ex99two.htm

Q2 FY2010 Results
	Q2 FY2010	Q2 FY2009	CHANGE (%)
Net Sales	$14.9 million	$10.1 million	+48%
Gross Profit	$7.8 million	$5.2 million	+50%
GAAP Net Income	$2.6 million	$2.1 million	+25%
Adjusted Net Income*	$3.4 million	$2.1 million	+62%
GAAP EPS (Diluted)	$0.08	$0.13	-38%
Adjusted EPS (Diluted)	$0.11	$0.13	-15%
Weighted Shares Outstanding	30.4 million	15.7 million	+94%

Six Months FY2010 Results
	Six Months FY2010	Six Months FY2009	CHANGE (%)
Net Sales	$28.3 million	$10.7 million	+44%
Gross Profit	$14.8 million	$10.0 million	+48%
GAAP Net Income	$4.8 million	$3.8 million	+24%
Adjusted Net Income	$5.5 million	$3.8 million	+48%
GAAP EPS (Diluted)	$0.17	$0.16	+6%
Adjusted EPS (Diluted)	$0.19	$0.16	+19%
Weighted Shares Outstanding	28.5 million	24.7 million	+15%

Revenue for the second quarter of fiscal 2010 was approximately $14.9 million, an increase of 47.9% compared to $10.1 million for the second quarter of fiscal 2009. The increase was attributable to higher sales of both existing and new products, channel expansion efforts that increased market penetration, and increased utilization of the Company’s expanded production facility. Revenues from the top three selling products, Ginkgo Mihuan Oral Liquid, Arpu Shuangxin Oral Liquid, and Azithromycin Dispersible Tablets, were $7.6 million and represented approximately 51% of total revenues collectively for the quarter.

Cost of goods sold for the three months ended December 31, 2009 was approximately $7.2 million or 48.1% of revenue as compared to $4.9 million or 49.0% of revenue for the three months ended December 31, 2008, yielding a gross profit of $7.8 million and gross margins of 51.9%, compared to $5.2 million in gross profit and gross margins of 51.0% during the second quarter of fiscal 2009. Gross margins improved as a result of an increase in higher margin products in the sales mix along with greater efficiencies in our production and manufacturing processes.

Operating expenses for the three months ended December 31, 2009 were approximately $4.6 million, up 72.0% compared to the same period in 2008. Selling, general and administration expenses for the period increased to approximately $4.4 million from $2.6 million in the second quarter of fiscal 2009 as a result of the implementation of Tianyin’s sales and marketing strategy, including increased sales payrolls and direct marketing expenses, in addition to non-cash stock compensation expense of $0.9 million. Research and development expenses for the three months ended December 31, 2009 increased 134.4% to $0.2 million compared to the second quarter of fiscal 2009.

Operating income for the second quarter of fiscal 2010 totaled approximately $3.2 million, a 27.2% increase from the $2.5 million reported for the second quarter of fiscal 2009. Operating margins were 21.1% and 24.5% for the second quarter of fiscal 2010 and fiscal 2009, respectively as the Company continued to spend aggressively on sales and marketing initiatives to generate incremental and future product sales.

GAAP net income was approximately $2.6 million in the second quarter of fiscal 2010, a 24.8% increase, compared to $2.1 million for the second quarter of fiscal 2009. The company had an effective tax rate of 18.2% and 16.6%, for the second quarter of fiscal 2010 and 2009, respectively. Diluted earnings per share were $0.08 compared to $0.13 for the second quarter of fiscal 2010 and fiscal 2009 respectively, based upon 30.4 million and 15.7 million shares. Adjusted net income, which adds back the non-cash equity compensation charge of $0.9 million, was $3.4 million, representing 62.0% year-over year growth with earnings of $0.11 per diluted share. The divergence in the share count relates to the preferred shares which have been and are convertible into common, in addition to common shares issued in October 2009 private placement, and warrants both exercised and outstanding.

“Our strong performance in the second quarter and first half of fiscal year 2010 was driven by continued execution of our growth strategy, including the expansion of our sales force and distribution channels, increased sales and marketing activities to support market share gains for our expanding portfolio of products, in addition to rapid utilization of our newly added manufacturing capacity,” stated Dr. Guoqing Jiang, Tianyin’s Chief Executive Officer. “To facilitate our future growth strategy and to diversify our product offering, we formalized a joint venture named Sichuan Jiangchuan Pharmaceutical Co., Ltd. to produce macrolide antibiotics, which addresses a large and rapidly growing market in China. We have secured the property and commenced construction for our new production facility and expect this to be a key contributor to growth during fiscal 2011. In addition, we received SFDA approval for four new generic products, which complement our portfolio and address established billion dollar plus markets that cover multiple indications. We currently have 40 drug candidates under SFDA review and believe the Chinese stimulus plan, favorable health care policies, increased consumer disposable income, and favorable demographic trends will continue driving overall growth in demand for the pharmaceutical market.”

