U. S.
Securities and Exchange Commission


Washington,
D. C. 20549





FORM
10-Q





[X]
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended March 31, 2010[ 
      ]
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from _____ to
_____





Commission
File No. 0-51012





XINYINHAI TECHNOLOGY, LTD.


(Exact
Name of Registrant as Specified in its Charter)









Utah
            87-0427336(State
      or Other Jurisdiction of
            (I.R.S.
      Employer I.D. No.)incorporation
      or organization)





No.
      4, Yantai Road, Centralized Park Haping Road, Harbin Development Zone,
      China 150060(Address
      of Principal Executive Offices)86-451-868-11118Issuer's
      Telephone Number:





Indicate  by
check mark  whether the  Registrant  (1) has filed
all reports required to be filed by Sections 13 or 15(d) of
the  Securities Exchange Act of
1934  during  the  preceding  12
months  (or for such shorter  period  that the
Registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.  YesX  No ____




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files.)  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. (Check One)




Large
accelerated filer ___ Accelerated filer ___ Non-accelerated filer
___ Small reporting companyX




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




APPLICABLE
ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding
of each of the Registrant's classes of common stock, as of the latest
practicable date:


May 14,
2010


Common
Voting Stock: 19,484,029





XINYINHAI
TECHNOLOGY, LTD.


CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS


FOR THE
THREE MONTHS ENDED MARCH 31, 2010 AND 2009











Index to
Condensed Consolidated Financial Statements

















PAGESCondensed
      Consolidated Balance Sheets
            
            1Condensed
      Consolidated Statements of Income and Comprehensive Income
            
            2Condensed
      Consolidated Statements of Cash Flows
            
            3Notes
      to Condensed Consolidated Financial Statements
            
            4 -
      17








XINYINHAI
TECHNOLOGY, LTD.


CONDENSED
CONSOLIDATED BALANCE SHEETS


AS
OF MARCH 31, 2010 AND DECEMBER 31, 2009


(Stated
in US Dollars)





March
      31,
            
            
            December
      31,2010
            
            
            2009(Unaudited)
            
            
            (Audited)ASSETSCurrent
      AssetsCash and cash
      equivalents
            
            $
            2,014,426
            
            
            $
            2,624,780Trade receivables (Net
      allowance for doubtful accounts of $11,048
      for 2010 and 2009)
            
            
            2,862,439
            
            
            
            2,163,647Inventories (Note
      7)
            
            
            2,055,992
            
            
            
            1,707,931Value added tax
      recoverable
            
            
            -
            
            
            
            19,198Other receivables, deposits and
      prepayments (Note 8(a))
            
            
            307,191
            
            
            
            352,449Loans to third party (Note
      8(b))
            
            
            5,264,672
            
            
            
            4,879,468Total
      Current Assets
            
            
            12,504,720
            
            
            
            11,747,473Property,
      plant and equipment, net (Note 9)
            
            
            5,551,224
            
            
            
            5,601,405Land-use-right
            
            
            1,035,193
            
            
            
            1,042,064TOTAL
      ASSETS
            
            $
            19,091,137
            
            
            $
            18,390,942LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      LiabilitiesCollateralized bank loan (Note
      10)
            
            $
            2,934,000
            
            
            $
            2,934,000Trade payables
            
            
            788,697
            
            
            
            561,804Customer
    deposits
            
            
            11,244
            
            
            
            1,300Other payables and accrued
      liabilities (Note 11)
            
            
            111,710
            
            
            
            208,676Income tax
    payable
            
            
            64,268
            
            
            
            27,160Value added tax
      payable
            
            
            33,241
            
            
            
            -TOTAL
      LIABILITIES
            
            
            3,943,160
            
            
            
            3,732,940COMMITMENTS
      AND CONTINGENCIES (NOTE 12)STOCKHOLDERS’
      EQUITYCommon stock (Note
      13)
            
            
            19,484
            
            
            
            19,484Additional paid-in
      capital
            
            
            3,294,543
            
            
            
            3,294,543Retained
    earnings
            
            
            7,462,241
            
            
            
            7,074,258Statutory
    reserves
            
            
            1,489,041
            
            
            
            1,437,061Accumulated other comprehensive
      income
            
            
            1,330,501
            
            
            
            1,330,394TOTAL
      XINYINHAI TECHNOLOGY, LTD.STOCKHOLDERS'
      EQUITY
            
            
            13,595,810
            
            
            
            13,155,740NONCONTROLLING
      INTERESTS (NOTE 3)
            
            
            1,552,167
            
            
            
            1,502,262TOTAL
      EQUITY
            
            
            15,147,977
            
            
            
            14,658,002TOTAL
      LIABILITIES AND STOCKHOLDERS'EQUITY
            
            $
            19,091,137
            
            
            $
            18,390,942








See the
accompanying notes to condensed consolidated financial
statements


1





XINYINHAI
TECHNOLOGY, LTD.


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Unaudited)


(Stated
in US Dollars)





Three
      months ended March 31,2010
            
            
            2009Revenues
      (Note 3)
            
            $
            2,174,378
            
            
            $
            2,396,981Cost
      of sales
            
            
            (1,363,290
            )
            
            
            (1,521,028
            )Gross
      profit
            
            
            811,088
            
            
            
            875,953Operating
      expensesSelling and distribution
      expenses
            
            
            70,989
            
            
            
            121,266General and administrative
      expenses
            
            
            149,291
            
            
            
            285,915Total expenses
            
            
            220,280
            
            
            
            407,181Income
      from operations
            
            
            590,808
            
            
            
            468,772Interest
      income
            
            
            1,219
            
            
            
            582Other
      income
            
            
            1,275
            
            
            
            8,988Finance
      costs (Note 4)
            
            
            (39,206
            )
            
            
            (198
            )Income
      before income taxes and noncontrolling interests
            
            
            554,096
            
            
            
            478,144Income
      taxes (Note 5)
            
            
            (64,245
            )
            
            
            (64,674
            )Net
      income before noncontrolling interest
            
            
            489,851
            
            
            
