U. S. Securities and Exchange Commission Washington, D. C. 20549  FORM 10-QSB  [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2006  [   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____  Commission File No. 0-51012   XINYINHAI TECHNOLOGY, LTD.(Name of Small Business Issuer in its Charter)Utah87-0427336(State of Other Jurisdiction of
incorporation or organization)(I.R.S.  Employer
Identification No.)  41-40 Union Street, Suite 6J, Flushing, NY                                                                                          11355 (Address of principal executive offices)(Zip Code)718-359-2682(Registrants telephone number including area code)  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.     Yes [X]         No [  ]  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: November 17, 2006 Common Voting Stock: 18,417,899  Transitional Small Business Disclosure Format (check one):      Yes [   ]     No [X]  1     XINYINHAI TECHNOLOGY, LTD.(FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSeptember 30,2006ASSETSCurrent Assets:Cash and cash equivalents$1,159,551Accounts receivable, net934,165Prepaid expenses464,398Inventory (Note 4)556,318Total current assets3,114,433Property and Equipment, net (Note 5)1,813,680Contracts deposit25,573Total Assets$4,953,686LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable and accrued expenses$252,052Others payable32,050Deferred revenue315,664Total Current Liabilities599,766Minority Interest444,434Stockholders' Equity:Common stock, $0.001 par value, 40,000,000 shares authorized;18,307,899 shares issued and outstanding as of September 30, 200618,307Additional Paid-in capital2,327,345Retained earnings1,392,455Accumulated other comprehensive income171,378Stockholders' Equity3,909,485Total Liabilities and Stockholders' Equity$4,953,686See Notes to Financial Statements  2    [xinyin10qsep06002.gif]   3    [xinyin10qsep06004.gif]  4  XINYINHAI TECHNOLGY, LTD. (FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 2006 (Unaudited)  [xinyin10qsep06006.gif]  5  XINYINHAI TECHNOLGY, LTD. (FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 2006 (Unaudited)  [xinyin10qsep06008.gif]  6  XINYINHAI TECHNOLGY, LTD. (FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 2006 (Unaudited)  [xinyin10qsep06010.gif]  7  XINYINHAI TECHNOLGY, LTD. (FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 2006 (Unaudited)  [xinyin10qsep06012.gif]  8  XINYINHAI TECHNOLGY, LTD. (FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 2006 (Unaudited)   [xinyin10qsep06014.gif]  9  XINYINHAI TECHNOLGY, LTD. (FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 2006 (Unaudited)    [xinyin10qsep06016.gif]  10  XINYINHAI TECHNOLGY, LTD. (FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 2006 (Unaudited)  [xinyin10qsep06018.gif]  11  XINYINHAI TECHNOLGY, LTD. (FORMERLY IRON STAR DEVELOPMENT, INC.) AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 2006 (Unaudited)   [xinyin10qsep06020.gif]  12    ITEM 2.  MANAGEMENT DISCUSSION AND ANALYSIS  Results of Operations Our revenue in the first nine months of 2006 increased by 69% over the revenue realized in the first nine months of 2005.  The increase was attributable to both our printing business (64% increase) and our equipment distribution business (84% increase).  The increase in printing revenue resulted primarily from our investment in added capacity during the year, which enabled us to market our services more aggressively.  The increase in distribution revenue was primarily the result of our acquisition of selling agents throughout China, which has opened a much larger market for the plasma arc cutting machines that we sell. Continued revenue growth in our printing services business will depend on whether we secure the capital needed to further expand our printing capacity.  Our production facilities are currently working near to capacity.  So an additional production line (estimate cost - $2,000,000) will be necessary if we are to sustain growth.  We are currently exploring financing possibilities, but have not yet received a commitment for the funds. The gross margin realized by our subsidiary, Harbin Yinhai Technology Development Company Limited (Harbin Yinhai) on sales in the first nine months of 2006 remained in the 30-31% range realized in the first nine months of 2005.  Although the gross margin for printing services declined from 40% to 36%, the decline was offset by an increase from 5% to 18% in the gross margin realized on equipment sales.  The decline in gross margin from printing primarily reflected the pricing of the particular contracts, which were particularly profitable in 2005.  Our expectation for the future is that our gross margin from printing services will stay in the area of 33%. Our gross margin from equipment distribution continues to lag behind its historical level, and will do so in the future.  In the nine months ended September 30, 2006 equipment sales produced gross margin of 18%, compared to 5% in the nine months ended September 30, 2005 and 23% in fiscal year 2004.  