For the six months ended December 31, 2009, revenues increased 44.1% to $28.3 million from $19.7 million reported for the prior year period. Ginkgo Mihuan, one of Tianyin’s flagship products, contributed approximately $9.2 million or 33% of total revenues for the first six months of fiscal 2010, representing 102% year-over-year growth. Revenues generated from the Arpu Shuangxin Oral Liquid were $2.9 million, or 16% of total revenues, a 2% increase from fiscal 2009. Tianyin’s top 5 selling products generated revenue of $14.7 million and represented 53% of total revenue.

For the six months ended December 31, 2009, net income was approximately $4.8 million, a 23.6% increase from $3.8 million recorded for the same period in fiscal 2009. Diluted earnings per share were $0.17, compared to $0.16 in the same period 2009, based on 28.5 million and 24.7 million shares for 2010 and 2009, respectively. Adjusted net income, which adds back the non-cash equity compensation charge of $0.9 million, was $5.5 million, representing 44.7% year-over year growth with earnings of $0.20 per diluted share.

Cash and cash equivalents and restricted cash totaled $19.9 million on December 31, 2009 compared to $12.4 million on June 30, 2009, which was the result of cash flow from operations, a $4.5 million net equity raise completed in October, 2009, and proceeds from exercised warrants. Net cash used in investing activities for the six months ended December 31, 2009 was $4.3 million for the acquisition of intangible drug, and property and equipment. The Company had a current ratio of 6.8 to 1 and total stockholders’ equity of $54.0 million, with total assets of $58.8 million versus total liabilities of $4.8 million on December 31, 2009. For the first six months of fiscal 2010, the Company generated $4.9 million in cash from operations versus $3.9 million for the same period in fiscal 2009.

On October 29, 2009, Tianyin announced the Sichuan Jiangchuan Pharmaceutical Co., Ltd. (“Jiangchuan”) joint venture, which will focus on production of macrolide antibiotics, such as Azithromycin, one of the world’s best-selling antibiotics. Jiangchuan holds a license from Chinese State Food and Drug Administration (SFDA) to produce macrolide antibiotics and a related business license from the Industry and Commerce Bureau and Tax department. Tianyin owns 77% of Jiangchuan and will utilize this as the foundation for a broader, longer term strategy to build a significant presence in the rapidly growing Chinese macrolide antibiotics market, while diversifying its revenue base of western pharmaceuticals. Construction on a new production facility in Xinjin Industry Development Area commenced January 8, 2010, with Phase I expected to operational by July, 2010 and Phase II to be operational by the second half of 2010, with total anticipated capital expenditures of $20 million. The Company anticipates significant revenue and earnings contributions from this initiative during fiscal 2011.

Cough Oral Liquid is a generic prescription TCM that is used for respiratory tract infections and influenza in children to effectively reduce symptoms such as fever, shakes, cough, shortness of breath, and sore throat. According to Tianyin's market research and estimation, annual sales of this type of products are approximately $1.1 billion in China. The Antibacterial/Anti-inflammatory Capsules are a generic OTC TCM used as natural antibiotics to treat bacterial infection and inflammation with minimal side effects as compared to western antibiotics. Tianyin estimates that total annual sales of associated with products in this category are approximately $1.5 billion in China.

Tianyin announced that 23 of its medicine compounds were included in the 2009 Edition of the National Basic Medical Insurance, Industrial Injury Insurance and Maternity Insurance Medicine Directory, which lists a total of 2,151 medicines and became effective on December 1, 2009. The 23 medicines treat a variety of common indications and diseases and make up approximately 70% of Tianyin’s total revenues for the fiscal year 2009.

On January 13, 2010, Tianyin received approvals from the Chinese State Food and Drug Administration (SFDA) to produce two generic antibiotics; Ofloxacin Tablets and Fleroxacin Tablets which target new indications for the Company. Ofloxacin addresses several indications including staph, strep throat (Streptococcus), pneumonia, E. Coli, and several sexually transmitted bacterial diseases. Fleroxacin addresses several indications including chronic and acute bronchitis and pneumonia, salmonella, multiple gastrointestinal and abdominal infections, and skin/soft tissue infections. Both drugs are included in China's Essential Drug List (EDL), which is increasing demand for these products throughout the PRC.