            413,470Net
      income attributable to noncontroling interests
            
            
            (49,888
            )
            
            
            (46,181
            )Net
      income attributable to Xinyinhai Technology, Ltd. commonstockholders
            
            $
            439,963
            
            
            $
            367,289Net
      income before noncontrolling interests
            
            
            489,851
            
            
            
            413,470Other
      comprehensive incomeForeign currency translation
      adjustments
            
            
            124
            
            
            
            (18,422
            )Comprehensive
      income
            
            
            489,975
            
            
            $
            395,048Comprehensive
      income attributable to noncontrolling interests
            
            
            (49,905
            )
            
            
            (44,235
            )Comprehensive
      income attributable to Xinyinhai Technology, Ltd.common stockholders
            
            $
            440,070
            
            
            $
            350,813Earnings
      per share attributable to XinyinhaiTechnology,
      Ltd. stockholders - basic and diluted (Note 6)
            
            
            0.023
            
            
            
            0.019Weighted
      average number of common stock outstanding
            
            
            19,484,029
            
            
            
            19,484,029







See the
accompanying notes to condensed consolidated financial
statements


2





XINYINHAI
TECHNOLOGY, LTD.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Unaudited)


(Stated
in US Dollars)





Three
      months ended March 31,2010
            
            
            2009Cash
      flows from operating activitiesNet income
            
            $
            439,963
            
            
            $
            367,289Adjustments to reconcile net
      income to net cash providedby
      operating activities:Bad debts written
      off
            
            
            -
            
            
            
            6,034Depreciation and
      amortization
            
            
            114,363
            
            
            
            142,178Noncontrolling
      interests
            
            
            49,888
            
            
            
            46,181Changes in operating assets and
      liabilitiesBills
receivable
            
            
            -
            
            
            
            (14,651
            )Trade
    receivables
            
            
            (698,553
            )
            
            
            63,940Inventories
            
            
            (347,942
            )
            
            
            95,950Other receivables, deposits and
      prepayments
            
            
            45,243
            
            
            
            167,218Trade payables
            
            
            226,816
            
            
            
            120,056Customer
    deposits
            
            
            9,939
            
            
            
            (101,798
            )Other payables and accrued
      liabilities
            
            
            (96,931
            )
            
            
            (505,914
            )Income tax
    payable
            
            
            37,095
            
            
            
            26,969Value added tax
      payable
            
            
            52,421
            
            
            
            (43,825
            )Net
      cash flows (used in)/provided by operating activities
            
            
            (167,698
            )
            
            
            369,627Cash
      flow from investing activitiesLoans to third
      party
            
            
            (422,309
            )
            
            
            -Loans repaid by third
      party
            
            
            37,105
            
            
            
            -Payments
      to acquire property, plant and equipment
      andland-use-right
            
            
            (57,330
            )
            
            
            (98,101
            )Net
      cash flows used in investing activities
            
            
            (442,534
            )
            
            
            (98,101
            )Effect
      of foreign currency translation on cash and cash
    equivalents
            
            
            (122
            )
            
            
            (689
            )Net
      (decrease)/increase in cash and cash equivalents
            
            
            (610,354
            )
            
            
            270,837Cash
      and cash equivalents, beginning of period
            
            
            2,624,780
            
            
            
            495,060Cash
      and cash equivalents, end of period
            
            $
            2,014,426
            
            
            $
            765,897Supplemental
      disclosures for cash flow information :-Cash paid for
:-Income taxes
            
            $
            27,151
            
            
            $
            42,598







See the
accompanying notes to condensed consolidated financial
statements


3





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








1.          
  Corporation information





(a)
            Xinyinhai
      Technology, Ltd. (“Xinyinhai” or the “Company”) was incorporated in Utah
      on October 18, 1985.  It currently has two subsidiaries, Winner
      Sea Group Limited (“Winner Sea”) and Harbin Golden Sea Technology Printing
      Co., Ltd. (“Harbin Golden Sea”).





Winner
Sea is a business company organized under the laws of the British Virgin Islands
on January 12, 2006.  It has conducted no business and is a holding
company whose only asset is 90% equity interest in Harbin Golden
Sea.  Ms. Xie Guihong, a director of the Company, owns the remaining
10% equity interest in Harbin Golden Sea.





Harbin
Golden Sea is a company located in Harbin City, Heilongjiang Province, the
People’s Republic of China (“PRC”).  Founded in 1998, Harbin Golden
Sea has developed into a leading participant in the PRC’s financial note
printing industry.  It is one of the companies to which the PRC
government has issued the Special Industry Operating Permit and the Government
Securities and Documents Duplicating Permit, which are the licenses required in
order to be engaged in printing bank vouchers in the PRC.





The
Company ended its development stage after the share exchange transaction as
detailed in note 1(b) to the financial statements.





(b)
            On
      June 29, 2006, the Company executed a share exchange agreement (the “Share
      Exchange”) with the stockholders of Winner Sea whereby the stockholders of
      Winner Sea exchanged all their Winner Sea shares for 18,000,000 shares of
      the Company’s common stock, representing 98.3% of the then outstanding
      stock of the Company.





The
purchase method under reverse takeover accounting has been applied for the Share
Exchange.  These consolidated financial statements issued under the
name of the legal parent, Xinyinhai, are a continuation of the financial
statements of Winner Sea, which include Winner Sea’s majority owned subsidiary
Harbin Golden Sea.








2.           Description
of business





The
Company, through Harbin Golden Sea, is a leading participant in PRC’s financial
notes printing industry.  It provides printing services whose quality
equals the highest standards worldwide and imports state-of-the-art printing
equipment from overseas that is installed on its advanced software systems, such
as anti-falsification software.





The
Company also earned approximately 7% of its revenue for the current reporting
period from its position as a distributor of plasma arc cutting machinery and
consumable parts.  The plasma arc cutting systems are designed to
provide metal workers with clean cuts for metal work that permits little
tolerance for error, and are well-known worldwide.


