UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form 10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934





For
      the Quarterly Period Ended March 31, 2009OR




o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934





For
the transition period
from            to





Commission
File No. 000-52930





YINLIPS
TECHNOLOGY, INC.


(Exact
name of Registrant as specified in its charter)





Delaware
            
            20-8057623(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)





Building
3, Baiwangxin Hi-tech Industrial District 1


Nanshan
District, Shenzhen, Guangdong


People’s
Republic of China


(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)





(86)
755-2906-0002


(COMPANY’S
TELEPHONE NUMBER, INCLUDING AREA CODE)





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 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 o    No x





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 oNo o





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
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):





Large
      accelerated filer o
            
            Accelerated
      filer oNon-accelerated
      filer o
            
            Smaller
      reporting company x(Do
      not check if a smaller reporting company)





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





The
number of shares outstanding of the registrant’s Common Stock, par value $0.0001
per share, was 7,690,795 as of August 20, 2009.











YINLIPS
TECHNOLOGY, INC.





FORM 10-Q





For
the Quarterly Period Ended March 31, 2009





INDEX





Part I
              Financial
      Information
              3Item
      1.
              Financial
      Statements
              3Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              28Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              35Item
      4.
              Controls
      and Procedures
              35Part II
              Other
      Information
              36Item
      1.
              Legal
      Proceedings
              36Item
      1A.
              Risk
      Factors
              36Item
      2.
              Unregistered
      Sale of Equity Securities and Use of Proceeds
              54Item
      3.
              Default
      Upon Senior Securities
              54Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              54Item
      5.
              Other
      Information
              54Item
      6.
              Exhibits
              54Signatures
              55




2


PART
1.  FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS





The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The accompanying unaudited financial statements reflect all adjustments that, in
the opinion of management, are considered necessary for a fair presentation of
the financial position, results of operations, and cash flows for the periods
presented. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any future
period. The accompanying unaudited financial statements should be read in
conjunction with the audited financial statements of Yinlips Technology, Inc. as
contained in its Annual Report for the fiscal year ended December 31, 2008 on
Form 10-K, as filed with the Securities and Exchange Commission on August 20,
2009.


3
  Yinlips
Technology, Inc. and Subsidiaries
 Consolidated
Balance Sheets
 (In U.S.
Dollars)
 
 March
      31,
                                  
                                  
                                  December
      31,2009
                                  
                                  
                                  2008(Unaudited)AssetsCurrent
      AssetsCash
      and cash equivalents (Note 3)
                                  
                                  $
                                  578,139
                                  
                                  
                                  $
                                  199,779Accounts
      receivable, net (Note 4)
                                  
                                  
                                  6,559,300
                                  
                                  
                                  
                                  4,692,956Advances
      (Note 5)
                                  
                                  
                                  922,512
                                  
                                  
                                  
                                  1,484,077Inventories,
      net (Note 6)
                                  
                                  
                                  2,784,480
                                  
                                  
                                  
                                  2,910,703Restricted
      cash (Note 9)
                                  
                                  
                                  101,649
                                  
                                  
                                  
                                  293,380Total
      current assets
                                  
                                  
                                  10,946,080
                                  
                                  
                                  
                                  9,580,895Property
      and equipment, net (Note 7)
                                  
                                  
                                  2,734,388
                                  
                                  
                                  
                                  1,669,670Plant
      renovation deposit (Note 8)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  960,453Other
      receivables
                                  
                                  
                                  59,754
                                  
                                  
                                  
                                  57,881Total
      Assets
                                  
                                  $
                                  13,740,222
                                  
                                  
                                  $
                                  12,268,899Liabilities
      and Shareholders' EquityCurrent
      LiabilitiesAccounts
      payable and accrued liabitlies
                                  
                                  $
                                  1,993,276
                                  
                                  
                                  $
                                  952,488Various
      taxes payable (Note 10)
                                  
                                  
                                  153,086
                                  
                                  
                                  
                                  187,381Short-term
      loans payable (Note 9)
                                  
                                  
                                  937,664
                                  
                                  
                                  
                                  1,114,498Wages
      payable
                                  
                                  
                                  501,299
                                  
                                  
                                  
                                  506,450Corporate
      tax payable (Note 15)
                                  
                                  
                                  225,125
                                  
                                  
                                  
                                  31,877Total
      current liabilities
                                  
                                  
                                  3,810,450
                                  
                                  
                                  
                                  2,792,694Due
      to related party (Note 14)
                                  
                                  
                                  65,930
                                  
                                  
                                  
                                  -Total
      Liabilities
                                  
                                  
                                  3,876,380
                                  
                                  
                                  
                                  2,792,694Commitments
      and Contigencies (Note 17)
                                  
                                  
                                  
                                  
                                  
                                  
                                  -Shareholders'
      EquityPreferred
      stock, $0.0001 par value, 10,000,000 shares authorized, 5,454,545
      shares  undesignated, 0 and 0 shares issued and outstanding at
      March 31, 2009 and  December 31, 2008,
    respectively.
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Preferred
      Stock  Series A Convertible, $0.0001 par value,
      4,545,455 shares authorized, 4,473,583 and 0 shares issued and outstanding
      at March 31, 2009 and Decemebr 31, 2008, respectively. Liquidation
      preference and redemption value  of $4,920,945 at March 31,
      2009.
                                  
                                  
                                  447
                                  
                                  
                                  
                                  447Common
      stock, $0.0001 par value, 100,000,000 shares authorized, 7,690,795 and
      7,690,795 shares issued and outstanding at March 31, 2009 and December 31,
      2008, respectively (Note 1)
                                  
                                  
                                  769
                                  
                                  
                                  
                                  769Additional
      paid-in capital
                                  
                                  
                                  5,034,077
                                  
                                  
                                  
                                  5,034,077Accumulated
      other comprehensive income
                                  
                                  
                                  692,683
                                  
                                  
                                  
                                  691,621Statutory
      surplus reserve fund (Note 16)
                                  
                                  
                                  70,881
                                  
                                  
                                  
                                  70,881Retained
      earnings (unrestricted)
                                  
                                  
                                  4,064,985
                                  
                                  
                                  
                                  3,678,410Total
      Shareholders' Equity
                                  
                                  
                                  9,863,842
                                  
                                  
                                  
                                  9,476,205Total
      Shareholders' Liabilities and Equity
                                  
                                  $
                                  13,740,222
                                  
                                  
                                  $
                                  12,268,899
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 
 Yinlips
Technology, Inc. and Subsidiaries
 Consolidated
Statements of Income
 (In
U.S. Dollars)
 
 For
      The Three Months EndedMarch
      31,2009
                        
                        
                        2008(Unaudited)
                        
                        
                        (Unaudited)Revenue
                        
                        $
                        7,797,986
                        
                        
                        $
                        6,931,030Cost
      of Goods Sold
                        
                        
                        (5,835,179
                        )
                        
                        
                        (5,463,815
                        )Gross
      Profit
                        
                        
                        1,962,807
                        
                        
                        
                        1,467,215Selling
      Expenses
                        
                        
                        152,783
                        
                        
                        
                        211,112General
      and administrativeDepreciation
      (Note 7)
                        
                        
                        16,118
                        
                        
                        
