The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the financial statements of Chengdu Tianyin for the six months ended December 31, 2008 and 2007 and should be read in conjunction with such financial statements and related notes included in this report.

Overview

We are engaged primarily in the development, manufacturing, marketing and sale of modernized traditional Chinese medicines and other pharmaceuticals in China. We currently manufacture and market a comprehensive portfolio of 39 products, 22 of which are listed in the highly selective National Medicine Catalog of the National Medical Insurance program. We have an extensive product pipeline of 22 products which are pending regulatory approvals with the China State Food and Drug Administration. It is common in China that drug applications are denied by SFDA because most of them are just generic.

Established in 1994, Chengdu Tianyin is a manufacturer and supplier of modernized traditional Chinese medicines. The current management of Chengdu Tianyin acquired 100% of the equity interest of Chengdu Tianyin in 2003. On October 30, 2007, Grandway completed the acquisition of the 100% of the equity interest and now owns 100% of the equity interest of Chengdu Tianyin, a company located in Chengdu, Sichuan Province of the PRC that operates our business.

Development and growth strategy

The cornerstone of our business development strategy relies upon our partnership-based research and development efforts. These efforts support our ability to commercialize, produce, and broaden our product pipeline allowing us to market and expand those products through our sales and marketing infrastructure. In the first half of our fiscal 2009 year, we continued this strategy and recognized increased market penetration and revenue growth in 2008. Management plans to continue our emphasis on expanded and enhanced marketing and sales in our 2009 fiscal year. Part of this strategy involves increasing and improving our marketing and sales activities to enhance the market leadership of our key leading products and to increase the sales of other products by expanding our sales force, solidifying our distribution network and expanding our market segment coverage, while increasing our marketing and promotional activities.

As part of our growth strategy, we will continue our partnership-based research and development efforts to further commercialize and broaden our product pipeline. We currently have 47 drug candidates under the Chinese State Food and Drug Administration ("SFDA") review and are planning a series of market launches in the next few years from our product pipeline. In the six months of our 2009 fiscal year, we have received approval from the SFDA to produce Laonian Kechuan Tablets (SFDA approval number H2008S02059), Fuke Zhidai Tablets (SFDA approval number Z20083375) and Tongbianling Capsule (SFDA approval number Z20083424).

Laonian Kechuan Tablets are a drug that is used to treat chronic bronchitis. In its review it was noted for its potential abilities to improve male sexual function and female natural function, enhance immunity and the promotion of recovery, and was found to be highly effective with fewer side effects as compared with similar drugs within the present marketplace.

Fuke Zhidai Tablets is a drug that is used to treat abnormal leucorrhea caused by chronic cervicitis, endometritis and endocolpitis. The tablet was also found to potentially alleviate fever and restrain abnormal leucorrhea. The drug was approved by SFDA with a clinical outcome that was noted for minimal side effects and a remarkable outcome during its review.

Tongbianling Capsule is a generic Traditional Chinese Medince ("TCM'). It is noted for its highly effective treatment in alleviating one-time abdominal distention constipation, bedridden constipation, and elderly chronic constipation.

An important aspect to supporting our development strategy is recognizing the importance of meeting the demand of our products and increasing our ability to produce and supply our sales infrastructure. As part of the use of proceeds from our recent private placement financings, we are building production facilities on the vacant land of our current premises to accommodate our growth. The new production plant project will enhance our overall production capacity by three times with our estimated expenditure of $5 million. The capital required for the expansion of our facilities was sourced from our recent $15.2 million financing completed in January 2008. The planned Gross Floor Areas (ÒGFAÓ) is approximately ten thousand square meters with state- of-the-art equipment. Construction started in July 2008 and operations are planned to begin in January 2009. The new capacity is expected to meet the increasing market demand of our current products and support our new product launches from our product pipeline.

Management also plans to pursue strategic acquisitions and licensing opportunities as part of our growth strategy in 2009. We plan to selectively pursue strategic acquisition and licensing opportunities to further consolidate our resources and expand our market coverage. We believe that strategic acquisitions and licensing provide effective means to broaden our product lines, increase our market coverage and complement our research and development capabilities.

Management believes that our emphasis on further commercializing and broadening our product line coupled with the expansion of our production facility and capacity, enhanced sales and marketing efforts should continue to yield significant increases in revenue in 2009. Additionally, we believe that our growth and overall market coverage could be approved by certain strategic acquisitions or licensing opportunities.

Management believes that our emphasis on further commercializing and broadening our product line coupled with the expansion of our production facility and capacity, enhanced sales and marketing efforts should continue to yield significant increases in revenue in 2009. We further believe the Pharmaceutical Industry could also be a beneficiary of revenue growth as a result of expanded social reform by the recently announced government stimulus plan and that our growth could also be strengthened by strategic acquisitions and/or further licensing opportunities.

Manufacturing, Sales and marketing

We support commercialized products with manufacturing, sales and marketing efforts. We are also moving forward with additional investments to enhance our infrastructure and business, including capital expenditures in new plant and production tools and facilities, improved and advanced information technology systems, and continued post-marketing studies and monitoring studies.

Management continually reviews the business, including manufacturing operations, to identify actions that will enhance long-term competitiveness. By continuously streamlining the management of our production processes and improving the formulations for our drugs, we believe we can recognize greater efficiencies in the productions of our products ultimately reducing both direct and overhead costs in our manufacturing processes.