4





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








3.            Summary
of significant accounting policies





Basis of presentation and
consolidation





The
accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission (the “SEC”) including the instructions to
Form 10-Q and Regulation S-X.  Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles in the United States of America
have been condensed or omitted from these statements pursuant to such rules and
regulation and, accordingly, they do not include all the information and notes
necessary for comprehensive consolidated financial statements and should be read
in conjunction with our audited consolidated financial statements for the year
ended December 31, 2009, included in our Annual Report on Form 10-K for the year
ended December 31, 2009.





In the
opinion of the management of the Company, all adjustments, which are of a normal
recurring nature, necessary for a fair statement of the results for the three
months and nine months periods have been made.  Results for the
interim period presented are not necessarily indicative of the results that
might be expected for the entire fiscal year.  The condensed
consolidated financial statements include the accounts of the Company and its
subsidiaries.  All significant inter-company accounts and transactions
have been eliminated in consolidation.





Use of
estimates





In
preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the condensed
consolidated financial statements, as well as the reported amounts of revenues
and expenses during the reporting periods.  These accounts and
estimates include, but are not limited to, the valuation of accounts receivable,
inventories and the estimation on useful lives of property, plant and
equipment.  Actual results could differ from those
estimates.





Concentrations of credit
risk





Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and cash equivalents and trade
receivable.  As of March 31, 2010 and December 31, 2009,
substantially all of the Company’s cash and cash equivalents were held by major
financial institutions located in the PRC, which management believes are of high
credit quality.  With respect to trade receivables, the Company
extends credit based on an evaluation of the customer’s financial condition,
generally without requiring collateral.  The Company maintains an
allowance for doubtful accounts of trade receivables.


5





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








3.         
  Summary of significant accounting policies (Cont’d)





Concentrations of credit
risk (Cont'd)




During
the reporting periods, customers representing 10% or more of the Company’s
consolidated sales are :-





Three
      months ended
              March
      31,
              (Unaudited)2010
            
            
            2009Company
      A
            
            $
            357,771
            
            
            $
            208,696Company
      B
            
            
            352,812
            
            
            
            354,393Company
      C
            
            
            234,165
            
            
            
            450,716Company
      D
            
            
            127,425
            
            
            
            326,131$
            1,072,173
            
            
            $
            1,339,936





Cash and cash
equivalents





Cash and
cash equivalents include all cash, deposits in banks and other highly liquid
investments with initial maturities of three months or less.  As of
March 31, 2010 the cash and cash equivalents were denominated in Renminbi
(“RMB”) and are not freely convertible into foreign currencies.





Trade
receivables





The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts.  An allowance for doubtful
accounts is established and recorded based on managements’ assessment of the
credit history with the customers and current relationships with
them.  Additional specific provision will be made against trade
receivables to the extent that they are considered to be doubtful.





Bad debts
are written off when identified.  The Company does not accrue interest
on trade receivables.





Inventories





Inventories
are stated at the lower of cost or market.  Cost is determined on a
weighted average basis and includes all expenditures incurred in bringing the
goods to the point of sale and putting them in a saleable
condition.  In assessing the ultimate realization of inventories, the
management makes judgments as to future demand requirements compared to current
or committed inventory levels.


6





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








3.       
    Summary of significant accounting policies
(Cont’d)





Property, plant and
equipment





Property,
plant and equipment are stated at cost less accumulated
depreciation.  Cost represents the purchase price of the asset and
other costs incurred to bring the asset into its existing use.





Depreciation
is provided to write off the cost of the assets to the estimated residual value
on a straight-line basis over their estimated useful lives as
follows:





Depreciable
      lifeBuildings
            20
      yearsPlant
      and machinery
            10
      yearsFurniture,
      fixtures and equipment
            5
      yearsMotor
      vehicles
            10
      years





Maintenance
or repairs are charged to expense as incurred.  Upon sale or
disposition, the applicable amounts of asset cost and accumulated depreciation
are removed from the accounts and the net amount less proceeds from disposal is
charged or credited to income.





Land-use-right





Land-use-right
is stated at cost less accumulated amortization.  Amortization is
provided using the straight-line method over the terms of the lease of 39
years.





Noncontrolling
interests





Noncontrolling
interests result from the consolidation of 90% owned subsidiary, Harbin Golden
Sea, where the Company has control over its operations.





Stock-based
compensation





The
Company adopted the ASC 718, "Share-Based Payment" (previously SFAS No. 123R),
using the modified prospective method.  Under ASC 718, equity
instruments issued to service providers for their services are measured at the
grant-date fair value and recognized in the statement of income and
comprehensive income over the vesting period.


7





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








3.            Summary
of significant accounting policies (Cont’d)





Revenue
recognition





The
Company derives revenues from the sales of printed products and trading of
equipment.  The Company recognizes its revenues net of related
business taxes and value added taxes and when persuasive evidence of an
arrangement exists, transfer of title has occurred or services have been
rendered, the selling price is fixed or determinable and collectibility is
reasonably assured.





(a)
            The
      Company recognizes revenue from the sale of printed forms upon delivery to
      the customers and the transfer of title and risk of
      loss.  Because the majority of products are customized to meet
      customer specifications, product returns are not
    significant.





(b)
            Trading
      of equipment, plasma arc cutting machines, does not require significant
      modification or customization.  Revenue from sale of the
      equipment and associated spare parts is recognized at the time of delivery
      of products to customers and when the title and ownership are passed to
      the customers.





Income
taxes





The
Company uses the asset and liability method of accounting for income taxes
pursuant to ASC 740 “Income
Taxes” (previously SFAS No. 109).  Under the asset and
liability method of ASC 740, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary differences between
the financial statements carrying amounts of existing assets and liabilities and
loss carryforwards and their respective tax bases.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.