Gross margin from equipment sales fell in 2005 and 2006 primarily as a result of our use of selling agents, whose compensation is a reduction to our margin.  If we obtain the funding necessary to expand our printing capacity, we expect the printing portion of its business to grow faster than the equipment sales business.  If that occurs, overall gross margin should increase towards the 33% margin that printing has historically produced. Operating expenses as a percentage of revenue fell to 10.2% in the first nine months of 2006 (from 12.6% in the first nine months of 2005) primarily as a result of the fact that our selling expense increased by 25% while revenue increased by 69%.  The disparity between our fixed costs and our revenue reflected our ability to increase our production without a proportionate increase in our administrative overhead.  Similarly we expect that if we obtain the funds needed to increase our printing production capacity, the resulting increase in our revenue will not require a corresponding increase in administrative expense, with the exception that new investment in equipment will cause an increase in depreciation expense. The operations of our subsidiary, Harbin Yinhai, produced $1,224,960 in income for the nine months ended September 30, 2006.  However, because we own only 90% of Harbin Yinhai, we deducted a minority interest of $122,496 on our Statement of Operations.  After that deduction and taking into account the expenses incurred by the parent corporation, our net income for the nine months ended September 30, 2006 was $1,012,043, a 127% increase over net income for the first nine months of 2005.  Our business operates primarily in Chinese Renminbi, but we report our results in our SEC filings in  13    U.S. Dollars.  The conversion of our accounts from RMB to Dollars results in translation adjustments, which are reported as a middle step between net income and comprehensive income.  The net income is added to the retained earnings on our balance sheet; while the translation adjustment is added to a line item on our balance sheet labeled accumulated other comprehensive income, since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business.  In the nine months ended September 30, 2006, the effect of converting our financial results to Dollars was to add $74,108 to our comprehensive income.  Liquidity and Capital Resources Since our subsidiary, Harbin Yinhai, 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 Yinhai has built its facilities and funded its operations, resulting in profitable operations for the past several years.  As a result, at September 30, 2006 we had working capital totaling $2,514,667 and no debt. During the first nine months of 2006, despite net income of $1,012,043, Harbin Yinhai increased its cash position by only $125,695.  This disparity occurred primarily due to the fact that our operations produced only $388,315 in cash.  During the nine month period we increased our accounts receivable by $353,204 while decreasing our accounts payable by $270,054, substantially improving our liquidity but at the expense of cash.  We also invested $464,398 in prepaid expenses, as we took advantage of our cash resources to lock in business opportunities at favorable prices.  In addition, prior to the reverse merger, we declared a cash dividend of $525,428 payable to our then-shareholders.  The dividend was offset in part by $310,978 that our shareholders paid to settle loans due to us. Yinhais business plan calls for significant investment in the growth of Yinhai during the next several months.  We have budgeted $2,000,000 to purchase an additional production line.  We also plan to spend $1,500,000 to purchase additional land on which to expand our production facilities.  And we intend to devote $800,000 to increase our marketing program.  It is our desire that the funds be obtained by the sale of equity.  To date, however, we have not received any commitment of funds. Our capital is sufficient to fund our operations at their current level for the foreseeable future.  Significant growth, however, will require that we obtain additional capital or incur debt.  Risk Factors That May Affect Future Results  You should carefully consider the risks described below before buying our common stock.  If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.  I.  Risks attendant to our business  We are operating at full capacity and must build additional facilities in order to grow. At the present, our printing facilities are operating at close to capacity.  We will not be able to meet the demand for our services or to grow significantly unless we invest substantial sums in increasing our production capacity.  If we cannot obtain the funds needed for that investment, our business may stagnate.    14    Currency fluctuations may adversely affect our business.  We generate revenues and (with one exception) incur expenses and liabilities in Chinese RMB. However we report our financial results in the United States in U.S. Dollars.  As a result, we are subject to the effects of exchange rate fluctuations between these currencies.  