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
      1934




For
      the quarterly period ended September 30,
2009




[
      ]
            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.


(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.
      16 Dalian 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:


November
13, 2009


Common
Voting Stock: 19,484,029





Xinyinhai
Technology, Ltd.


Condensed
Consolidated Financial Statements





For the
three and nine months ended September 30, 2009 and 2008





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 -
      16





Xinyinhai
Technology, Ltd.


Condensed
Consolidated Balance Sheets


As
of September 30, 2009 and December 31, 2008


(Stated
in US Dollars)





September
      30,
            
            
            December
      31,2009
            
            
            2008(Unaudited)ASSETSCurrent
      AssetsCash
      and cash equivalents
            
            $
            4,399,745
            
            
            $
            495,060Trade
      receivables (Net of allowance for doubtful accounts of $6,038 for 2009 and
      $6,024 for 2008)
            
            
            2,835,510
            
            
            
            2,901,909Inventories
      (Note 6)
            
            
            1,613,833
            
            
            
            1,950,544Other
      receivable, deposits and prepayments (Note 7)
            
            
            3,144,504
            
            
            
            3,680,640Prepaid
      expenses (Note 8)
            
            
            -
            
            
            
            87,693Total
      Current Assets
            
            
            11,993,592
            
            
            
            9,115,846Property,
      plant and equipment, net (Note 9)
            
            
            5,237,697
            
            
            
            5,103,480Land-use-right
            
            
            1,048,935
            
            
            
            1,069,546TOTAL
      ASSETS
            
            $
            18,280,224
            
            
            $
            15,288,872LIABILITIES
      AND EQUITYCurrent
      LiabilitiesCollateralized
      bank loans (Note 11)
            
            $
            2,934,000
            
            
            $
            -Trade
      payable
            
            
            592,004
            
            
            
            899,141Customer
      deposits
            
            
            1,301
            
            
            
            117,221Other
      payable and accrued liabilities (Note 10)
            
            
            60,659
            
            
            
            652,170Value
      added tax payable
            
            
            173,632
            
            
            
            111,718Income
      tax payable
            
            
            32,191
            
            
            
            37,713TOTAL
      LIABILITIES
            
            
            3,793,787
            
            
            
            1,817,963COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITYCommon
      stock (Note 12)
            
            
            19,484
            
            
            
            19,484Additional
      paid-in capital
            
            
            3,294,543
            
            
            
            3,294,543Retained
      earnings
            
            
            7,003,759
            
            
            
            6,184,913Statutory
      reserves
            
            
            1,358,139
            
            
            
            1,276,013Accumulated
      other comprehensive income
            
            
            1,330,423
            
            
            
            1,329,779TOTAL
      XINYINHAI TECHNOLOGY, LTD. STOCKHOLDERS’EQUITY
            
            
            13,006,348
            
            
            
            12,104,732NON-CONTROLLING
      INTEREST (NOTE 3)
            
            
            1,480,089
            
            
            
            1,366,177TOTAL
      LIABILITIES AND EQUITY
            
            $
            18,280,224
            
            
            $
            15,288,872







See the
accompanying notes to condensed consolidated financial
statements


1


Xinyinhai
Technology, Ltd.


Condensed
Consolidated Statements of Income and Comprehensive Income


For
the three and nine months ended September 30, 2009 and 2008


(Unaudited)


(Stated
in US Dollars)





Three
      months ended
              September
      30, (Unaudited)
            
            
            Nine
      months ended
              September
      30, (Unaudited)2009
            
            
            2008
            
            
            2009
            
            
            2008Revenues
      (Note 3)
            
            
            1,921,858
            
            
            
            3,143,423
            
            
            
            6,430,498
            
            
            
            10,666,016Cost
      of revenues
            
            
            (1,338,697
            )
            
            
            (2,017,430
            )
            
            
            (4,213,878
            )
            
            
            (6,521,285
            )Gross
      profit
            
            
            583,161
            
            
            
            1,125,993
            
            
            
            2,216,620
            
            
            
            4,144,731Operating
      expensesSelling
      and distribution expenses
            
            
            82,766
            
            
            
            79,497
            
            
            
            270,729
            
            
            
            254,012General
      and administrative expenses
            
            
            284,408
            
            
            
            299,965
            
            
            
            803,196
            
            
            