Foreign currency
translation





The
functional currency of the Company and Winner Sea is United States dollars
(“US$”) while that of Harbin Golden Sea is RMB.  The Company maintains
its financial statements in the functional currency.  Monetary assets
and liabilities denominated in currencies other than the functional currency are
translated into the functional currency at rates of exchange prevailing at the
balance sheet date.  Transactions denominated in currencies other than
the functional currency are translated into the functional currency at the
exchanges rates prevailing at the dates of the transaction.  Exchange
gains or losses arising from foreign currency transactions are included in the
determination of net income for the respective periods.





For
financial reporting purposes, the financial statements of Harbin Golden Sea,
which are prepared using the functional currency, have been translated into
US$.  Assets and liabilities are translated at the exchange rates at
the balance sheet dates and revenue and expenses are translated at the average
exchange rates and stockholders’ equity is translated at historical exchange
rates.  Any translation adjustments resulting are not included in
determining net income but are included in foreign exchange adjustment to other
comprehensive income, a component of stockholders’ equity.  Both of
the exchange rates in effect at March 31, 2010 and December 31, 2009 were RMB1
for US$0.1467.  There is no significant fluctuation in exchange rate
for the conversion of RMB to US$ after the balance sheet date.


8





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








3.       
    Summary of significant accounting policies
(Cont’d)





Fair value of financial
instruments





The
carrying values of the Company’s financial instruments, including cash and cash
equivalents, trade and other receivables, customer deposits, collateralized bank
loan, and trade and other payables approximate their fair values due to the
short-term maturity of such instruments.





It is the
management’s opinion that the Company is not exposed to significant foreign
currency, interest, price or credit risks arising from these financial
instruments.





Comprehensive
income





The
Company has adopted ASC 220 “Comprehensive Income”
(previously SFAS No. 130), which establishes standards for reporting and display
of comprehensive income, its components and accumulated
balances.  Components of comprehensive income include net income and
foreign currency translation adjustments.





Basic and diluted earnings
per share





The
Company reports basic earnings per share in accordance with ASC 260, “Earnings
Per Share”, (previously SFAS No. 128).  Basic earnings per share is
computed using the weighted average number of shares outstanding during the
periods presented.  The weighted average number of shares of the
Company represents the common stock outstanding during the periods.





Recently issued accounting
standards





Accounting for Transfers of
Financial Assets (Included in amended Topic ASC 860 “Transfers and Servicing”,
previously SFAS No. 166, “Accounting for Transfers of Financial Assets - an
Amendment ofFinancial Accounting Standard Board (“FASB”)Statement No. 140.”).The
amended topic addresses information a reporting entity provides in its financial
statements about the transfer of financial assets; the effects of a transfer on
its financial position, financial performance, and cash flows; and a
transferor’s continuing involvement in transferred financial assets. Also, the
amended topic removes the concept of a qualifying special purpose entity, limits
the circumstances in which a transferor derecognizes a portion or component of a
financial asset, defines participating interest and enhances the information
provided to financial statement users to provide greater transparency. The
amended topic is effective for the first annual reporting period beginning after
November 15, 2009 and will be effective for us as of January 1, 2010. The
adoption of this amended topic has no material impact on the Company’s financial
statements.


9





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








3.           Summary
of significant accounting policies (Cont’d)





Recently issued accounting
standards (Cont'd)





Consolidation of Variable Interest
Entities - Amended (Included in amended Topic ASC 810 “Consolidation”,
previously SFAS 167 “Amendments to FASB Interpretation No. 46(R)”). The
amended topic requires an enterprise to perform an analysis to determine the
primary beneficiary of a variable interest entity; to require ongoing
reassessments of whether an enterprise is the primary beneficiary of a variable
interest entity and to eliminate the quantitative approach previously required
for determining the primary beneficiary of a variable interest entity. The
amended topic also requires enhanced disclosures that will provide users of
financial statements with more transparent information about an enterprise’s
involvement in a variable interest entity. The amended topic is effective for
the first annual reporting period beginning after November 15, 2009 and will be
effective for us as of January 1, 2010. The adoption of this amended topic has
no material impact on the Company’s financial statements.





The FASB
issued Accounting Standards Update (ASU) No. 2009-13, Revenue Recognition (Topic
605): Multiple Deliverable Revenue Arrangements - A Consensus of the FASB
Emerging Issues Task Force.” This update provides application guidance on
whether multiple deliverables exist, how the deliverables should be separated
and how the consideration should be allocated to one or more units of
accounting. This update establishes a selling price hierarchy for determining
the selling price of a deliverable. The selling price used for each deliverable
will be based on vendor-specific objective evidence, if available, third-party
evidence if vendor-specific objective evidence is not available, or estimated
selling price if neither vendor-specific or third-party evidence is available.
The Company will be required to apply this guidance prospectively for revenue
arrangements entered into or materially modified after January 1, 2011; however,
earlier application is permitted. The management is in the process of evaluating
the impact of adopting this ASU update on the Company’s financial
statements.





The FASB
issued ASU No. 2010-06 “Improving
Disclosures about Fair Value Measurements.” The ASU amends
previously issued authoritative guidance and requires new disclosures and
clarifies existing disclosures and is effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the rollforward activity in
Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010 and for interim periods within those
fiscal years. As this requires only additional disclosures, the guidance will
have no impact on our financial position or results of operations.





The FASB
issued ASU No. 2010-02, “Consolidation (Topic 810) Accounting and Reporting for
Decreases in Ownership of a Subsidiary - a Scope Clarification”. This amendment
affects entities that have previously adopted Topic 810-10 (formally SFAS 160).
It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes
the potential conflict between guidance in that Subtopic and asset derecognition
and gain or loss recognition guidance that may exist in other US GAAP. An entity
will be required to follow the amended guidance beginning in the period that it
first adopts FAS 160 (now included in Subtopic 810-10). For those entities that
have already adopted FAS 160, the amendments are effective at the beginning of
the first interim or annual reporting period ending on or after December 15,
2009. The amendments should be applied retrospectively to the first period that
an entity adopted FAS 160. The adoption of this ASU update has no material
impact on the Company’s financial statements.