                        18,468Bad
      debts
                        
                        
                        2,054
                        
                        
                        
                        -Others
      general and administrative
                        
                        
                        355,420
                        
                        
                        
                        120,705Total
      general and administravive
                        
                        
                        373,592
                        
                        
                        
                        139,173Research
      and development
                        
                        
                        650,030
                        
                        
                        
                        232,822Total
      operating expenses
                        
                        
                        1,176,405
                        
                        
                        
                        583,107Income
      from operations
                        
                        
                        786,402
                        
                        
                        
                        884,108Other
      income (expenses)Interest
      income
                        
                        
                        493
                        
                        
                        
                        18Interest
      expense
                        
                        
                        (29,762
                        )
                        
                        
                        -Penalty
      on renovation contract
                        
                        
                        -
                        
                        
                        
                        (41,931
                        )Other
      income (expense), net
                        
                        
                        (177,271
                        )
                        
                        
                        28Total
      other income (expenses)
                        
                        
                        (206,540
                        )
                        
                        
                        (41,885
                        )Income
      (loss) before income taxes
                        
                        
                        579,862
                        
                        
                        
                        842,223Income
      taxes (Note 15)
                        
                        
                        (193,287
                        )
                        
                        
                        (155,354
                        )Net
      income (loss)
                        
                        $
                        386,575
                        
                        
                        $
                        686,869Basic
      earnings per share
                        
                        $
                        0.05
                        
                        
                        $
                        0.10Weighed-average
      shares outstanding, Basic
                        
                        
                        7,690,795
                        
                        
                        
                        6,565,795Diluted
      earnings per share
                        
                        $
                        0.03
                        
                        
                        $
                        0.10Weighed-average
      shares outstanding, Diluted
                        
                        
                        12,829,469
                        
                        
                        
                        6,565,795
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  5
 
 Yinlips
Technology, Inc. and Subsidiaries
 Consolidated
Statements of Stockholders' Equities
 (In
U.S. Dollars)
 (unaudited)
 
 AccumulatedPreferred
      Stock
                      
                      
                      
                      
                      
                      
                      
                      
                      Additional
                      
                      
                      Other
                      
                      
                      Statutory
                      
                      
                      Retained
                      
                      
                      TotalSeries
      A
                      
                      
                      Common
      Stock
                      
                      
                      Paid-in
                      
                      
                      Comprehensive
                      
                      
                      Reserve
                      
                      
                      Earnings
                      
                      
                      Stockholders'
                      
                      
                      ComprehensiveShares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Income
      (Loss)
                      
                      
                      Fund
                      
                      
                      (Unrestricted)
                      
                      
                      Equity
                      
                      
                      IncomeBalance
      at December 31, 2008
                      
                      
                      4,473,583
                      
                      
                      $
                      447
                      
                      
                      
                      7,690,795
                      
                      
                      $
                      769
                      
                      
                      $
                      5,034,077
                      
                      
                      $
                      691,621
                      
                      
                      $
                      70,881
                      
                      
                      $
                      3,678,410
                      
                      
                      $
                      9,476,205Foreign
      currency translation adjustment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,062
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,062
                      
                      
                      
                      1,062Net
      income for the three months ended March 31, 2009
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      386,575
                      
                      
                      
                      386,575
                      
                      
                      
                      386,575Comprehensive
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      387,637Balance
      at March 31, 2009
                      
                      
                      4,473,583
                      
                      
                      $
                      447
                      
                      
                      $
                      7,690,795
                      
                      
                      $
                      769
                      
                      
                      $
                      5,034,077
                      
                      
                      $
                      692,683
                      
                      
                      $
                      70,881
                      
                      
                      
                      4,064,985
                      
                      
                      $
                      9,863,842
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  6
 
 Yinlips
Technology, Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
 (In
U.S. Dollars)
 
 For
      The Three Months EndedMarch
      31,2009
                            
                            
                            2008(Unaudited)
                            
                            
                            (Unaudited)Cash
      Flows From Operating ActivitiesNet
      Income (loss)
                            
                            $
                            386,575
                            
                            
                            $
                            686,869Adjustments
      to reconcile net income to net cash provided by operating
      activities:Bad
      debt allowance
                            
                            
                            2,054Depreciation
                            
                            
                            75,541
                            
                            
                            
                            49,186Changes
      in operating assets and liabilities:Accounts
      receivable
                            
                            
                            (1,868,398
                            )
                            
                            
                            (2,232,028
                            )Advances
                            
                            
                            561,565Inventories,
      net
                            
                            
                            126,223
                            
                            
                            
                            (64,803
                            )Plant
      renovation deposit
                            
                            
                            960,453Other
      receivables
                            
                            
                            (1,873
                            )
                            
                            
                            (643
                            )Restricted
      cash
                            
                            
                            191,731
                            
                            
                            
                            -Accounts
      payable and accrued liabilities
                            
                            
                            1,040,788
                            
                            
                            
                            1,257,811Various
      taxes payable
                            
                            
                            (34,295
                            )
                            
                            
                            (15,394
                            )Wages
      payable
                            
                            
                            (5,151
                            )
                            
                            
                            46,372Corporate
      tax payable
                            
                            
                            193,248
                            
                            
                            
                            166,856Net
      cash provided by (used in) operating activities
                            
                            
                            1,628,461
                            
                            
                            
                            (105,774
                            )Cash
      Flows From Investing ActivitiesPurchases
      of property and equipment
                            
                            
                            (1,142,307
                            )
                            
                            
                            (928
                            )Net
      cash used in investing activities
                            
                            
                            (1,142,307
                            )
                            
                            
                            (928
                            )Cash
      Flows From Financing ActivitiesRepayment
      of short-term demand loans payable
                            
                            
                            (176,834
                            )
                            
                            
                            -Due
      to related parties and affiliated companies
                            
                            
                            65,930
                            
                            
                            
                            -Net
      cash provided by (used in) financing activities
                            
                            
                            (110,904
                            )
                            
                            
                            -Effect
      of exchange rate changes on cash
                            
                            
                            3,110
                            
                            
                            
                            95,081Net
      increase (decrease) in cash and cash equivalents
                            
                            
                            378,360
                            
                            
                            
                            (11,621
                            )Cash
      and cash equivalents, beginning of period
                            
                            
                            199,779
                            
                            
                            
                            20,287Cash
      and cash equivalents, end of period
                            
                            $
                            578,139
                            
                            
                            $
                            8,666Supplemental
      disclosure information:Interest
      expense paid
                            
                            $
                            29,762
                            
                            
                            $
                            -Income
      taxes paid
                            
                            $
                            -
                            
                            
                            $
                            -
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  7
 Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note 1 - Organization and Nature of
Business
 
 Yinlips
Technology, Inc. (“Yinlips US”) was incorporated the State of Delaware on
December 7, 2006. Yinlips US was organized as a blank check shell company to
investigate and acquire a target company or business seeking the perceived
advantages of being a publicly held corporation.  On October 17, 2008,
Yinlips US (i) completed a share exchange transaction pursuant to which it
became the 100% parent of Podium Technology Limited (“Podium”), (ii) assumed the
operations of Podium and its subsidiaries, and (iii) changed its name to from
SRKP 17, Inc. to Yinlips Technology, Inc.
 