            897,301Total
      expenses
            
            
            367,174
            
            
            
            379,462
            
            
            
            1,073,925
            
            
            
            1,151,313Income
      from operations
            
            
            215,987
            
            
            
            746,531
            
            
            
            1,142,695
            
            
            
            2,993,418Other
      income
            
            
            -
            
            
            
            10,278
            
            
            
            16,411
            
            
            
            386,528Interest
      income
            
            
            4,410
            
            
            
            9,470
            
            
            
            10,457
            
            
            
            10,894Income
      before income taxes andnon-controlling interest
            
            
            220,397
            
            
            
            766,279
            
            
            
            1,169,563
            
            
            
            3,390,840Income
      taxes (Note 4)
            
            
            (32,090
            )
            
            
            (361
            )
            
            
            (154,765
            )
            
            
            (303,712
            )Net
      income
            
            
            188,307
            
            
            
            765,918
            
            
            
            1,014,798
            
            
            
            3,087,128Net
      income attributable to non-controllinginterest
            
            
            (21,633
            )
            
            
            (94,742
            )
            
            
            (113,826
            )
            
            
            (307,087
            )Net
      income attributable to Xinyinhai Technology,Ltd.
      stockholders
            
            
            166,674
            
            
            
            671,176
            
            
            
            900,972
            
            
            
            2,780,041Net
      income
            
            
            188,307
            
            
            
            765,918
            
            
            
            1,014,798
            
            
            
            3,087,128Other
      comprehensive incomeForeign
      currency translation adjustments
            
            
            17,574
            
            
            
            35,798
            
            
            
            730
            
            
            
            976,820Comprehensive
      income
            
            
            205,881
            
            
            
            801,716
            
            
            
            1,015,528
            
            
            
            4,063,948Comprehensive
      income attributable tonon-controlling interest
            
            
            (23,403
            )
            
            
            (98,322
            )
            
            
            (113,912
            )
            
            
            (404,769
            )Comprehensive
      income attributable toXinyinhai Technology, Ltd.
      stockholders
            
            
            182,478
            
            
            
            703,394
            
            
            
            901,616
            
            
            
            3,659,179Earnings
      per share attributable toXinyinhai
      Technology, Ltd. stockholders(Note 5) : basic and
      diluted
            
            $
            0.01
            
            
            $
            0.03
            
            
            $
            0.05
            
            
            $
            0.14Weighted
      average number ofcommon stock outstanding
            
            
            19,484,029
            
            
            
            19,448,159
            
            
            
            19,484,029
            
            
            
            20,566,363








See the
accompanying notes to condensed consolidated financial statements




2





Xinyinhai
Technology, Ltd.


Condensed
Consolidated Statements of Cash Flows


For
the nine months ended September 30, 2009 and 2008


(Stated
in US Dollars)




Nine
      months ended
              September
      30, (Unaudited)2009
            
            
            2008Cash
      flows from operating activitiesNet
      income attributable to Xinyinhai Technology Ltd.
    Stockholders
            
            $
            900,972
            
            
            $
            2,780,041Adjustments
      to reconcile net income attributable to Xinyinhai Technology Ltd. to net
      cash provided by/(used in) operating activities:Depreciation
      and amortization
            
            
            450,846
            
            
            
            284,557Other
      income
            
            
            (4,000
            )
            
            
            (376,250
            )Non-controlling
      interest
            
            
            113,826
            
            
            
            307,087Loss
      on disposal of property, plant and equipment
            
            
            -
            
            
            
            3,749Changes
      in operating assets and liabilitiesRestricted
      cash
            
            
            -
            
            
            
            395,701Trade
      receivables
            
            
            66,394
            
            
            
            (2,282,748
            )Inventories
            
            
            336,711
            
            
            
            (616,591
            )Other
      receivable, deposits and prepayments
            
            
            536,137
            
            
            
            (304,855
            )Trade
      payable
            
            
            (307,138
            )
            
            
            (25,682
            )Bills
      payable
            
            
            -
            
            
            
            (395,701
            )Customers
      deposits
            
            
            (115,920
            )
            
            
            178,485Other
      payable and accrued liabilities
            
            
            (587,511
            )
            
            
            (51,678
            )Income
      tax payable
            
            
            (5,521
            )
            
            
            -Value
      added tax payable
            
            
            61,913
            
            
            