10





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








3.           
Summary of significant accounting policies (Cont’d)





Recently issued accounting
standards (Cont'd)





In
February 2010, the FASB issued ASU 2010-09, Subsequent Events: Amendments to
Certain Recognition and Disclosure Requirements, which amends FASB ASC Topic
855, Subsequent Events. The update provides that SEC filers, as defined in ASU
2010-09, are no longer required to disclose the date through which subsequent
events have been evaluated in originally issued and revised financial
statements. The update also requires SEC filers to evaluate subsequent events
through the date the financial statements are issued rather than the date the
financial statements are available to be issued. The Company adopted ASU 2010-09
upon issuance. This update had no material impact on the financial position,
results of operations or cash flows of the Company.








4.     
      Finance costs





Three
      months ended
              March
      31,
              (Unaudited)2010
            
            
            2009Bank
      interest
            
            
            38,936
            
            
            
            -Bank
      charges
            
            
            270
            
            
            
            198$
            39,206
            
            
            $
            198








5.        
    Income taxes





The
Company is subject to the United States of America tax law at a tax rate of
34%.  It had no taxable income for income tax purposes for the three
months ended March 31, 2010 and 2009.  The Company has not provided
deferred taxes on undistributed earnings of its non-U.S. subsidiaries as of
March 31, 2010, as it is the Company’s current policy to reinvest these earnings
in non-U.S. operations.





Winner
Sea was incorporated in the BVI and, under the current law of the BVI, it is not
subject to income taxes.





Harbin
Golden Sea is subject to PRC enterprise income tax that is computed according to
the relevant laws and regulations in the PRC.  It is registered as a
new and high technology enterprise in the Harbin region of the PRC and is
entitled to a 50% preferential reduction of the income tax rate.  On
May 1, 2006, Harbin Golden Sea became a wholly-owned foreign enterprise under a
reorganization plan and the Taxation Bureau of Harbin City approved its income
tax exemption.  The new arrangement of exemption began in the first
two years after Harbin Golden Sea became profitable, being 2006 and 2007, and a
50% income tax reduction for the following three years, being 2008 through
2010.


11





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








5.    
        Income taxes
(Cont'd)





On March
16, 2007, the PRC’s legislative body, the National People’s Congress, adopted
the unified enterprise income tax ("EIT") Law.  This new tax law
replaces the existing separate income tax laws for domestic enterprises and
foreign-invested enterprises and became effective on January 1,
2008.  Under the new tax law, a unified income tax rate is set at 25%
for both domestic enterprises and foreign-invested
enterprises.  However, there will be a transition period for
enterprises, whether foreign-invested or domestic, that are currently receiving
preferential tax treatments granted by relevant tax
authorities.  Enterprises that are subject to an enterprise income tax
rate lower than 25% may continue to enjoy the lower rate and will transit into
the new tax rate over a five year period beginning on the effective date of the
EIT Law.  Enterprises that are currently entitled to exemptions for a
fixed term will continue to enjoy such treatment until the exemption term
expires.  Preferential tax treatment will continue to be granted to
industries and projects that qualify for such preferential treatments under the
new tax law.  Accordingly, as approved by the Taxation Bureau of
Harbin City, Harbin Golden Sea was still entitled to two years’ exemption from
the first profit making calendar year of operations after offset of accumulated
taxable losses, followed by a 50% tax reduction for the immediate next three
calendar years (“tax holiday”).  The tax holiday of Harbin Golden Sea
commenced in the fiscal financial year of 2006.  Accordingly, Harbin
Golden Sea was subject to preferential tax rate of 9% for 2008, 10% for 2009 and
11% for 2010 respectively.








6.        
    Earnings per share - basic and diluted





The basic
and diluted earnings per share is calculated using the net income attribute to
Xinyinhai Technology, Ltd. common stockholders and the weighted average number
of common stock outstanding during the reporting periods.





The basic
and diluted earnings per share are the same as the warrants granted to external
financial advisors were anti-dilutive.








7.       
     Inventories





March
      31,
            
            
            December
      31,2010
            
            
            2009(Unaudited)
            
            
            (Audited)Raw
      materials
            
            $
            1,166,459
            
            
            $
            1,033,203Work
      in progress
            
            
            217,646
            
            
            
            209,966Finished
      goods
            
            
            671,887
            
            
            
            464,7622,055,992
            
            
            $
            1,707,931




12





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








8.  
         Other receivable, deposits
and prepayments and loans to third parties





(a)           Other
receivable, deposits and prepayments





March
      31,
            
            
            December
      31,2010
            
            
            2009(Unaudited)
            
            
            (Audited)Deposits
            
            $
            117,528
            
            
            $
            189,126Retention
      money
            
            
            14,670
            
            
            
            14,670Advances
      to staff
            
            
            132,896
            
            
            
            110,832Prepayments
            
            
            5,938
            
            
            
            1,662Other
      receivables
            
            
            36,159
            
            
            
            36,159$
            307,191
            
            
            $
            352,449





(b)           Loans
to third parties





On July
1, 2009, Harbin KeHai Trade Co., Ltd. (“Harbin KeHai”) and Harbin Golden Sea
entered into a loan agreement.  Pursuant to the loan agreement, the
amount is unsecured, interest-free and repayable within 6 months after the
drawdown date.  During the months of January, February and March 2010,
Harbin KeHai had drawn down RMB1,348,726 (equivalent to $197,858) and repaid a
total amount of RMB222,932 (equivalent to $32,704), resulting in an outstanding
loan balance of RMB2,787,335 (equivalent to $408,902) as of March 31,
2010.





On
October 15, 2009, Heilongjiang Jindi Real Estate Development Co., Ltd.
(“Heilongjiang Jindi”) and Harbin Golden Sea entered into a loan
agreement.  Mr. Xia Songlin, the accountant of Harbin Golden Sea, is
one of the shareholders of Heilongjiang Jindi.  Pursuant to the loan
agreement, the amount is unsecured, interest-free and repayable within 6 months
after the drawdown date.  During the months of January and March 2010,
Heilongjiang Jindi had drawn down a total amount of RMB1,530,000 (equivalent to
$224,451) and repaid the amount of RMB30,000 (equivalent to $4,401), resulting
in an outstanding loan balance of RMB32,500,000 (equivalent to $4,767,750) as of
March 31, 2010.