Recently, there have been suggestions made to the Chinese government that it should adjust the exchange rate and end the linkage that in recent years has held the RMB-U.S. dollar exchange rate constant. If the RMB exchange rate is adjusted or is allowed to float freely against the U.S. dollar, our revenues, which are denominated in RMB, may fluctuate significantly in U.S. dollar terms. We have not entered into agreements or purchased instruments to hedge our exchange rate risks.  The one exception to our practice of doing business in Chinese RMB is the fact that we pay U.S. Dollars for the plasma arc cutting equipment that we distribute.  If the RMB is allowed to float against the U.S. Dollar, it is likely to reduce the price we pay for the equipment, which will make the equipment easier to sell in China.  If the adjustment becomes too great, however, it is possible that Hypertherm may alter its marketing arrangements to accommodate the effect of the falling Dollar on its overall marketing strategy.  Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.  Our future success depends on our ability to attract and retain highly skilled engineers, draftsmen, and technicians, as well as sales personnel experienced in international sales.  Qualified individuals are in high demand in China, and there are insufficient experienced personnel to fill the demand.  Therefore we may not be able to successfully attract or retain the personnel we need to succeed.  We may have difficulty establishing adequate management and financial controls in China.  The Peoples Republic of China has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with.  We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company.  If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.  Government regulations could increase our expenses. We market our printing services to the financial services industry, which is highly regulated in China.  The government of China has many regulations that govern the documents that we print, the way we print them, and the companies that are permitted to print them.  The government is considering additional regulations, as it strives to modernize the Chinese financial services industry.  One or more of those regulations could impose compliance costs on us that would adversely affect our profits.  Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.  The Peoples Republic of China has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct  15    investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to fund our business activities outside China or to pay dividends to our shareholders.  We have limited business insurance coverage.  The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.  II.  Risks attendant to our management  Our business development would be hindered if we lost the services of our Chairman.  Tian Ling is the Chief Executive Officer of Xinyinhai Technology, Ltd. and of its operating subsidiary, Harbin Yinhai Technology Development Company, Inc.  Mrs. Tian is responsible for strategizing not only our business plan but also the means of financing it.  If Mrs. Tian were to leave Xinyinhai or become unable to fulfill her responsibilities, our business would be imperiled.  At the very least, there would be a delay in the development of Xinyinhai until a suitable replacement for Mrs. Tian could be retained.  Xinyinhai is not likely to hold annual shareholder meetings in the next few years.  Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved.  The current members of the Board of Directors were appointed to that position by the previous directors.  If other directors are added to the Board in the future, it is likely that the current directors will appoint them.  As a result, the shareholders of Xinyinhai will have no effective means of exercising control over the operations of Xinyinhai.  Your ability to bring an action against us or against our directors, or to enforce a judgment against us or them, will be limited because we conduct all of our operations in China and because our management resides outside of the United States.  We conduct all of our operations in China through our wholly-owned subsidiary. All of our directors and officers reside in China and all of the assets of those Chinese residents are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the United States and of China may render you unable to enforce a judgment against our assets or the assets of our directors.  16    ITEM 3.  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 September 30, 2006.  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, Ms. Tian and Ms. Du concluded that the Companys system of disclosure controls and procedures was effective as of September 30, 2006 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 third 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 6. Exhibits   31.1 Rule 13a-14(a) Certification  Chief Executive Officer 31.2 Rule 13a-14(a) Certification  Chief Financial Officer 32 Rule 13a-14(b) Certification  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: November 17, 2006 By: /s/ Tian Ling  Tian Ling, Chief Executive Officer  By: /s/ Du Song  Du Song, Chief Financial Officer, Chief Accounting Officer    17