            (64,134
            )Net
      cash flows provided by/(used in) operating activities
            
            
            1,446,709
            
            
            
            (168,019
            )Cash
      flows from investing activitiesPayments
      to acquire property, plant and equipment andland use
      right
            
            
            (476,673
            )
            
            
            (958,197
            )Proceeds
      from disposal of property, plant and equipment
            
            
            -
            
            
            
            287Net
      cash flows used in investing activities
            
            
            (476,673
            )
            
            
            (957,910
            )Cash
      flows from financing activityCollateralized
      bank loan
            
            
            2,934,000
            
            
            
            -Net
      cash flows provided by financing activity
            
            
            2,934,000
            
            
            
            -Effect
      of foreign currency translation on cash and cash
    equivalents
            
            
            649
            
            
            
            121,522Net
      increase/(decrease) in cash and cash equivalents
            
            
            3,904,685
            
            
            
            (1,004,407
            )Cash
      and cash equivalents - beginning of period
            
            
            495,060
            
            
            
            1,308,877Cash
      and cash equivalents - end of period
            
            $
            4,399,745
            
            
            $
            304,470Supplemental
      disclosures for cash flow informationInterest
      paid
            
            $
            35,893
            
            
            $
            -Income
      taxes paid
            
            $
            157,716
            
            
            $
            314,681





See the
accompanying notes to condensed consolidated financial
statements


3


Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(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
(“BVI”) 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 15% 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


For
the three months and nine months ended September 30, 2009 and 2008
(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, 2008, included in our Annual Report on Form 10-K for the year
ended December 31, 2008.





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
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, cash equivalents, trade receivables,
other receivables and deposits.  As of September 30, 2009 and
December 31, 2008, 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, other receivables and deposits, 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


For
the three months and nine months ended September 30, 2009 and 2008
(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
              September
      30,
              (unaudited)
            
            
            Nine
      months ended
              September
      30,
              (unaudited)2009
            
            
            2008
            
            
            2009
            
            
            2008Company
      A
            
            
            374,354
            
            
            
            316,291
            
            
            
            1,427,625
            
            
            
            492,765Company
      B
            
            
            200,649
            
            
            
            55,699
            
            
            
            678,262
            
            
            
            55,699Company
      C
            
            
            138,132
            
            
            
            178,209
            
            
            
            828,109
            
            
            
            615,760Company
      D
            
            
            94,683
            
            
            
            374,955
            
            
            
            463,117
            
            
            
            1,374,212Company
      E
            
            
            19,753
            
            
            
            180,279
            
            
            
            243,487
            
            
            
            1,214,192827,571
            
            
            
            1,105,433
            
            
            
            3,640,600
            
            
            
            3,752,628





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
were 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.





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:


6




Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)





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





Property, plant and
equipment (cont’d)





Depreciable
      lifeBuilding
            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 remaining terms of the lease of
38 years.





Non-controlling
interest





Non-controlling
interest results 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 SFAS No. 123R "Share-Based Payment" (ASC 718) 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.





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)
            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.  Revenue from the resale of
      equipment and associated spare parts is recognized on a gross basis
      pursuant to the guidance of Topic 605-45 of EITF 99-19, since the Company
      is acting as a principal, rather than as another company’s
      agent.  The Company is a re-distributor of Hypertherm products,
      including the whole machines and the spare parts and responsible for the
      after-sale service, which include repair and maintenance of the
      machines.  The Company also assigns its engineers to provide
      assistance to its customers if they have trouble setting up the machines
      or if the machines malfunction.


7





Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)








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





Basic and diluted earnings
per share





The
Company reports basic earnings per share in accordance with SFAS No. 128
“Earnings Per Share” (ASC 260).  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





In
October 2009, the FASB issued Accounting Standards Update, 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 Accounting Standards update, 2009-13 will have on the Company’s
financial statement upon adoption.





In August
2009, the FASB issued Accounting Standards Update No. 2009-05 (“ASC Update
2009-05”), an update to ASC 820, Fair Value Measurements and Disclosures. This update provides
amendments to reduce potential ambiguity in financial reporting when measuring
the fair value of liabilities. Among other provisions, this update provides
clarification that in circumstances in which a quoted price in an active market
for the identical liability is not available, a reporting entity is required to
measure fair value using one or more of the valuation techniques described in
ASC Update 2009-05. ASC Update 2009-05 will become effective for the Company’s
annual financial statements for the year ended December 31, 2009. The management
is in the process of evaluating the impact of ASC Update 2009-05 will have on
the Company’s financial statement upon adoption.