On
November 15, 2009, Heilongjiang BaoSen Century Pharmaceutical Co., Ltd.
(“Heilongjiang BaoSen”) and Harbin Golden Sea entered into a loan
agreement.  Pursuant to the loan agreement, the amount is unsecured,
interest-free and repayable within 6 months after the drawdown
date.  Heilongjiang BaoSen had an outstanding loan balance of
RMB600,000 (equivalent to $88,020) as of March 31, 2010 and December 31,
2009.





In the
opinion of the management of the Company, the purpose of the short-term,
interest-free loans to third parties is to develop strategic business
relationships within the Chinese business community.  As of March 31,
2010, a total of loan amounts of $5,264,672 were made to Harbin KeHai,
Heilongjiang Jindi and Heilongjiang BaoSen in anticipation of future benefits to
trading, real estate and pharmaceutical industries
respectively.


13





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








9.         
  Property, plant and equipment, net





March
      31,
            
            
            December
      31,2010
            
            
            2009(Unaudited)
            
            
            (Audited)Buildings
            
            $
            4,187,618
            
            
            $
            4,158,278Plant
      and machinery
            
            
            2,952,575
            
            
            
            2,930,257Motor
      vehicles
            
            
            438,605
            
            
            
            432,914Furniture,
      fixtures and equipment
            
            
            92,613
            
            
            
            92,6137,671,411
            
            
            
            7,614,062Accumulated
      depreciation
            
            
            (2,120,187
            )
            
            
            (2,012,657
            )Property,
      plant and equipment, net
            
            $
            5,551,224
            
            
            $
            5,601,405








10.           Collateralized
bank loans





March
      31,
            
            
            December
      31,2010
            
            
            2009(Unaudited)
            
            
            (Audited)Bank
      loans repayable within 1 year
            
            $
            2,934,000
            
            
            $
            2,934,000





The above
bank loans are denominated in RMB and carry an average interest rate at 5.31%
per annum.  The bank loan as of March 31, 2010 was collateralized by
land use rights and buildings with carrying values of $1,035,193 and $3,113,915
respectively.








11.           Other
payables and accrued liabilities





March
      31,
            
            
            December
      31,2010
            
            
            2009(Unaudited)
            
            
            (Audited)Other
      payables
            
            $
            37,444
            
            
            $
            132,534Accrued
      statutory staff welfare and salaries
            
            
            23,106
            
            
            
            28,982Accrued
      liabilities
            
            
            51,160
            
            
            
            47,160$
            111,710
            
            
            $
            208,676




14





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)








12.           Commitments
and contingencies





The
Company had no commitments or contingencies liabilities as of March 31, 2010 and
December 31, 2009.








13.           Stockholders’
equity





Common
stock





No.
      of shares
            
            
            AmountAuthorized:-Common stock at USD0.001 par
      value
            
            
            40,000,000
            
            
            $
            40,000Issued
      and outstanding:-As of March 31, 2010 and
      December 31, 2009
            
            
            19,484,029
            
            
            $
            19,484








14.           Defined
contribution plan





The
Company has a defined contribution plan for all its qualified employees in the
PRC.  The Company and its employees are each required to make
contributions to the plan at the rates specified in the plan.  The
only obligation of the Company with respect to retirement scheme is to make the
required contributions under the plan.  No forfeited contribution is
available to reduce the contribution payable in future years.  The
defined contribution plan contributions were charged to the statement of
operations.  The Company contributed $771 and $3,206 for the three
months ended March 31, 2010 and 2009 respectively.


15





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)





15.           Segment
information





The
Company currently operates in two reportable segments, Sales of printed products
and trading of equipment.  The accounting policies of the segments are
the same as described in the summary of significant accounting
policies.  The Company evaluates segment performance based on income
from operations.  As a result, the components of operating income for
one segment may not be comparable to another segment.  The following
is a summary of the Company’s segment information:





Printing
      Products
            
            
            Trading
      of Equipment
            
            
            TotalThree
      months ended March 31,
              (Unaudited)
            
            
            Three
      months ended March 31,
              (Unaudited)
            
            
            Three
      months ended March 31,
              (Unaudited)2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009Revenues
            
            $
            2,027,210
            
            
            $
            1,860,077
            
            
            $
            147,168
            
            
            $
            536,904
            
            
            $
            2,174,378
            
            
            $
            2,396,981Segment
      profit/(loss)
            
            $
            588,434
            
            
            $
            468,032
            
            
            $
            (25,282
            )
            
            $
            46,918
            
            
            $
            563,152
            
            
            $
            514,950March
      31,
            
            
            December
      31,
            
            
            March
      31,
            
            
            December
      31,
            
            
            March
      31,
            
            
            December
      31,2010
            
            
            
            2009
            
            
            
            2010
            
            
            
            2009
            
            
            
            2010
            
            
            
            2009(Unaudited)
            
            
            (Audited)
            
            
            (Unaudited)
            
            
            (Audited)
            
            
            (Unaudited)
            
            
            (Audited)Segment
      assets
            
            $
            11,974,165
            
            
            $
            11,658,140
            
            
            $
            770,681
            
            
            $
            767,542
            
            
            $
            12,744,846
            
            
            $
            12,425,682





A
reconciliation is provided for unallocated amounts relating to corporate
operations which is not included in the segment information.