 Podium
Technology Limited (“Podium”) was established on July 3, 2007 in the British
Virgin Islands (“BVI”) with 50,000 shares authorized and issued at par value
$1HKD. Podium was organized as a non-operating BVI company with nominal net
assets to organize business restructuring of going public. On December 27, 2007,
Podium signed an Equity Transfer Agreement with Yinlips Digital Technology
(Shenzhen) Co., Ltd. (“Yinlips PRC”).
 
 Yinlips
PRC was a private operating company established in 2001. Yinlips PRC business
includes design, manufacture, and marketing of CRTs, LCDs, and a series of
portable digital devices, including portable DVDs, Palm PCs, MP3s, Mp4s, PMPs,
Mp4+Games, Game cards, and digital photo frames.
  On
January 5, 2008, Podium and Yinlips PRC agreed that the owners would transfer
their 100% ownership in its registered capital of RMB 1 million to Podium. This
agreement was approved by the Chinese authorities on January 16, 2008. The two
parties also agreed that the first payment (10% of the total consideration) to
be made on April 2008, and the rest of the payments will be made within the next
six months. On April 29, 2008, Podium made its first payment of USD $14,893 to
the owners and a subsequent payment of USD $122,943 on June 18, 2008. However,
on June 11, 2008 the original Equity Transfer Agreement was restated to increase
the equity transfer price to its appraised value of RMB 19,200,000. The balance
of RMB 18,200,000 was payable to the Yinlips PRC owner.
  On
September 22, 2008, Podium entered into a Share and Warrant Exchange agreement
(“Exchange Agreement”) with Yinlips US (formerly known as SRKP 17, Inc.).
Pursuant to the exchange agreement, the shareholder and warrant holders of
Podium would transfer all of the issued and outstanding shares and warrants of
Podium to SRKP 17 in exchange for 65,795 shares of Yinlips US’s common stock and
warrants to purchase 300,000 shares of common stock at an exercise price of
$1.10 per share (the “Share and Warrant Exchange”). On October 17, 2008, the
Share and Warrant Exchange closed and Podium became Yinlips US wholly-owned
subsidiary. A total of 65,795 shares and 300,000 warrants were issued to the
former shareholder and warrant holders of Podium, respectively.
 
 Pursuant
to the Share and Warrant Exchange Cancellation agreement, Yinlips US
shareholders and warrant holders agreed to cancel 5,971,390 shares of common
stock and warrants to purchase 6,431,299 shares of common stock and offered a
thirty (30) day right to purchase up to 6,500,000 shares of common stock at a
per share purchase price of $0.415 (the “Purchase Right”) to the owners of
Yinlips PRC. On October 18, 2009, the Yinlips PRC owner used the receivables
from Podium as the conversion for the Yinlips US share purchase.
 
 Yinlips
US and its subsidiaries Podium and Yinlips PRC shall be collectively referred
throughout as “the Company”.
 
 Pursuant
to PRC rules and regulations relating to mergers of PRC companies with foreign
entities, an offshore company controlled by PRC citizens that intends to merge
with a PRC company will be subject to strict examination by the relevant PRC
foreign exchange authorities. To enable Yinlips PRC to go public, the owners of
Yinlips PRC (“Yinlips management”) made the following restructuring
arrangements: (i) established Podium as a BVI holding company owned by a non
PRC-citizen and indirectly controlled the operations of Podium, (ii) had Podium
enter into an equity transfer agreement with Yinlips PRC by paying 19,200,000
RMB to the Yinlips management, (iii) had Podium and its subsidiary Yinlips PRC
enter into a share exchange agreement with Yinlips US, and (vi) the Yinlips
management entered into an agreement to convert the RMB 18,200,000 payables to
Yinlips management in exchange for the Company’s common stock
purchase.
 
 Upon
consummation of the Share Exchange and the Purchase Right, Yinlips management
owns a majority of the issued and outstanding shares of common stock of the
Company and Zhao Zifeng, Chairman of the Board of Yinlips PRC, was appointed as
Chairman of the Board and Chief Executive Officer of Yinlips
US.
  8
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note 1 - Organization and Nature of Business
(continued)
 
 For
accounting purposes, this transaction is being accounted for as a reverse
merger. The transaction has been treated as a recapitalization of Podium and its
subsidiaries, with Yinlips US (the legal acquirer of Podium and its subsidiaries
including Yinlips PRC) considered the accounting acquiree and Yinlips PRC, the
only operating company, and whose management took control of Yinlips US (the
legal acquiree of Yinlips US) is considered the accounting acquirer. The Company
did not recognize goodwill or any intangible assets in connection with the
transaction.
 
 To
summarize the paragraphs above, the organization and ownership structure of the
Company is as follows:
 
 
 
 Note
2 - Summary of Significant Accounting Policies
 
 a.
                Basis
      of preparation
 
 The
consolidated financial statements have been prepared in accordance with U.S.
GAAP for interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation SX. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. These consolidated financial statements
should be read in conjunction with the consolidated financial statements of the
Company for the year ended December 31, 2008 and notes thereto contained in the
Report on Form 10-K of the Company as filed with the United States Securities
and Exchange Commission (the “SEC”). Interim results are not necessarily
indicative of the results for the full year.
 
 In the
opinion of the management, the consolidated financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position of the Company as of March 31, 2009 and
December 31, 2008, and the results of operations and cash flows for the three
months ended March 31, 2009 and 2008, respectively.
 
 b.
                Basis of
      consolidation
 
 The
consolidated financial statements include the accounts of the Company and its
subsidiaries.  All significant inter-company transactions have been
eliminated in consolidation.
 
 c.
                Use of
      estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting year. Because of the use
of estimates inherent in the financial reporting process, actual results could
differ from those estimates.
  9
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
2 - Summary of Significant Accounting Policies (continued)
 
 d.
                Fair
      values of financial instruments
 
 Statement
of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures About Fair Value of
Financial Instruments,” defines financial instruments and requires fair
value disclosures of those financial instruments. On January 1, 2008, the
Company adopted SFAS No. 157, “Fair Value Measurements,” which defines fair
value, establishes a three-level valuation hierarchy for disclosures of fair
value measurement and enhances disclosures requirements for fair value measures.
Current assets and current liabilities qualified as financial instruments and
management believes their carrying amounts are a reasonable estimate of fair
value because of the short period of time between the origination of such
instruments and their expected realization and if applicable, their current
interest rate is equivalent to interest rates currently
available.  The three levels are defined as follow:
 
 ·
                Level
      1 — inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active markets.·
                Level
      2 — inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the assets or liability, either directly or indirectly, for
      substantially the full term of the financial
  instruments.·
                Level
      3 — inputs to the valuation methodology are unobservable and significant
      to the fair value.
 