FASB Accounting Standards
Codification (Accounting Standards Update “ASU” 2009-1). In June 2009,
the Financial Accounting Standard Board (“FASB”) approved its Accounting
Standards Codification (“Codification”) as the single source of authoritative
United States accounting and reporting standards applicable for all
non-governmental entities, with the exception of the SEC and its staff. The
Codification is effective for interim or annual financial periods ending after
September 15, 2009 and impacts our financial statements as all future references
to authoritative accounting literature will be referenced in accordance with the
Codification. There have been no changes to the content of our financial
statements or disclosures as a result of implementing the
Codification.





As a
result of the Company’s implementation of the Codification during the quarter
ended September 30, 2009, previous references to new accounting standards and
literature are no longer applicable. In the current quarter financial
statements, the Company will provide reference to both new and old guidance to
assist in understanding the impacts of recently adopted accounting literature,
particularly for guidance adopted since the beginning of the current fiscal year
but prior to the Codification.


8





Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(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 (To be included in ASC 810 “Consolidation”, previously SFAS
167 “Amendments to FASB Interpretation No. 46(R)”).SFAS 167 amends FASB
Interpretation No. 46 (revised December 2003), “Consolidation of Variable
Interest Entities,” to require 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. SFAS 167
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. SFAS 167 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 management is in the process of evaluating the impact
of adopting this standard on the Company’s financial statements.





Accounting for Transfers of
Financial Assets (To be included in ASC 860 “Transfers and Servicing”,
previously SFAS No. 166, “Accounting for Transfers of Financial Assets - an
Amendment of FASB Statement No. 140.”).SFAS 166 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, SFAS 166 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. SFAS 166 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 management is in the process of
evaluating the impact of adopting this standard on the Company’s financial
statements.





Subsequent Events (Included in ASC
855 “Subsequent Events”, previously SFAS No. 165). SFAS No.165,
“Subsequent Events” establishes accounting and disclosure requirements for
subsequent events. SFAS 165 details the period after the balance sheet date
during which we should evaluate events or transactions that occur for potential
recognition or disclosure in the financial statements, the circumstances under
which we should recognize events or transactions occurring after the balance
sheet date in its financial statements and the required disclosures for such
events. We adopted this statement effective June 1, 2009 and have evaluated all
subsequent events through the filing date with the SEC.





Interim Disclosures about Fair Value
of Financial Instruments (Included in ASC 825 “Financial
Instruments”, previously FSP SFAS No. 107-1).This guidance requires that
the fair value disclosures required for all financial instruments within the
scope of SFAS No. 107, “Disclosures about Fair Value of
Financial Instruments”, be included in interim financial statements. This
guidance also requires entities to disclose the method and significant
assumptions used to estimate the fair value of financial instruments on an
interim and annual basis and to highlight any changes from prior periods. FSP
107-1 was effective for interim periods ending after September 15, 2009. The
adoption of FSP 107-1 has no material impact on the Company’s financial
statements.




9


Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)





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





Recently issued accounting
standards (Cont'd)





Investments - Debt and Equity
Securities - Overall - Transition and Open Effective Date Information (Included
in ASC 320-10-65, previously FASB Staff Position No. 115-2 and Statement of
Financial Accounting Standards No. 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments”).ASC 320-10-65 amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities
through increased consistency in the timing of impairment recognition and
enhanced disclosures related to the credit and noncredit components of impaired
debt securities that are not expected to be sold. In addition, increased
disclosures are required for both debt and equity securities regarding expected
cash flows, credit losses, and securities with unrealized losses. The adoption
of this statement has no material impact on the Company’s financial
statements.





Fair Value Measurements and
Disclosures (Included in ASC 820, previously FSP No. 157-4, “Determining Whether
a Market is Not Active and a Transaction Is Not Distressed”.)FSP No.
157-4 clarifies when markets are illiquid or that market pricing may not
actually reflect the “real” value of an asset. If a market is determined to be
inactive and market price is reflective of a distressed price then an
alternative method of pricing can be used, such as a present value technique to
estimate fair value. FSP No. 157-4 identifies factors to be considered when
determining whether or not a market is inactive. FSP No. 157-4 would be
effective for interim and annual periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009 and shall be applied
prospectively. The adoption of this standard has no material effect on the
Company's financial statements.





