermore, these down protection clauses have been removed according to unanimous consent by the eight warrant holders and made retroactively effective on November 30, 2010. Since the net financial impact during the period is minimal and ultimately be reversed out, we believe that given the immateriality of the respective amounts in those effected periods, a restatement with regard to the impact of the Series C warrants is not warranted.

The basis for our warrant calculation with regard to the Series C warrants is as follows:

The Company calculated the warrant impact for the respective financial reporting periods utilizing both Black-Scholes and binomial valuation models that returned similar results. Our inputs were a stock issuance price of $4.50 per share as of October 27, 2009 for 331,366 common shares using a discount rate of 1.2% with cumulative volatility ranges from 33% - 63%. The net income impact is as follows:

Date	Amount ($)			%
12/31/2009	$	(57,000	)		(1.8	)
3/31/2010		105,000			2.9
6/30/2010		126,000			2.4

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the financial statements of TPI for the periods ended September 30, 2010 and 2009 and should be read in conjunction with such financial statements and related notes included in this report and the Company’s Annual Report on Form 10-K for the year ended June 30, 2010.

Under ASC 815-40-15, the Company’s accounting treatment of the warrants including Series A and B warrants from July 1, 2009 until December 31, 2010 is subject to revisions. Due to the presence of certain anti-dilutive clauses in both warrants during the above period, these financial instruments were re-categorized as liabilities while they were previously treated as equity. Since the removal of the anti-dilutive clauses in both series of warrants on January 14, 2011, the warrants were re-categorized as equity in the third quarter of fiscal year 2011 while the accounting issues related to the warrants ceased to exist. Due to the non-cash and non-operational nature of these charges, readers are recommended to use pro forma numbers that exclude these charges to evaluate the operation of the company.

The information set forth below includes forward-looking statements. Certain factors that could cause results to differ materially from those projected in the forward-looking statements are set forth below. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.

Discussion on Operating Results

The following table shows the results of our business. All references to the results of operations and financial conditions are on a consolidated basis that includes Chengdu Tianyin Pharmaceutical Co., Ltd (“Chengdu Tianyin”), Tianyin Medicine Trading Co., Ltd (“TMT”) and Sichuan Jiangchuan Pharmaceutical Co., Ltd (“JCM”).

Comparison of results for the three months ended September 30, 2010 and 2009 (in $ millions):

		Three Months Ended September 30,
		2010		2009
		(Restated)		(Restated)
Sales	$	22.0	$	13.4
Cost of sales	$	11.1	$	6.3
Gross profit	$	10.8	$	7.1
Total operating expenses	$	6.2	$	4.3
Provision for income taxes	$	0.91	$	0.51
Net income (loss)	$	3.4	$	(3.0)
Foreign currency translation adjustment	$	0.95	$	0.04
Comprehensive income (loss)	$	4.3	$	(3.0)

Net Income (Loss) (restated) was $3.4 million for the three months ended September 30, 2010, as compared to net loss of $(3.0) million for the three months ended September 30, 2009, a net increase of $6.4 million. Net profit margins for the three months ended September 30, 2010 was 15.5% versus (22.4)% for the three months ended September 30, 2009. The non-cash financial impacts from warrants mainly contribute to the difference between these comparable periods. The pro forma net income results illustrate the operational improvements.

Net Income (pro forma) was $3.7 million for the three months ended September 30, 2010, as compared to net income of $2.2 million for the three months ended September 30, 2009, a net increase of $1.5 million or 68.0% year over year. Net profit margins for the three months ended September 30, 2010 improved to 16.7% from 16.3% for the comparable period in fiscal year 2009. This was the result of the leverage in the business operation that drives the growth of the revenue while keeping the operating expenses in-line with the sales expansion.

Comprehensive Income (Loss) (restated) that includes the currency adjustment to net income was $4.3 million for the three months ended September 30, 2010, as compared to the comprehensive loss of $(3.0) million for the three months ended September 30, 2009, an increase of $7.3 million. The non-cash financial impacts from warrants mainly contribute to the difference between these comparable periods. The pro forma net income results illustrate the operational improvements.

Comprehensive Income (pro forma) that includes the currency adjustment to net income was $4.6 million for the three months ended September 30, 2010, as compared to the comprehensive income of $2.2 million for the three months ended September 30, 2009, an increase of $2.4 million or 108.1%.

Critical Accounting Policies and Estimates

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K/A for the year ended June 30, 2010, for disclosures regarding TPI’s critical accounting policies and estimates as well as updates further disclosed in our interim financial statements as described in this Form 10-Q/A.

Item 4. Controls and Procedures

(a)	Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission, and are effective in providing reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

(b)	Changes in internal control over financial reporting

In our Management’s Report on Internal Control Over Financial Reporting included in our Form 10-K for the year ended June 30, 2010, management concluded that our internal controls over financial reporting were effective. Management did however identify a significant deficiency as of June 30, 2010, as discussed in our Form 10-K for the year ended June 30, 2010. In connection with our review of our internal controls and procedures over financial reporting as of our last fiscal quarter, ended March 31, 2011, and based on certain comments that we received from the staff of the SEC regarding the accounting treatment and subsequently the non-cash/non-operational financial charges of Series A and B Warrants, which resulted in our having to amend and restate financial statements from July 1, 2009 till December 31, 2010, management has concluded that the Company has a material weakness. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. Management identified the following material weaknesses during its assessment of our internal control over financial reporting as of September 30, 2010.

●	Lack of sufficient knowledge regarding U.S. GAAP reporting by our existing accounting staff.
●	Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control;
●	Lack of sufficient documentation with our existing financial processes, risk assessment and internal controls.

Currently we do not have sufficient in-house expertise in US GAAP reporting. Additionally, Mr. Hongcai Li, the financial controller at our operating subsidiary recently resigned due to personal reasons. Since the end of our last fiscal quarter, management has met on numerous occasions and discussed the following plans to remedy the material weaknesses discussed above. We are seeking to do the following,

Recruit experienced professionals to augment and upgrade our financial staff for sufficient US GAAP financial reporting. We believe that additional accounting staff trained in U.S. GAAP would improve our controls and procedures, specifically with regard to the preparation of our financial statements; and

The Company has made efforts to improve our current accounting staff’s knowledge of U.S. accounting standards.

We believe that the remediation measures we are taking, if effectively implemented and maintained, will remediate the significant deficiency discussed above.

Except as described above, there have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarter to which this Quarterly Report on Form 10-Q/A relates that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

PART II - OTHER INFORMATION

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, 2010).

3.2	Bylaws (Incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K filed on September 29, 2010).

31.1	Certification of Chief Executive Officer required by Rule 13a-14/15d-14(a) under the Exchange Act

31.2	Certification of Chief Accounting Officer required by Rule 13a-14/15d-14(a) under the Exchange Act

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Acting Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 22, 2011

By: TIANYIN PHARMACEUTICAL CO., INC.

/s/ Dr. Guoqing Jiang
	Name: Dr. Guoqing Jiang
	Title: Chairman, Chief Executive Officer



/s/ Dr. James Jiayuan Tong
	Name: Dr. James Jiayuan Tong
	Title: Chief Financial Officer, Chief Accounting Officer,
	Chief Business and Development Officer, Director

TIANYIN PHARMACEUTICAL CO., INC. - FORM 10-Q/A - August 22, 2011

Attached files

TIANYIN PHARMACEUTICAL CO., INC. Reports