 As of the
balance sheet date, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented due to the
short maturities of these instruments and that the interest rates on the
borrowings approximate those that would have been available for loans of similar
remaining maturity and risk profile at respective period-ends. Determining which
category an asset or liability falls within the hierarchy requires significant
judgment. The Company evaluates the hierarchy disclosures each
quarter.
 
 e.
                Cash
      and cash equivalents
 
 Cash and
cash equivalents include cash on hand, demand deposits with banks and liquid
investments with an original maturity of three months or less.
 
 f.
                Accounts
      Receivable
 
 Accounts
receivable are carried at original invoice amount less an estimate made for
doubtful accounts based on a review of all outstanding amounts periodically. The
Company analyzes the aging of accounts receivable balances, historical bad
debts, customer concentrations, customer credit-worthiness, current economic
trends and changes in our customer payment terms, significant changes in
customer concentration or payment terms, deterioration of customer
credit-worthiness or weakening in economic trends that could have a significant
impact on the collectability of receivables and its operating results. If the
financial condition of its customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.
  The
allowance for doubtful accounts is provided using a factor of 0.5% of the
year-end or period-end total accounts receivable trade balances.
 
 g.
                Inventories
 
 Inventories,
which are primarily comprised of raw materials, packaging materials,
work-in-progress, semi-assembled goods and finished goods, are stated at the
lower of cost or net realizable value, using the first-in, first-out (“FIFO”)
method. Cost is determined on the basis of a moving average costing method. The
Company evaluates the need for reserves associated with obsolete, slow-moving
and non-salable inventory by reviewing net realizable values on a periodic basis
and uses specific identification method to make the reserves.
  10
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
2 - Summary of Significant Accounting Policies (continued)
 
 h.
                Property and
      Equipment
  Property
and equipment are recorded at cost and depreciated using the straight-line
method, with an estimated 5% salvage value of original cost, over the estimated
useful lives of the assets listed below.
  Expenditures
for repairs and maintenance, if not to improve or extend the expected useful
lives of the assets, are expensed as incurred while major replacements and
improvements are capitalized.
 
 When
property or equipment is retired or disposed of, the cost and accumulated
depreciation are removed from the accounts, with any resulting gains or losses
being included in net income or loss in the year of disposition.
 
 Building
                    20
      yearsMolds
                    5
      yearsMachinery
      &Equipment
                    5
      yearsElectronic
      Equipment
                    5
      yearsComputer
      Software
                    5
      yearsComputer
      Equipment
                    5
      yearsOffice
      Equipment
                    5
      yearsOther
      Equipment
                    5
      yearsAutomobiles
                    5
      yearsLeasehold
      Improvement
                    5
      years
 
 i.
                Comprehensive
      Income
 
 The
Company has adopted SFAS No. 130,Reporting Comprehensive
Income, which establishes standards for reporting and displaying comprehensive
income, its components, and accumulated balances in a full-set of
general-purpose financial statements. Accumulated other comprehensive income
represents the accumulated balance of foreign currency translation
adjustments.
 
 j.
                Revenue
      recognition
  The
Company’s revenue is derived from the sale of electronic products. The Company
recognizes its revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sale price is fixed or determinable, and
collectibility is reasonably assured in accordance with SAB 104. Returns and
allowances are recorded as incurred and have been immaterial for all the periods
presented.
  k.
                Advertising
 
 Yinlips
expenses advertising costs as incurred. Advertising is included in selling
expenses for financial reporting. The Company spent $50,587 and $104,549 on
advertising expenses for the three months ended March 31, 2009 and 2008,
respectively.
 
 l.
                Research and development
      costs
 
 Research
and development costs are expensed to operations as incurred. The Company spent
$650,030 and $232,822, on direct research and development (“R&D”) efforts
for the three months ended March 31, 2009 and 2008, respectively.
 
 m.
                Income
    Taxes
 
 The
Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes", which requires the Company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in the Company’s financial statements or tax
returns using the liability method. Under this method, deferred tax liabilities
and assets are determined based on the temporary differences between the
financial statements and tax basis of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to
reverse.
  11
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
2 - Summary of Significant Accounting Policies (continued)
 
 n.
                Foreign currency
      translation
 
 The
functional currency of Podium Technology Limited is Hong Kong Dollar (“HKD”)
prior to September 30, 2008. The functional currency was changed to US Dollar
(“USD”) beginning October 1, 2008. The financial statements are maintained using
the functional currency of HKD prior to September 30, 2008 and USD beginning
October 1, 2008.
 
 The
functional currency of Yinlips Digital Technology (ShenZhen) Co. Ltd. is the
Renminbi (“RMB”), the PRC’s currency. The financial statements are maintained
using the functional currency of RMB.
  For
financial reporting purposes, the financial statements of Podium Technology
Limited prior to September 30, 2008,  which are prepared in HKD, are
translated into the Company’s reporting currency, United States Dollars (“USD”);
the financial statements of Yinlips Digital Technology (ShenZhen) Co. Ltd. ,
which are prepared in RMB, are translated into the Company’s reporting currency,
USD. Balance sheet accounts are translated using the closing exchange rate in
effect at the balance sheet date and income and expense accounts are translated
using the average exchange rate prevailing during the reporting period.
Adjustments resulting from the translation, if any, are included in accumulated
other comprehensive income (loss) in stockholder’s equity.
 
 The
exchange rates used for foreign currency translation were as follows (USD$1 =
RMB):
 
 Period
      Covered
                      
                      Balance
      Sheet Date Rates
                      
                      
                      Average
      RatesYear
      ended December 31, 2008
                      
                      
                      6.81710
                      
                      
                      
                      6.93722Three
      months ended March 31, 2009
                      
                      
                      6.82547
                      
                      
                      
                      6.82547Three
      months ended March 31, 2008
                      
                      
                      7.00220
                      
                      
                      
                      7.15461
 
 The
exchange rates used for foreign currency translation were as follows (USD$1 =
HKD):
 
 Period
      Covered
                      
                      Balance
      Sheet Date Rates
                      
                      
                      Average
      RatesThree
      months ended March 31, 2009
                      
                      
                      7.75014
                      
                      
                      
                      7.75374Three
      months ended March 31, 2008
                      
                      
                      7.77968
                      
                      
                      
                      7.79423
 
 o.
                  Goodwill
 
 The
Company adopted SFAS No. 142, “Goodwill and Intangible Assets” (“SFAS 142”) on
January 1, 2002. Under SFAS 142, goodwill is no longer amortized, but tested for
impairment annually, or more frequently, if facts and circumstances warrant a
review. The provisions of SFAS 142 require that a two-step test be performed to
assess goodwill for impairment. First, the fair value of each reporting unit is
compared to its carrying value. If the fair value exceeds the carrying value,
goodwill is not impaired and no further testing is performed. The second step is
performed if the carrying value exceeds the fair value. The implied fair value
of the reporting unit’s goodwill must be determined and compared to the carrying
value of the goodwill. If the carrying value of a reporting unit’s goodwill
exceeds its implied fair value, an impairment loss equal to the difference will
be recorded.
 