Business Combinations (Included in
ASC 805, previously FSP No. 141R-1 “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies”).FSP 141R-1 amends the provisions in FASB Statement 141R for the initial
recognition and measurement, subsequent measurement and accounting, and
disclosures for assets and liabilities arising from contingencies in business
combinations. FSP 141R-1 eliminates the distinction between contractual and
non-contractual contingencies, including the initial recognition and measurement
criteria in Statement 141R and instead carries forward most of the provisions in
SFAS 141 for acquired contingencies. FSP 141R-1 is effective for contingent
assets and contingent liabilities acquired in evaluating the impact of SFAS
141(R). The management is in the process of evaluating the impact of adopting
this standard on the Company’s financial statements.





Intangibles-Goodwill and Other
(Included in ASC 350”, previously FASB staff position (“FSP”) FAS 142-3,
Determination of the Useful Life of Intangible Assets). FSP FAS 142-3
amends the factors an entity should consider in developing renewal or extension
assumptions used in determining the useful life of recognized intangible assets
under FASB Statement No. 142, “Goodwill and Other Intangible Assets”. This
new guidance applies prospectively to intangible assets that are acquired
individually or with a group of other assets in business combinations and asset
acquisitions. FSP FAS 142-3 is effective for financial statements issued for
fiscal years and interim periods beginning after December 15, 2008. Early
adoption is prohibited. The adoption of this standard has no material effect on
the Company's financial statements.





Business Combinations(Included in ASC 805 “Business
Combinations”, previously SFAS No. 141(R)).This ASC
guidance revised SFAS No. 141, “Business Combinations” and
addresses the accounting and disclosure for identifiable assets acquired,
liabilities assumed, and noncontrolling interests in a business combination. The
adoption of this standard has no material impact on the Company’s financial
statements.


10


Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)





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





Recently issued accounting
standards (Cont'd)





Noncontrolling Interests (Included
in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements”, an amendment of ARB No. 51). SFAS 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. We adopted SFAS 160 on January 1, 2009. As a result, we
have reclassified financial statement line items within our Condensed
Consolidated Balance Sheets and Statements of Income and Comprehensive Income
for the prior period to conform to this standard.





4.       
    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
and nine months ended September 30, 2009 and 2008.  The Company has
not provided deferred taxes on undistributed earnings of its non-U.S.
subsidiaries as of September 30, 2009 and December 31, 2008, 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.





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.


11





Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)








5.       
     Earnings per share - basic and diluted





The basic
and diluted earnings per share is calculated using the net income 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.








6.
            Inventories
            
            September
      30,
            
            
            December
      31,2009
            
            
            
            2008(Unaudited)Raw
      materials
            
            $
            944,489
            
            
            $
            1,303,481Work
      in progress
            
            
            87,445
            
            
            
            228,524Finished
      goods
            
            
            581,899
            
            
            
            418,5391,613,833
            
            
            $
            1,950,544




12


Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)








7.        
   Other receivable, deposits and prepayments





September
      30,
            
            
            December
      31,2009
            
            
            2008(Unaudited)Deposits
            
            $
            377,044
            
            
            $
            439,702Retention
      money
            
            
            57,213
            
            
            
            46,793Advances
      to staff
            
            
            253,537
            
            
            
            150,630Receivable
      for disposal of building (Note)
            
            
            2,420,550
            
            
            
            3,007,350Other
      receivables
            
            
            36,160
            
            
            
            36,1653,144,504
            
            
            $
            3,680,640





Note:





The
“receivable for disposal of building” arose from a contract under which the
Company sold a building.  The contract provided that the Buyer should
pay RMB 5,950,000 on the day the Company signed the contract.  The
remaining balance should be settled in two installments:  RMB
10,250,000 by June 30, 2009, and RMB 10,250,000 by December 31,
2009.  At that time, the Company did not foresee any risks associated
with future payment as the contract is legally executed. Based on review of the
creditworthiness of the Buyer, management was confident that the Buyer would
meet the payment terms.  Hence no allowance was suggested at December
31, 2008.