The Company will host a conference call to discuss the 2010 second quarter financial results on Monday, February 8, 2010 at 4:30 p.m. ET. Interested participants should call +1-877-941-8418 within the United States, or US +1-480-629-9809 if calling internationally. The conference ID is 4207607. It is advisable to dial in approximately 5-10 minutes prior to 4:30 p.m. EDT. If you are unable to participate in the call at the scheduled time, a playback will be available through February 22, 2010. To listen to the playback, please call +1-800-406-7325 from within the United States, or US +1-303-590-3030 internationally. Please use passcode 4207607 for the replay.

Tianyin is a manufacturer and supplier of modernized Traditional Chinese Medicine ("TCM") in China. It was established in 1994 and acquired by the current management team in August 2003. It has a comprehensive product portfolio of 39 products, 22 of which are listed in the highly selective National Medicine Catalog of the National Medical Insurance program. Tianyin owns and operates two GMP manufacturing facilities and an R&D platform supported by leading Chinese academic institutions. The Company has a pipeline of 17 pharmaceutical products pending approval. Tianyin has an extensive nationwide distribution network throughout China with a sales force of 720 salespeople. Tianyin is headquartered in Chengdu, Sichuan Province with two manufacturing facilities and a total of 1,365 employees. For more information about Tianyin, please visit http://www.tianyinpharma.com.

The Statements which are not historical facts contained in this press release are forward-looking statements that involve certain risks and uncertainties including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, government approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the Company's filings with the Securities and Exchange Commission.

	December 31,			June 30,
	2009			2009
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	19,866,573		$	12,352,223
Accounts receivable, net of allowance for doubtful accounts of $172,182
and $171,947 at December 31, 2009 and June 30, 2009, respectively		8,642,875			5,620,519
Inventory		3,220,937			3,808,289
Advance payments		381,420			1,188,115
Loan receivable		293,400			-
Other receivables		201,321			601,912
Other current assets		43,811			81,277
Total current assets		32,650,337			23,652,335

Property and equipment, net		10,646,495			9,642,526

Intangibles, net		15,470,215			12,037,483

Total assets	$	58,767,047		$	45,332,344

Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	1,650,451		$	1,392,639
Short-term bank loans		1,400,985			1,399,075
VAT taxes payable		542,629			458,930
Income taxes payable		571,885			490,514
Other taxes payable		15,696			11,890
Dividends payable		98,538			325,417
Other current liabilities		501,851			307,934
Total current liabilities		4,782,035			4,386,399

Total liabilities		4,782,035			4,386,399

Equity
Stockholders’ equity:
Common stock, $0.001 par value, 50,000,000 shares authorized,
25,795,902 and 17,908,912 shares issued and outstanding at
December 31, 2009 and June 30, 2009, respectively		25,796			17,909
Series A convertible preferred stock, $0.001 par value, 10,000,000
shares authorized, 2,322,750 and 7,146,500 shares issued and
outstanding at December 31, 2009 and June 30, 2009, respectively		2,323			7,147
Additional paid-in capital		28,337,810			19,694,514
Statutory reserve		2,299,807			2,299,807
Treasury stock		(111,587	)		(111,587	)
Retained earnings		20,393,640			16,486,775
Accumulated other comprehensive income		2,598,164			2,551,380
Total stockholders’ equity		53,545,953			40,945,945

Noncontrolling interest		439,059			-

Total equity		53,985,012			40,945,945

Total liabilities and equity	$	58,767,047		$	45,332,344

Consolidated Statements of Operations and Comprehensive Income (Unaudited)

	For the Three Months Ended						For the Six Months Ended
	December 31,						December 31,
	2009			2008			2009			2008

Sales	$	14,936,378		$	10,101,869		$	28,341,581		$	19,663,809

Cost of sales		7,177,503			4,944,980			13,526,730			9,627,603

Gross profit		7,758,875			5,156,889			14,814,851			10,036,206

Operating expenses:
Selling, general and administrative		4,409,735			2,595,311			8,527,501			5,228,672
Research and development		197,380			84,220			389,870			166,858
Total operating expenses		4,607,115			2,679,531			8,917,371			5,395,530