 p.
                Impairment of Long-Lived
      Assets
 
 The
Company accounts for impairment of plant and equipment and amortizable
intangible assets in accordance with SFAS No. 144, “Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the
Company to evaluate a long-lived asset for recoverability when there is event or
circumstance that indicate the carrying value of the asset may not be
recoverable. An impairment loss is recognized when the carrying amount of a
long-lived asset or asset group is not recoverable (when carrying amount exceeds
the gross, undiscounted cash flows from use and disposition) and is measured as
the excess of the carrying amount over the asset’s (or asset group’s) fair
value.
  12
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
2 - Summary of Significant Accounting Policies (continued)
  q.
                Related
      parties
  A party
is considered to be related to the Company if the party directly or indirectly
or through one or more intermediaries, controls, is controlled by, or is under
common control with the Company. Related parties also include principal owners
of the Company, its management, members of the immediate families of principal
owners of the Company and its management and other parties with which the
Company may deal if one party controls or can significantly influence the
management or operating policies of the other to an extent that one of the
transacting parties might be prevented from fully pursuing its own separate
interests. A party which can significantly influence the management or operating
policies of the transacting parties or if it has an ownership interest in one of
the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests is also a related party.
 
 r.
                Recently Issued Accounting
      Pronouncements
  In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4
amends SFAS 157 and provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value
measurements. This FSP shall be applied prospectively with retrospective
application not permitted. This FSP shall be effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. An entity early adopting this FSP must
also early adopt FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). Additionally,
if an entity elects to early adopt either FSP FAS 107-1 and APB 28-1,
“Interim Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1
and APB 28-1) or FSP FAS 115-2 and FAS 124-2, it must also elect to early adopt
this FSP. The Company is currently evaluating this new FSP but do not believe
that it will have a significant impact on the determination or reporting of the
Company’s financial results.
  In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation
of Other-Than-Temporary Impairment” (FSP 115-2/124-2). FSP 115-2/124-2 amends
the requirements for the recognition and measurement of other-than-temporary
impairment for debt securities by modifying the pre-existing “intent and
ability” indicator. Under FSP 115-2/124-2, an other-than-temporary impairment is
triggered when there is an intent to sell the security, it is more likely then
not that the security will be required to be sold before recovery, or the
security is not expected to recover the entire amortized cost basis of the
security. Additionally, FSP 115-2/124-2 changes the presentation of an
other-than-temporary impairment in the income statement for those impairments
involving credit losses. The credit loss component will be recognized in
earnings and the remainder of the impairment will be recorded in other
comprehensive income. FSP 115-2/124-2 is effective for the Company beginning in
the second quarter of fiscal year 2009. Upon implementation at the beginning of
the second quarter of 2009, FSP 115-2/124-2 is not expected to have a
significant impact on the Company’s consolidated financial
statements.
 
 In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosure about Fair
Value of Financial Instruments” (“FSP 107-1/APB 28-1”). FSP 107-1/APB 28-1
requires interim disclosures regarding the fair values of financial instruments
that are within the scope of FAS 107, “Disclosures about the Fair Value of
Financial Instruments,” Additionally, FSP 107-1/APB 28-1 requires disclosures of
the methods and significant assumptions used to estimate the fair value of
financial instruments on an interim basis as well as changes in the methods and
significant assumptions from prior periods. FSP 107-1/APB 28-1 does not change
the accounting treatment for these financial instruments and is effective for
the Group beginning in the second quarter of fiscal year 2009.
  13
 Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
2 - Summary of Significant Accounting Policies (continued)
 
 s.
                Recently
      adopted accounting pronouncements
  In the
first quarter of 2009, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 141 (revised 2007), “Business Combinations” (SFAS No.
141(R)) as mended by FASB staff position FSP 141(R)-1, “Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination.” SFAS No. 141(R)
generally requires an entity to recognize the assets acquired, liabilities
assumed, contingencies, and contingent consideration at their fair value on the
acquisition date. In circumstances where the acquisition-date fair value for a
contingency cannot be determined during the measurement period and it is
concluded that it is probable that an asset or liability exists as of the
acquisition date and the amount can be reasonably estimated, a contingency is
recognized as of the acquisition date based on the estimated amount. It further
requires that acquisition related costs be recognized separately from the
acquisition and expensed as incurred, restructuring costs generally be expensed
in periods subsequent to the acquisition date, and changes in accounting for
deferred tax asset valuation allowances and acquired income tax uncertainties
after the measurement period impact income tax expenses. In addition, acquired
in-process research and development is capitalized as an intangibles asset and
amortized over its estimated useful life. SFAS No. 141(R) is applicable to
business combinations on a prospective basis beginning in the first quarter of
2009. The Company did not complete any business combination in the first quarter
of 2009.
  In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”). SFAS 157 defines fair value, establishes a framework and gives guidance
regarding the methods used for measuring fair value, and expands disclosures
about fair value measurements. In February 2008, the FASB issued FASB Staff
Position 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13
and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13 (“FSP 157-1”)
and FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157” (“FSP
157-2”). FSP 157-1 amends SFAS 157 to remove certain leasing transactions from
its scope. FSP 157-2 delays the effective date of SFAS 157 for all non-financial
assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), until fiscal years beginning after November 15, 2008. SFAS 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Group
adopted SFAS 157 effective January 1, 2008 for all financial assets and
liabilities as required. The adoption of SFAS 157 was not material to the
Company’s financial statements or results of operations.
  Effective
January 1, 2009, the Group adopted the provisions of EITF 07-5,"Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”). EITF 07-5 applies to any freestanding financial instruments or embedded
features that have the characteristics of a derivative, as defined by SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities,”
and to any freestanding financial instruments that are potentially settled in an
entity’s own common stock. The adoption of EITF 07-5 was not material to the
Company's financial statements or results of operations.
 
 In July
2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for
Uncertainty in Income Taxes,” which prescribes a comprehensive model for how a
company should recognize, measure, present and disclose in its financial
statements uncertain tax positions that the company has taken or expects to take
on a tax return (including a decision whether to file or not to file a return in
a particular jurisdiction). The accounting provisions of FIN No. 48 are
effective for fiscal years beginning after December 15, 2006. The adoption of
this Interpretation had no impact on the Company’s financial position or results
of operations.
  Note
3 - Cash and Cash Equivalents
 
 Cash and
Cash Equivalents consist of the following:
 
 March
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008Cash
      on hand
                      
                      $
                      5,550
                      
                      
                      $
                      7,708Cash
      in bank
                      
                      
                      572,589
                      
                      
                      
                      192,071Total
                      
                      $
                      578,139
                      
                      
                      $
                      199,779
  14
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
4 - Accounts Receivable
 
 Accounts
receivable consists of the following:
 
 March
      31,
                              
                              
                              December
      31,2009
                              
                              
                              2008Accounts
      receivable
                              
                              $
                              6,592,449
                              
                              
                              $
                              4,724,088Allowance
      for doubtful accounts
                              
                              
                              (33,149
                              )
                              
                              
                              (31,132
                              )Total
                              
                              $
                              6,559,300
                              
                              
                              $
                              4,692,956
  The
provisions for bad debts were $2,054 and $592 for the three months ended March
31, 2009 and 2008. The change in allowance for doubtful accounts for the three
months ended March 31, 2009 and 2008 respectively was as follows:
 
 March
      31,
                              
                              
                              March
      31,2009
                              
                              
                              2008Beginning
      of year
                              
                              $
                              31,132
                              
                              
                              $
                              14,206Effect
      of exchange rate
                              
                              
                              (37
                              )
                              
                              
                              -Current
      period’s provisions
                              
                              
                              2,054
                              
                              
                              
                              592End
      of period
                              
                              $
                              33,149
                              
                              
                              $
                              14,798
  Note
5 - Advances
 
 Equipment
Purchases
 
 In
November 2008, the Company signed two agreements for equipment purchases. The
cost of the new equipments is $2,707,754 which was completely assembled in the
second quarter of 2009.
 