By
September 30 2009, the Buyer had paid the Company RMB 4,000,000 of the RMB
10,250,000 due on that date. The remaining RMB6,250,000 is outstanding, because
the Buyer increased its investment in 2009 for their business development, which
resulted in tightened cash flow.  On June 30, 2009 the Company made a
supplemental agreement with the Buyer, in which the Buyer has agreed to settle
the entire balance before December 31, 2009.  If it fails to meet the
revised payment terms, it is mandatory that the Buyer pay the Company at an
interest rate which is 20% higher than the general bank interest rate during the
extended period.





The
Company has not reserved against this receivable because the Company believes
that it is unlikely the Buyer would fail to meet the payment terms, due to the
penalties involved.  By the end of 2009, if the Buyer does not meet
the revised payment terms, the Company will reconsider the necessity for an
allowance.








8.
            Prepaid
      expenses
            
            September
      30,
            
            
            December
      31,2009
            
            
            
            2008(Unaudited)Prepaid
      consultancy fees
            
            $
            218,000
            
            
            $
            673,000Amortization
            
            
            (218,000
            )
            
            
            (261,557
            )-
            
            
            
            411,443Termination
      of consulting agreements
            
            
            -
            
            
            
            (323,750
            )-
            
            
            $
            87,693




13





Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)








9.
            Property,
      plant and equipment, net
            
            September
      30,
            
            
            December
      31,2009
            
            
            
            2008(Unaudited)Building
            
            $
            3,887,354
            
            
            $
            3,499,037Plant
      and machinery
            
            
            2,777,986
            
            
            
            2,693,877Motor
      vehicles
            
            
            390,842
            
            
            
            389,602Furniture,
      fixtures and equipment
            
            
            92,613
            
            
            
            89,2487,148,795
            
            
            
            6,671,764Accumulated
      depreciation
            
            
            (1,911,098
            )
            
            
            (1,568,284
            )Property,
      plant and equipment, net
            
            
            5,237,697
            
            
            $
            5,103,480








10.
            Other
      payables and accrued liabilities
            
            September
      30,
            
            
            December
      31,2009
            
            
            
            2008(Unaudited)Other
      payables
            
            $
            32,799
            
            
            $
            553,899Accrued
      statutory staff welfare and salaries
            
            
            17,700
            
            
            
            47,111Accrued
      liabilities
            
            
            10,160
            
            
            
            51,160$
            60,659
            
            
            $
            652,170








11.
            Collateralized
      bank loans
            
            September
      30,
            
            
            December
      31,2009
            
            
            
            2008(Unaudited)Bank
      loans repayable within 1 year
            
            $
            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 September 30, 2009 was collateralized
by land use rights and buildings with carrying values of $1,048,935 and
$2,880,897 respectively.








12.          Stockholders’
equity





Common
stock





No.
      of shares
            
            
            AmountAuthorized:Common stock at USD0.001 par
      value
            
            
            40,000,000
            
            
            $
            40,000Issued
      and outstanding:As of September 30, 2009 and
      December 31, 2008
            
            
            19,484,029
            
            
            $
            19,484




14





Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)








13.           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 income
and comprehensive income.  The Company contributed $89,338 and $46,073
for the nine months ended September 30, 2009 and 2008 respectively.








14.           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
            
            
            TotalNine
      months ended
              Septermber
      30, (Unaudited)
            
            
            Nine
      months ended
              Septermber
      30, (Unaudited)
            
            
            Nine
      months ended
              Septermber
      30, (Unaudited)2009
            
            
            2008
            
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Revenues
            
            $
            5,447,406
            
            
            $
            7,350,434
            
            
            $
            983,092
            
            
            $
            3,315,582
            
            
            $
            6,430,498
            
            
            $
            10,666,016Segment
      profit
            
            $
            1,188,628
            
            
            $
            2,960,862
            
            
            $
            104,398
            
            
            $
            340,894
            
            
            $
            1,293,026
            
            
            $
            3,301,756





Three
      months ended
              September
      30, (Unaudited)
            
            
            Three
      months ended
              September
      30, (Unaudited)
            