Three
      months ended March 31,
              (Unaudited)2010
            
            
            2009Total
      consolidated revenue
            
            $
            2,174,378
            
            
            $
            2,396,981Total
      income for reportable segments
            
            $
            563,152
            
            
            $
            514,950Unallocated
      amounts relating to operations :-General and administrative
      expenses
            
            
            (9,056
            )
            
            
            -Amortization of prepaid
      expenses
            
            
            -
            
            
            
            (36,806
            )Income
      before income taxes and noncontrolling interests
            
            $
            554,096
            
            
            $
            478,144








March
      31,
            
            
            December
      31,2010
            
            
            2009(Unaudited)
            
            
            (Audited)AssetsTotal
      assets for reportable segments
            
            $
            12,744,846
            
            
            $
            12,425,682Unallocated
      amounts relating to operations :-Building and
      land-use-right
            
            
            1,042,448
            
            
            
            1,046,590Other
    receivables
            
            
            36,160
            
            
            
            36,160Loan to third
      parties
            
            
            5,264,672
            
            
            
            4,879,468Cash and cash
      equivalents
            
            
            3,011
            
            
            
            3,042Total
            
            $
            19,091,137
            
            
            $
            18,390,942





All of
the Company’s long-lived assets and customers are located in the
PRC.  Accordingly, no geographic information is
presented.


16





XINYINHAI
TECHNOLOGY, LTD.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(Stated
in US Dollars)





16.           Related
party transactions





The
Company had no material transactions with its related parties during the
reporting periods.








17.           Subsequent
events





The
Company has evaluated all subsequent events and determined that there were no
subsequent events or transactions that required recognition or disclosure in the
consolidated financial statements.


17


ITEM
      2.
            MANAGEMENT
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Results of Operations




The recent global recession reduced
demand for capital goods in China.  Since late 2008, this situation
has had a negative impact on both of our business segments.  In the
first quarter of 2010, which ended on March 31, 2010, the effect of the
recession was most dramatic in our equipment distribution business, where
revenues declined by 73% to $147,168 during the first quarter of 2010 from
$536,904 during the first quarter of 2009 (which was, in turn, 45% lower than in
the first quarter of 2008).  The decline in equipment distribution
reflected delays in the construction of new manufacturing facilities in China,
as potential customers wait to see whether demand for their products is
revived.  The decline reversed a surge in equipment sales that we had
experienced in 2008, and reduced this business segment to a 7% contribution to
our overall revenue during the first quarter of 2010, a level below even the 13%
level we experienced in 2007 and 2006.  The future of this business
segment will depend, in part, on the success of the economic stimulus initiated
by the Government of China.




Revenue from our printing business, on
the other hand, was modestly higher, increasing by 9% to $2,027,210 during the
first quarter of 2010, compared to $1,860,077 during the first quarter of
2009.  The printing segment of our business had declined in 2008 and
2009, in part due to the weakening of the Chinese banking industry, as many of
our customers were conserving cash pending stabilization of the international
credit markets.  The decline also occurred because we moved our entire
production operation to a larger facility at the end of 2008.  The
move necessitated delays in production, while our equipment was in transit,
which in turn interfered with our sales effort, as our customers delayed orders
until we could demonstrate that our facilities were up and
running.    Today, however, our new facility is fully
operational, and we expect the traditional growth of our printing business to be
renewed.




Over the longer term, the continued
revenue growth in our printing services business will require further capital
investment.  As China’s banking industry rapidly modernizes, our
customers demand additional product offerings similar to those available to the
banking industry in Europe and the U.S.  Our ability to meet that
demand will determine the long term growth of our
business.  Immediately, the development of these new products will
require substantial capital investment.  For that purpose, we secured
a $2.9 million collateralized loan during the third quarter of 2009, and applied
$748,379 to improvements in our plant and equipment during the second half of
the year.  The growth in first quarter printing revenue indicates a
first step toward realizing the benefit of that investment.  In
addition, our backlog of firm orders at March 31, 2010 for 2010 delivery was
approximately double the backlog level at March 31, 2009, indicating that we
should be able to sustain growth for the remainder of the current
year.




The 37.3% gross margin realized by our
subsidiary, Harbin Golden Sea, on sales in the first three months of 2010 was
only slightly better than the 36.5% gross margin realized in first three months
of 2009.  The gross margin was adversely affected by the decline of
our equipment business, which operated at a loss during the first quarter of
2010.  However, margins from our printing business also remained lower
than optimal.  Our business plan contemplates that gross margin from
printing services will average approximately 45%, albeit within a
range of 35% to 50%, depending on the components of the
business.  During the past two years, however, three factors caused
margins from printing operations to fall below that standard:


18




·
            the
      disruption in the Chinese banking industry forced us to price our products
      more aggressively;




·
            our
      move at the end of 2008 to a larger manufacturing facility with upgraded
      equipment increased our annual depreciation expense by more than 50%;
      and




·
            the
      reduction in our sales volume led to inefficient use of the new larger
      facility.




As the Chinese banking industry is
moving towards stabilization, our expectation is that we will be able to revive
our sales growth and return our printing operations to the levels of
profitability that they sustained prior to the international credit
crisis.




We operated substantially more
efficiently during the first quarter of 2010 that during the prior year’s
quarter.  Total expenses during the first quarter of 2010 were
$220,280, a 46% decline from the $407,181 in operating expenses that we incurred
during the first quarter of 2009.  The decline was attributable to our
continuing efforts to achieve efficiencies in our operations, leading to a
decrease of $50,277 in our selling and distribution expenses and $136,624 in our
general and administrative expenses for the three months ended March 31, 2010
compared to the three months ended March 31, 2009. When demand for our products
returns to prior levels, we will endeavor to maintain the efficiencies that we
implemented during the current slow period.




Our increased efficiency was sufficient
to offset the reduction in our revenues from the first quarter of 2009 to the
first quarter of 2010.  Income from operations, therefore, increased
by 26%, from $468,772 to $590,808.  During the third quarter of 2009,
however, we obtained a one-year bank loan in the amount of $2.9 million, secured
by a portion of our real property.  This caused us to incur $39,206 in
finance costs in the first quarter of 2010, compared to only $198 in the first
quarter of 2009.  We will continue to incur finance costs related to
the loan until it matures in the third quarter of 2010, and thereafter if we
decide to refinance the loan.