 In March
2009, the Company signed an agreement for equipment purchases. The cost of the
new equipments is $966,966 which will be completed in four months. The Company
paid $922,512 to the supplier as an advance. The balance will be paid upon
shipment to the Company and in working condition.
  15
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
6 - Inventories
 
 Inventory
consists of the following:
 
 March
      31,
                              
                              
                              December
      31,2009
                              
                              
                              2008Raw
      materials
                              
                              $
                              2,124,497
                              
                              
                              $
                              1,383,073Finished
      goods
                              
                              
                              604,511
                              
                              
                              
                              1,593,775WIP
                              
                              
                              146,447
                              
                              
                              
                              24,942Less:
      allowance for obsolete inventories
                              
                              
                              (90,975
                              )
                              
                              
                              (91,087
                              )Total
                              
                              $
                              2,784,480
                              
                              
                              $
                              2,910,703
 
 Management
uses the specific identification method to provide an allowance for obsolete or
slow-moving inventory items, including finished goods and raw materials. The
provisions for allowance for obsolescence were $0 and $0 for the three months
ended March 31, 2009 and 2008. The change in allowance for obsolescence for the
three months ended March 31, 2009 and 2008, respectively, as
follows:
 
 March
      31,
                              
                              
                              March
      31,2009
                              
                              
                              2008Beginning
      of year
                              
                              $
                              91,087
                              
                              
                              $
                              85,132Current
      period’s provisions
                              
                              
                              -
                              
                              
                              
                              -Effect
      of exchange rate
                              
                              
                              (112
                              )
                              
                              
                              3,546End
      of year
                              
                              $
                              90,975
                              
                              
                              $
                              88,678
 
 Note
7- Fixed Assets
 
 Fixed
assets consist of the following:
 
 March
      31,
                              
                              
                              December
      31,2009
                              
                              
                              2008Building
                              
                              $
                              890,130
                              
                              
                              $
                              891,223Molds
                              
                              
                              550,438
                              
                              
                              
                              391,809Machinery
      and Equipments
                              
                              
                              692,615
                              
                              
                              
                              672,401Office
      equipment
                              
                              
                              81,281
                              
                              
                              
                              60,085Automobiles
                              
                              
                              86,968
                              
                              
                              
                              87,075Leasehold
      improvements
                              
                              
                              1,069,816
                              
                              
                              
                              129,0873,371,249
                              
                              
                              
                              2,231,680Accumulated
      Depreciation
                              
                              
                              (636,891
                              )
                              
                              
                              (562,010
                              )Total
      Fixed Assets – Net
                              
                              $
                              2,734,388
                              
                              
                              $
                              1,669,670
 
 The
depreciation expense is $75,541 and $49,186 for three months ended March 31,
2009 and 2008, respectively, as follows:
 
 March
      31,
                          
                          
                          March
      31,2009
                          
                          
                          2008Cost
      of goods sold
                          
                          $
                          59,423
                          
                          
                          $
                          30,718Operating
      expenses
                          
                          
                          16,118
                          
                          
                          
                          18,468Total
                          
                          $
                          75,541
                          
                          
                          $
                          49,186
  16
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
8 - Deposit Paid for Plant Renovation
  On
November 18, 2008, the Company entered into a renovation contract with an
estimated cost of $1,027,447 with a decoration company. The renovation was
completed as of March 31, 2009, and the deposit of $960,453 was applied
accordingly.
 
 Note
9 - Short Term Loans
 
 On
October 28, 2008, the Company obtained a one year term loan of RMB 8,000,000
($1,114,498) from Pudong Development Bank ("PDB") bearing interest at
approximately 110% of the prevailing prime rate (approximately 7%-8%). Pursuant
to the loan contract, the monthly payment is RMB 400,000 plus monthly interest
and the balance will be repaid in October 2009.
 
 The above
loan was part of a package of loans PDB made to 5 different companies where all
the companies cross guarantee each others’ loans.  In the event when one
company defaulted on its loan the other companies are required to pay a penalty
based on the percentage of the defaulted loan to PDB.  Additionally, each
company was required to deposit 25% of the loan amount it received in an account
held at PDB to be used as collateral for the loans.  The Company deposited
RMB 2,000,000 ($293,380) in the bank account as restricted
cash.
 
 On March
23, 2009, one of 5 companies’ loans went into default and the Company received a
notice from PDB for a penalty fee of $191,731. This amount is deducted from the
restricted cash held at PDB subsequent to March 31, 2009. However, the
Company reflected the contingency loss as other expenses for the quarter ended
March 31, 2009.
 
 Note
10 - Various Taxes Payable
 
 Various
taxes payable consists of the following:
 March
      31,
                              
                              
                              December
      31,2009
                              
                              
                              2008Value-added
      taxes (VAT) payable:
                              
                              $
                              146,966
                              
                              
                              $
                              180,174Other
      misc. taxes/levies
                              
                              
                              6,120
                              
                              
                              
                              7,207Total
                              
                              $
                              153,086
                              
                              
                              $
                              187,381
 
 The
Company pays and collects Value-added taxes (VAT) both at the rate of 17%. The
other misc taxes/levies included City development levies and Educational levies.
The City development levies and Educational levies are respectively 1% and 3% of
last month VAT.
 
 Note
11 – Series A Preferred Stock
 
 The
Company is authorized to issue 10,000,000 shares of preferred
stock.
 
 On
October 15, 2008, the Company filed a Certificate of Designations, Preferences
and Rights (the “Certificate”) whereby it designated 4,545,455 shares of its
preferred stock, $0.0001 par value per share, as Series A Convertible Preferred
Stock, (the “Preferred Stock”).  Each share of Preferred Stock has a
stated value of $1.10.  Each share of Preferred Stock is convertible,
at the option of the holder at any time and from time to time after the original
issue date of the Preferred Stock, into one share of Common Stock, at a
conversion price equal to the per share purchase price, subject to adjustment as
more fully described in the Certificate.  Each share of Preferred
Stock has the right to one vote per share of Common Stock issuable upon
conversion of the shares of Preferred Stock.
  17
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
11 – Series A Preferred Stock (continued)
 
 On
October 31, 2008, the Company closed a private placement transaction in which
the Company received gross proceeds of approximately $4.9 million (the “Private
Placement”). Pursuant to the subscription agreements entered into with the
investors, the Company sold an aggregate of 4,473,583 shares of Series A
Convertible Preferred Stock at a price of $1.10 per share. Each share of
Preferred Stock shall be convertible at the option of the holder thereof, at any
time and from time to time from and after the Original Issue Date into that
number of shares of Common Stock determined by dividing the Stated Value of
$1.10 of such share of Preferred Stock by the Conversion Price of
$1.10.
 