            
            Three
      months ended
              September
      30, (Unaudited)2009
            
            
            2008
            
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Revenues
            
            $
            1,697,436
            
            
            $
            2,285,531
            
            
            $
            224,422
            
            
            $
            857,892
            
            
            $
            1,921,858
            
            
            $
            3,143,423Segment
      profit
            
            $
            237,705
            
            
            $
            786,487
            
            
            $
            29,221
            
            
            $
            2,263
            
            
            $
            266,926
            
            
            $
            788,750





September
      30,
            
            
            December
      31,
            
            
            September
      30,
            
            
            December
      31,
            
            
            September
      30,
            
            
            December
      31,2009
            
            
            2008
            
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008(Unaudited)
            
            
            
            
            
            (Unaudited)
            
            
            
            
            
            (Unaudited)Segment
      assets
            
            $
            14,050,394
            
            
            $
            10,895,494
            
            
            $
            1,303,049
            
            
            $
            558,250
            
            
            $
            15,353,443
            
            
            $
            11,453,744




15





Xinyinhai
Technology, Ltd.


Notes
to Condensed Consolidated Financial Statements


For
the three months and nine months ended September 30, 2009 and 2008
(Unaudited)


(Stated
in US Dollars)








14.           Segment
information (Cont’d)





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





Three
      months ended
              September
      30,
              (Unaudited)
            
            
            Nine
      months ended
              September
      30,
              (Unaudited)2009
            
            
            2008
            
            
            2009
            
            
            2008Total
      consolidated revenue
            
            $
            1,921,858
            
            
            $
            3,143,423
            
            
            $
            6,430,498
            
            
            $
            10,666,016Total
      income for reportable segments
            
            $
            266,926
            
            
            $
            788,750
            
            
            $
            1,293,026
            
            
            $
            3,301,756Unallocated
      amounts relating tooperations:Other income
            
            
            4,000
            
            
            
            -
            
            
            
            4,000
            
            
            
            376,250Amortization of prepaid
      expensesand
      professional fee
            
            
            (50,529
            )
            
            
            (22,471
            )
            
            
            (127,463
            )
            
            
            (287,166
            )Income
      before income taxes andNon-controlling
      interest
            
            $
            220,397
            
            
            $
            766,279
            
            
            $
            1,169,563
            
            
            $
            3,390,840





September
      30,
            
            
            December
      31,2009
            
            
            2008(Unaudited)AssetsTotal
      assets for reportable segments
            
            $
            15,353,443
            
            
            $
            11,453,744Unallocated
      amounts relating to operations:Prepaid
expenses
            
            
            -
            
            
            
            87,693Building
            
            
            2,887,503
            
            
            
            3,708,052Other
    receivables
            
            
            36,160
            
            
            
            36,160Cash and cash
      equivalents
            
            
            3,118
            
            
            
            3,223Total
            
            $
            18,280,224
            
            
            $
            15,288,872





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








15.           Subsequent
Events





Effective
this quarter, the Company implemented SFAS No. 165.  This standard
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are
issued.  The adoption of SFAS 165 did not impact our financial
position or results of operations.  The Company evaluated all events
or transactions that occurred after September 30, 2009 up through November 14,
2009, the date these financial statements were issued.  During this
period the Company did not have any material recognizable subsequent
events.


16


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





Results of Operations




The current global recession has
reduced demand for capital goods in China.  As of the first nine
months of 2009, this situation had a negative impact on both of our business
segments.  Overall, our revenue during the nine months ended September
30, 2009 decreased by 40% to $6,430,498 from $10,666,016 achieved during the
nine months ended September 30, 2008.  Our revenue during the three
months ended September 30, 2009 decreased by 39% to $1,921,858 from $3,143,423
achieved during the three months ended September 30, 2008.  The
decrease was most dramatic in our equipment distribution business, where
revenues declined by 70% to $983,092 during the nine months ended September 30,
2009 from $3,315,582 during the same period of 2008, and from $857,892 during
the third quarter of 2008 to $224,422 during the third quarter of
2009.  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
returned this business segment to a 15% contribution to our overall revenue
during the nine months ended September 30, 2009, a level similar to our
experience in 2007 and 2006.  The future of this business segment will
depend, in part, on the success of the recent economic stimulus initiated by the
Government of China.




Revenue from our printing business fell
by 26% to $5,447,406 during the nine months ended September 30, 2009, compared
to $7,350,434 during the same period of 2008.  During the three months
ended September 30, 2009, the revenue from our printing business decreased by
26% to $1,697,436, compared to $2,285,531 during the same period of
2008.  The decline occurred, in part, due to the weakening of the
Chinese banking industry, as many of our customers are 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, which interfered with our printing
business.  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.