Our
income before income taxes and noncontrolling interests for the first quarter of
2010, therefore, was $554,096, compared to $478,144 in the first quarter of
2009.  Commencing in 2008, we became subject to preferential Chinese
income tax rates of 9% for 2008, 10% for 2009 and 11% for 2010,
respectively.  As a result of this government allowance, we were taxed
at a 10% rate in the first quarter of 2009, causing an expense of $64,674, and
at an 11% rate in the first quarter of 2010, cause an expense of $64,245. In
2011 our income will be taxed at the national rate of 25%.




The
operations of our subsidiary, Harbin Golden Sea, produced $498,880 in income
during the first quarter of 2010.  However, because we own only 90% of
Harbin Golden Sea, we deducted a “noncontrolling interest” of $49,888 before
recognizing net income on our Consolidated Statements of Income and
Comprehensive Income.  After that deduction and taking into account
the income and expenses incurred by the parent corporation, our net income for
the first quarter of 2010 was $439,963, representing $.023 per share, a 20%
increase from the net income we achieved in the first quarter of
2009.


19


Liquidity
and Capital Resources




Since our subsidiary, Harbin Golden
Sea, was organized in 1998, the growth of its operations has been funded by
contributions to capital by our Chairman, Mrs. Tian.  With the $2.4
million that she invested, Harbin Golden Sea built its facilities and funded its
operations, resulting in profitable operations for the past several
years.  As a result, at March 31, 2010, we had working capital
totaling $8,561,560 (an increase of $547,027 since the end of 2009) and no
long-term liabilities.




However,
Harbin Golden Sea’s business plan calls for significant investment in the growth
of Harbin Golden Sea during the next twelve months.  We are purchasing
new equipment for our new production facility.  We also plan to invest
in the development of additional product lines.  To accomplish those
goals, during the third quarter of 2009, we obtained a $2.9 million bank loan
collateralized by our real property.  The loan bears interest at 5.31%
per annum and is due in the third quarter of 2010.  We are utilizing
the borrowed funds to implement the capital improvements necessary for our
growth.  Because the loan amount is substantially less than the value
of our real property and because we are operating profitably, we expect to be
able to refinance the loan when it matures.




Until our
sales return to pre-recession levels, a rapid expansion of our facilities would
only increase depreciation expense and operational inefficiency.  For
that reason, the largest portion of our working capital is now invested in
developing strategic relationships that will, we hope, benefit us in the
future.  Within the Chinese business community, the extension of
interest-free loans is a normal method of securing good relations and future
opportunities.  For that reason, as of March 31, 2010, we have
extended a total of $5,264,672 in short-term, interest-free loans to parties
that have no other affiliation with Harbin Golden Sea or its
management.  The largest loan, $4,767,750, has been made to
Heilongjiang Jindi Real Estate Development Co., Ltd., in anticipation of future
benefits to our real estate assets.  We also had relatively small
loans outstanding to a trading company and a company in the pharmaceutical
industry.  All of the loans are due within six months after we fund
the loan.




Our operations during the first quarter
of 2010 used $167,698 in net cash.  The disparity between our net
income and net cash from operations was primarily attributable to the fact that
during the quarter we increased our inventories by $347,942 in anticipation of
near-term growth, and also increased our outstanding trade receivables by
$698,553.  The increase in our trade receivables was primarily a
reflection of the timing of sales, and did not reflect any adjustment in our
credit policies.  We anticipate, therefore, that our trade receivables
will increase or decrease in future periods in proportion to the increases or
decreases in our sale revenue.




With the
proceeds of our bank loan, we held $2.0 million in cash and equivalents at March
31, 2010.  We will have no debt payment obligations until the bank
line comes due in the third quarter.  And, in accordance with
customary banking practice in China, we expect that the bank loan will be
extended when it reaches maturity, provided that our financial results are
satisfactory to the bank.  For that reason, we expect our liquidity
will be sufficient in the next year to fund our ongoing operations as well as
our near-term growth.




Off-Balance
Sheet Arrangements




We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a
current or future effect on our financial condition or results of
operations.


20




ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not applicable.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





Evaluation of Disclosure Controls
and Procedures.  Tian Ling, our Chief Executive Officer, and Du
Song, our Chief Financial Officer, carried out an evaluation of the
effectiveness of the Company’s disclosure controls and procedures as of March
31, 2010.  Pursuant to Rule13a-15(e) promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, “disclosure
controls and procedures” means controls and other procedures that are designed
to insure that information required to be disclosed by the Company in the
reports that it files with the Securities and Exchange Commission is recorded,
processed, summarized and reported within the time limits specified in the
Commission’s rules.  “Disclosure controls and procedures” include,
without limitation, controls and procedures designed to insure that information
the Company is required to disclose in the reports it files with the Commission
is accumulated and communicated to our Chief Executive Officer and Chief
Financial Officer as appropriate to allow timely decisions regarding required
disclosure.  Based on his evaluation, Mrs. Tian and Ms. Du concluded
that the Company’s system of disclosure controls and procedures was effective as
of March 31, 2010 for the purposes described in this paragraph.





Changes in Internal
Controls.  There was no change in internal controls over
financial reporting (as defined in Rule 13a-15(f) promulgated under the
Securities Exchange Act or 1934) identified in connection with the evaluation
described in the preceding paragraph that occurred during the Company’s first
fiscal quarter that has materially affected or is reasonably likely to
materially affect the Company’s internal control over financial
reporting.





PART
II   -   OTHER INFORMATION





Item
1A      Risk Factors





There have been no material changes
from the risk factors disclosed in response to Item 1A to Part I of our Annual
Report on Form 10-K for the year ended December 31, 2009.





Item
6.        Exhibits




31.1
            Rule
      13a-14(a) Certification – Chief Executive Officer31.2
            Rule
      13a-14(a) Certification – Chief Financial Officer32
            Rule
      13a-14(b) Certification





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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.





XINYINHAI
      TECHNOLOGY, LTD.Date:
      May 14, 2010
            By:
      /s/ Tian
      LingTian
      Ling, Chief Executive OfficerBy:
      /s/ Du
      SongDu
      Song, Chief Financial Officer








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