Income from operations		3,151,760			2,477,358			5,897,480			4,640,676

Other income (expenses):
Interest income (expense), net		(10,443	)		15,564			(19,995	)		29,808
Other expenses		-			(26,975	)		(39,510	)		(54,695	)
Total other expenses		(10,443	)		(11,411	)		(59,505	)		(24,887	)

Income before provision for income tax		3,141,317			2,465,947			5,837,975			4,615,789

Provision for income tax		571,756			408,827			1,081,691			767,677

Net income		2,569,561			2,057,120			4,756,284			3,848,112

Less: Net income attributable to noncontrolling interest		1,485			-			(1,040	)		-

Net income attributable to Tianyin		2,568,076			2,057,120			4,757,324			3,848,112

Other comprehensive income
Foreign currency translation adjustment		10,927			256,933			46,784			346,367

Comprehensive income	$	2,579,003		$	2,314,053		$	4,804,108		$	4,194,479

Basic earnings per share	$	0.10		$	0.11		$	0.20		$	0.20
Diluted earnings per share	$	0.08		$	0.13		$	0.17		$	0.16

Weighted average number of common shares
outstanding
Basic		24,906,965			15,691,495			22,323,116			15,637,623
Diluted		30,439,912			15,691,495			28,521,127			24,697,018

	For the Six Months Ended
	December 31,
	2009			2008
Cash flows from operating activities:
Net Income	$	4,757,324		$	3,848,112
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		393,575			237,619
Noncontrolling interest		(1,040	)		-
Share-based payments		1,055,395			-
Loss on disposal of fixed assets		39,510			-
Changes in current assets and current liabilities:
Accounts receivable		(3,013,450	)		132,660
Inventory		592,309			(1,117,856	)
Other receivables		401,237			608,042
Other current assets		37,500			227,140
Accounts payable and accrued expenses		256,055			(119,588	)
VAT taxes payable		83,038			71,402
Income tax payable		80,668			66,275
Other taxes payable		3,788			(35,705	)
Other current liabilities		193,483			732
Total adjustments		122,068			70,721

Net cash provided by operating activities		4,879,392			3,918,833

Cash flows from investing activities:
Additions to property and equipment		(1,288,234	)		(570,491	)
Additions to intangible assets – drug		(2,742,168	)		(130,323	)
Advance payments for research and development		-			(2,155,450	)
Loan receivable		(293,280	)		-

Net cash used in investing activities		(4,323,682	)		(2,856,264	)

Cash flows from financing activities:
Repayment of bank loans		-			(512,505	)
Additional paid-in capital		7,590,962			-
Proceeds from minority shareholders		439,920			-
Payment of dividends		(1,077,335	)		-

Net cash provided by (used in) financing activities		6,953,547			(512,505	)

Effect of foreign currency translation on cash		5,093			66,124

Net increase in cash and cash equivalents		7,514,350			616,188

Cash and cash equivalents – beginning		12,352,223			12,057,150

Cash and cash equivalents – ending	$	19,866,573		$	12,673,338

Supplemental schedule of non cash activities
Advance payments exchanged for intangible assets – drug	$	807,986		$	-

As used herein, “GAAP” refers to generally accepted accounting principals in the United States. We use various numerical measures in conference calls, investor meetings and other forums, which are or may be considered “Non-GAAP financial measures” under the SEC’s Regulation G. We have provided below for your reference supplemental financial disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation.

	Three Months Ending		Six Months Ending
	December 31, 2009		December 31, 2009

Net Income (GAAP)	$	2,568,076	$	4,756,324
Stock Compensation Charges (a)	$	900,000	$	900,000
Less: Tax Adjustment	$	163,800	$	166,500
Adjusted Net Income	$	3,304,276	$	5,489,824


	Three Months Ending		Six Months Ending
	December 31, 2009		December 31, 2009

Earnings Per Share - Diluted (GAAP)	$	0.08	$	0.17
Stock Compensation Charges (a)	$	0.03	$	0.03
Adjusted Earnings Per Share - Diluted	$	0.11	$	0.20

Note: To supplement our consolidated financial statements presented in accordance with GAAP, Tianyin Pharmaceutical Corp. uses non-GAAP measures, such as Adjusted Net Income and Adjusted Diluted Earnings per share, which exclude certain non cash expenses. This non-GAAP adjustment is provided to enhance the user’s overall understanding of our historical and current financial performance and our prospects for the future. We believe the non-GAAP results provide useful information to both management and investors by excluding certain expenses we believe are not indicative of our core operating results.