The 34% gross margin realized by our
subsidiary, Harbin Golden Sea, on sales during the nine months ended September
30, 2009 (30% during the three month period) was lower than the 39% gross margin
realized during the nine months ended September 30, 2008 (36% during the three
month period).  The primary reason for the fall-off was the sharp
decline in profits from equipment sales during the nine months ended September
30, 2009.  The decline in demand for our cutting machinery forced us
to price our sales aggressively, which reduced margins on equipment sales in the
recent quarter.  At the same time, the disruption in the Chinese
banking industry forced us to reduce margins in our printing segment as
well.  Our expectation for the future is that our gross margin from
printing services will average approximately 45%, albeit within a range of 35%
to 50%, depending on the components of the business.  Since we intend
to devote the funds that we recently borrowed 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 higher margins that printing has historically produced.




17




During the nine months ended September
30, 2009, we reduced our total expenses by 6.7% to $1,073,925, compared to
$1,151,313 during the same period of 2008. This reduction was achieved despite a
58% increase in depreciation and amortization and $16,717 increase in our
selling and distribution expenses during the first nine months of
2009.  These increases were counterbalanced by the favorable results
of our continuing efforts to achieve efficiencies in our operations, leading to
a decrease of $94,105 in our general and administration expenses for the first
nine months of 2009.  Likewise, our total expenses during the three
months ended September 30, 2009 was reduced by 3.2% to $367,174, compared to
$379,462 during the same period of 2008. When demand for our products returns to
prior levels, we expect that the ratio of our selling expense to revenues will
return to the lower levels that we consistently achieved in prior
periods.




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 9% rate in the first nine months
of 2008, causing an expense of $303,712 and at a 10% rate in the first nine
months of 2009, causing an expense of $154,765. The reduction in our tax
liability was attributed to our decreased income during the nine months ended
September 30, 2009, compared to the same period of 2008.




The
operations of our subsidiary, Harbin Golden Sea, earned a net income of
$1,014,798 during the first nine months of 2009 and $188,307 during the third
quarter of 2009.  However, because we own only 90% of Harbin Golden
Sea, we deducted a “noncontrolling interest” of $113,826 and $21,633
respectively during the nine and three months ended September 30, 2009 before
recognizing net income on our 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 attributable to the
shareholders of Xinyinhai Technology for the first nine months and third quarter
of 2009 was $900,972 and $166,674, respectively, representing $0.05 and $0.01
per share.




Our business operates primarily in
Chinese RMB, but we report our results in our SEC filings in 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.  During the nine and three months ended September 30, 2009,
the effect of converting our financial results to Dollars was to increase our
comprehensive income by $730 and $17,574.


18





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 September 30, 2009, we had working capital
totaling $8,199,805 (an increase of $901,922 since the end of 2008) 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 plan to
purchase 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 will utilize the borrowed funds to implement the capital
improvements necessary for our growth.




During the third quarter of 2009 our
operations produced $1,114,639 in net cash, representing 77% of our net cash
from operations for the nine months ended September 30, 2009.  The
improvement in cash flow in the third quarter was primarily due to the fact that
we reduced our trade receivables in the quarter by $642,692.  In 2008
and the first nine months of 2009 our trade receivables have increased
disproportionately to our sales due to the ongoing international financial
crisis.  Our customers are primarily Chinese banks, and the
restriction of international credit lines has adversely affected their
liquidity.  To assist them in meeting their cash obligations, we
extended the credit terms afforded to the majority of our
customers.  This led to the disproportionate increase in our trade
receivables.  In the third quarter of 2009, there has increased
availability of credit within the international banking system, and our
customers have been better able to meet their payment obligations.  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 new bank loan and the satisfaction of our receivables, we held
$4.4 million in cash and equivalents at September 30, 2009.  We will
have no debt payment obligations until the bank line comes due next
year.  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.




ITEM
      3
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not applicable.


19





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
September 30, 2009.  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 September 30, 2009 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
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, 2008.





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 16, 2009
            By:
      /s/ Tian
      LingTian Ling, Chief Executive OfficerBy:
      /s/ Du
      SongDu Song, Chief Financial Officer






20


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