 In
accordance with Emerging Issues Task Force (‘‘EITF’’) 98-5 and EITF 00-27, the
Series A convertible preferred stock does not have an embedded beneficial
conversion feature (BCF) because the effective conversion price of such shares
equals the fair value of the Company’s common stock. The Company determined that
the fair value of the common stock at $1.10 per share based on the fact that (1)
the common stock is not readily tradable in an open market at the time of
issuance, and (2) the Company has recently sold the convertible preferred stock
that is convertible into common stock at 1:1 ratio for $1.10 per share in a
private placement, therefore the market price of the common stock is $1.10 per
share. However, if in the future the Company has a dilutive issuance of
securities, as defined in the Preferred Stock Certificate of Designator, the
Company must recognize a beneficial conversion if a reset of the conversion
price occurs.
 
 Value
      Allocated to Preferred Stocks:Proceeds
      from issuance
                            
                            $
                            4,920,941Less
      value allocated to warrants
                            
                            
                            -Value
      allocated to preferred stocks
                            
                            $
                            4,920,941Market
      Value of Shares Issuable Upon Conversion:Shares
      issuable upon conversion of the preferred stocks
                            
                            
                            4,473,583Market
      value of stock on preferred stock issuance date
                            
                            $
                            1.10Market
      value of shares issuable upon conversion
                            
                            $
                            4,920,941Beneficial
      Conversion Feature:Market
      value of shares issuable upon conversion
                            
                            $
                            4,920,941Less
      value allocated to preferred stocks
                            
                            
                            4,920,941Value
      of beneficial conversion feature
                            
                            $
                            -
  The
Company evaluated whether or not the Series A convertible preferred stock
contained any embedded conversion features that meet the definition of
derivatives under SFAS 133, “Accounting for Derivative Instruments and Hedging
Activities” and related interpretations.  Paragraph 12 of SFAS 133
states that an embedded derivative instrument shall be separated from the host
contract and accounted for as a derivative instrument pursuant to the statement
if and only if all the following criteria are met:
 a.
                The
      economic characteristics and risks of the embedded derivative instrument
      are not clearly and closely related to the economic characteristic and the
      risks to the host contact. (Additional guidance on applying this criterion
      to various contracts containing embedded derivative instrument s is
      included in Appendix A of this
statement.)
 b.
                The
      contract that embodies both the embedded derivative instrument and the
      host contract are not measured at fair value under otherwise applicable
      generally accepted accounting principles with changes in fair value
      reported in earnings as they occur.
 c.
                A
      separate instrument with the same terms as the embedded derivative
      instrument would, pursuant to paragraph 6-11, be a derivative instrument
      subject to the requirements of this statement. However, this criterion is
      not met if the separate instrument with the same terms as the embedded
      derivative instrument would be classified as a liability (or an asset in
      some circumstance) under the provisions of Statement 150 but would be
      classified in stockholders’ equity absent the provisions in Statement
      150.
   18
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
11 – Series A Preferred Stock (continued)
 
 The
Series A Preferred Stock has a fixed conversion provision of 1 preferred share
for 1 common share and is convertible at the option of the holder and
automatically based upon certain events happening. Based upon the above
requirement of paragraph 12 of SFAS 133, it is clear that any potential embedded
derivatives in the Series A Preferred Stock are clearly and closely related and
do not require bifurcation from the host.
 
 The
Company evaluated whether or not the convertible preferred stock should be
classified as a liability or equity under SFAS 150, “Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity” and
Topic D-98 “Classification and Measurement of Redeemable Securities”. The
Company concluded that under EITF Topic D-98, preferred securities that are
redeemable for cash or other assets are to be classified outside of permanent
equity if they are redeemable (i) at a fixed or determinable price on a
fixed or determinable date, (ii) at the option of the holder, or
(iii) upon the occurrence of an event that is not solely within the control
of the issuer. Accordingly, the Company classified the Series A Preferred Stock
as permanent equity since there was no deemed liquidation event that requires
one or more class or type of equity security to be redeemed.
 
 Note
12 – Warrants
 
 Original shareholders
warrants
 
 In
January 2007, the Company sold to its original shareholders warrants to purchase
7,096,390 shares of common stock at an exercise price of $0.0001. On October 17,
2008, these shareholders canceled an aggregate of 6,431,299 warrants such that
the shareholders held an aggregate of 665,091 warrants immediately after the
Share Exchange. The warrant has a 5 year term and is not exercisable until at
least one year from the date of Share Exchange.
 
 Bridge loans
warrants
 
 On May
30, 2008, Podium was indebted for two bridge loans from Midsouth Investment and
Trillion Investment. A warrant was issued to each lender to purchase conversions
shares of the Company. The warrant is exercisable for that number of conversion
shares determined by dividing the Warrant Coverage Amount (50% of the principal
amount of the note) by the Conversion Price prior to May 30, 2013. The fair
market value of the warrant is equal to 0.01% of the principal amount of the
note to which it relates.
 
 On
September 22, 2008, the Company signed Share and Warrants Exchange Agreement
(“Exchange”) with Podium Technology Limited (“BVI”) that the Company issues
65,795 shares of common stock (par value of $0.0001), and 300,000 warrants to
purchase 300,000 shares of common stock at $1.10 each in exchange for the 100%
of all issued and outstanding shares of common stock and all outstanding
warrants. The bridge loans are repaid in cash as of December 31,
2008
 
 The fair
market value of the warrants used were estimated on the date of grant using the
Black-Scholes option pricing model in accordance with SFAS No. 123R using the
following assumptions: risk-free interest rate of 1.6%, expected volatility of
10%, and a term  of 5 years. The value the warrants was determined to
be $594,000 and was recorded as bridge loans warrants interest
expense.
 
 The
summary of the status of the Company’s outstanding warrants and changes during
the period ended is as follows:
 
 March
      31,
                                  2009
                                
                                
                                December
      31,
                                  2008Number of
                                  Warrants
                                
                                
                                Average
                                  Exercise Price
                                
                                
                                Number of
                                  Warrants
                                
                                
                                Average
                                  Exercise PriceOriginal
      stockholders warrants
                                
                                
                                665,091
                                
                                
                                $
                                0.0001
                                
                                
                                
                                665,091
                                
                                
                                $
                                0.0001Bridge
      loans warrants
                                
                                
                                300,000
                                
                                
                                $
                                1.10
                                
                                
                                
                                300,000
                                
                                
                                $
                                1.10Exercised
                                
                                
                                -
                                
                                
                                $
                                -
                                
                                
                                
                                -
                                
                                
                                $
                                -Forfeited/canceled
                                
                                
                                -
                                
                                
                                $
                                -
                                
                                
                                
                                -
                                
                                
                                $
                                -End
      of the Period
                                
                                
                                965,091
                                
                                
                                
                                
                                
                                
                                
                                965,091
 
 In
accordance with EITF 00-19, “Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in a Company’s Own Stock”, the warrants are
considered freestanding instruments and are classified as equity instruments and
included in additional paid-in capital.
  19
  Yinlips
Technology, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
13 – Reconciliation of Earnings per Share (EPS)
 
 Three
      months endedMarch
      31,2009
                                        
                                        
                                        2008NumeratorNet
      Income (loss) available to common stockholders
                                        
                                        
                                        386,575
                                        
                                        
                                        
                                        686,869DenominatorWeighted-average
      shares outstanding
                                          for
      earnings per share, basic
                                        
                                        
                                        7,690,795
                                        
                                        
                                        
                                        6,565,795Effect
      of dilutive securities:Warrants
                                        
                                        
                                        665,091
                                        
                                        
                                        
                                        -Convertible
      preferred stock
                                        
                                        
                                        4,473,583
                                        
                                        
                                        
                                        -Weighted-average
      shares outstanding
                                          for
      earnings per share, diluted
                                        
                                        
                                        12,829,469
                                        
                                        
                                        
                                        6,565,795Net
      income per share:Basic
                                        
                                        $
                                        0.05
                                        
                                        
                                        $
                                        0.10Diluted
                                        
                                        $
                                        0.03
                                        
                                        
                                        $
                                        0.10
 
 The
following were excluded from the computation of the diluted securities
outstanding as they would have been an anti-dilutive impact.
 