Competitive environment

The market for pharmaceutical products is competitive. Our operations may be affected by technological advances by competitors, industry consolidation, patents granted to competitors, competitive combination products, new products offered by our competitors, as well as new information provided by other marketed products and/or other post-market studies.

Discussion on Operating Result

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

Comparison of results for the six months ended December 31, 2008 and 2007, the
three months ended December 31, 2008 and 2007

                                                Three Months Ended                Six Months Ended
                                                   December 31                       December 31
                                               2008            2007             2008             2007
Revenue                                    $ 10,101,869     $ 7,749,199     $ 19,663,809     $ 14,918,692
Cost of revenue                            $  4,944,980     $ 4,567,429     $  9,627,603     $  8,861,258
Gross profit                               $  5,156,889     $ 3,181,770     $ 10,036,206     $  6,057,434
Operating expense                          $  2,595,311     $ 1,172,062     $  5,228,672     $  2,200,541
Other income (expense)                     $    -11,411     $   -31,659     $    -24,887     $    -66,362
Income taxes                               $    408,827     $   291,572     $    767,677     $    556,646
Net profit (loss)                          $  2,057,120     $ 1,652,371     $  3,848,112     $  3,172,327
Foreign currency translation adjustment    $    256,933     $   391,115     $    346,367     $    574,966
Comprehensive income                       $  2,314,053     $ 2,043,486     $  4,194,479     $  3,747,293

Revenue. Total revenue was approximately US$10.1 million for the three months ended December 31, 2008 as compared to approximately US$7.7 million for the three months ended December 31, 2007, an increase of approximately US$2.35 million or 30%. Revenue for the six months ended December 31, 2008 was approximately US$19.7 million. This was an increase of roughly US$4.7 million or 32% as compared to total revenue of US$14.9 million for the six months ended December 31, 2007. The increase in our revenue was materially the result of our recent sales and marketing efforts. Specifically, our revenue growth was attributable to our sales channel expansion efforts that increased our market penetration of our current products. Management believes that our emphasis on broadening our product pipeline coupled with our continued sales channel expansions, along with our enhanced sales and marketing efforts and our continued expansion of our production facility should continue to yield increases to our revenue expectations for the remainder of this fiscal year.

Cost of Revenue. Cost of revenue for the three months ended December 31, 2008 was approximately US$4.9 million or 49% of revenue as compared to US$4.6 million or 59% of revenue for the three months ended December 31, 2007. Cost of revenue for the six months ended December 31, 2008 was approximately US$9.6 million or 49% of revenue as compared to US$8.87 million or 59% of revenue for the six months ended December 31, 2007. Our cost of revenue is primarily composed of the costs of direct raw materials, labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead. The decrease in our costs of revenue was materially attributable to our increased production of higher margin products supported by costs savings we realized from improvements that we made in costs controls that reduced both direct and overhead cost in our manufacturing process. We anticipate further improvements in our cost of revenues as we continue to expand our facilities and realize economies of scale and improve our processes.

Gross profit. As a result of the above, gross profit for the three months ended December 31, 2008 was approximately 51% as compared to 41% for the three months ended December 31, 2007.

Operating Expenses. Selling and general and administrative expenses were approximately US$2.6 million for the three months ended December 31, 2008, as compared to approximately US$1.2 million for the three months ended December 31, 2007, an increase of approximately US$1.42 million or 121%. Selling and general and administrative expenses were approximately US$5.2 million for the six months ended December 31, 2008, as compared to approximately US$2.2 million for the six months ended December 31, 2007, an increase of approximately US$3.03 million or 138%. The increase was materially a result of the implementaion of our recent sales and marketing strategy that increased our sales payrolls and direct marketing expenses. We anticipate these costs may continue to increase but will be in line with our revenue growth.

Net income. Net income was approximately US$2.1 million for the three months ended December 31, 2008, as compared to net income of approximately US$1.7 million for the three months ended December 31, 2007, an increase of US$0.4 million or 24%. Net income was approximately US$3.9 million for the six months ended December 31, 2008, as compared to net income of approximately US$3.2 million for the six months ended December 31, 2007, an increase of US$0.7 million or 21%. The increase in our net income was materially the result of increases in our revenue along with improved product margins and efficiencies partially offset by increases in sales and marketing costs.

Foreign Currency Translation Adjustment. Our reporting currency is the US dollar. Our local currency, Renminbi (RMB), is our functional currency. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by the People's Bank of China at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders' equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Currency translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statement of shareholders' equity and amounted to US$ 256,933 as of December 31, 2008. The balance sheet amounts with the exception of equity at December 31, 2008 were translated at 6.81663 RMB to 1.00 US dollar as compared to 7.29395 RMB to 1.00 US dollar at December 31, 2007. The equity accounts were stated at their historical rate. The average translation rates for the three months ended December 31, 2008, and December 31, 2007 were RMB6.82786 and RMB7.44345, respectively. The average translation rates applied to income statement accounts for the six months ended December 31, 2008, and December 31, 2007 were RMB6.82920 and RMB7.50626.

Comprehensive Income. As a result of the above, the comprehensive income, which adds the currency adjustment to Net Income, was US$4.19 million for the six months ended December 31, 2008, as compared to the comprehensive income of US$3.75 million for the six months ended December 31, 2007, an increase of US$0.44 million.