 Three
      months endedMarch
      31,2009
                      
                      
                      2008Stock
      warrants
                      
                      
                      -
                      
                      
                      
                      -Convertible
      preferred stock
                      
                      
                      -
                      
                      
                      
                      -
  Note
14 – Due to related party
 
 Due to
related party consist of the following:
 March
      31,
                                      
                                      
                                      December
      31,2009
                                      
                                      
                                      2008Due
      to Mr. Zhao, Zifeng, President and Chairman of Board of
      Directors
                                      
                                      $
                                      65,930
                                      
                                      
                                      $
                                      -Total
                                      
                                      $
                                      65,930
                                      
                                      
                                      $
                                      -
 
 On
January 14, 2009, the Company borrowed $65,930 from Mr. Zhao, Zifeng. The loan
is due on July 14, 2009 and carried monthly interest rate of
0.75%.
  20
 
 Yinlips
Technology, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
15 - Income Taxes
 
 The
Company’s subsidiary - Yinlips as a manufacturing enterprise established in
Shenzhen, PRC, was entitled to a preferential Enterprise Income Tax (”EIT”)
rate.  In 2008, the local government has increased the EIT rate from
15% to 18%.  In 2009, the local government has increased the EIT rate
from 18% to 20%.Yinlips is currently applying for the High-Tech Enterprise
title, if the application is approved by the local government Yinlips will have
a tax holiday of 2 years 100% exemption starting from the first profitable year,
and followed by 3 years of 50% tax deduction.
 
 The
corporate income tax expense are as follows:
 
 Three
      months endedMarch
      31,2009
                    
                    
                    2008Current
      income taxes expense:
                    
                    
                    
                    
                    
                    -PRC
      Enterprises Income Tax
                    
                    $
                    193,287
                    
                    
                    $
                    155,354United
      States Federal Income Taxes
                    
                    
                    -
                    
                    
                    
                    -Total
                    
                    $
                    193,287
                    
                    
                    $
                    155,354
 
 The tax
authority of the PRC Government conducts periodic and ad hoc tax filing reviews
on business enterprises operating in the PRC after those enterprises had
completed their relevant tax filings, hence the Company’s tax filings in the PRC
may not be finalized.  It is therefore uncertain as to whether the PRC
tax authority may take different views about the Company’s tax filings which may
lead to additional tax liabilities.
 
 A
reconciliation between the income tax computed at the U.S. statutory rate and
the Company’s provision for income tax is as follows:
 
 March
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008U.S.
      statutory rate
                      
                      
                      34
                      %
                      
                      
                      34
                      %Foreign
      income not recognized in the U.S.
                      
                      
                      -34
                      %
                      
                      
                      -34
                      %PRC
      preferential enterprise income tax rate
                      
                      
                      20
                      %
                      
                      
                      18
                      %Provision
      for income tax
                      
                      
                      20
                      %
                      
                      
                      18
                      %
 
 The
corporate income tax payables are as follows:
  March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008Corporate
      tax payable
                        
                        $
                        225,125
                        
                        
                        $
                        31,877
 
 Effective
January 1, 2008, the new "Law of the People's Republic of China on Enterprise
Income Tax" was implemented. The new law requires that:
 (i)
                For
      all resident enterprises, domestic or foreign, the Enterprise Income Tax
      rate is unified 25%.
 (ii)
                Enterprises
      that are categorized as the "High Tech Enterprise" will have a reduced tax
      rate of 15%.
 (iii)
                From
      January 1, 2008 onwards, enterprises that enjoyed a preferential tax rate
      before, will need to adopt the new law within the next five years.
      Specifically; enterprises with a current preferential tax rate of 15% for
      2007, the tax rate will be 18%, 20%, 22%, 24%, and 25% for the years ended
      December 31 2008, 2009, 2010, 2011, and 2012,
  respectively.
 The
Company’s tax expense will increase as a result of the new tax rate when
adopted.
  21
  Yinlips
Technology, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
16 - Statutory Reserves
 
 As
stipulated by the relevant laws and regulations for enterprises operating in the
PRC is required to make annual appropriations to a statutory surplus reserve
fund that is to allocate total 10-15% its profits after taxes, as determined in
accordance with the PRC accounting standards applicable to the Company’s
subsidiary - Yinlips, to a statutory surplus reserve until such reserves reach
50% of the registered capital.  The management has an appropriation of
$70,881 for this surplus reserve as of March 31, 2009 and December 31, 2008,
which is 50% of the registered capital.
 
 Note
17 - Commitments and Contingencies
 
 Operating Lease
Commitments
 
 On
November 17, 2008, the Company has entered into a new 5 years lease tenancy
plant and the office agreement which effects on January 1, 2009. The terms on
the contract are revised on March 2009. As of December 31, 2008, the commitment
of minimum lease payments under these non-cancelable operating leases for the
next five years and thereafter is as follows:
 
 Years
                            
                            Amounts2009
                            
                            $
                            248,1842010
                            
                            
                            248,1842011
                            
                            
                            248,1842012
                            
                            
                            248,1842013
                            
                            
                            248,184Thereafter
                            
                            
                            -$
                            1,240,920
 
 Lack of
Insurance
 
 The
Company could be exposed to liabilities or other claims for which the Company
would have no insurance protection. The Company does not currently maintain any
business interruption insurance, products liability insurance, or any other
comprehensive insurance policy except for property insurance policies with
limited coverage. For example, because the Company does not carry products
liability insurance, a failure of any of the products marketed by the Company
may subject it to the risk of product liability claims and litigation arising
from injuries allegedly caused by the improper functioning or design of its
products. The Company cannot assure that it will have enough funds to defend or
pay for liabilities arising out of a products liability claim. To the extent the
Company incurs any product liability or other litigation losses, its expenses
could materially increase substantially. There can be no assurance that the
Company will have sufficient funds to pay for such expenses, which could end its
operations.  There can be no guarantee that the Company will be able
to obtain additional insurance coverage in the future, and even if it can obtain
additional coverage, the Company may not carry sufficient insurance coverage to
satisfy potential claims. All investors of the Company stock could lose their
entire investment should uninsured losses occur.
 
 Loan guarantee and
contingencies
 
 On
October 28, 2008, the Company acquired a short term loan (that cross guarantees
by four other companies’ loans). (Refer to Note 9). On March 23, 2009,
one of 5 companies’ loans went into default and the Company received a notice
from the bank for a penalty fee of $191,731. This amount is deducted from the
restricted cash held at the bank subsequent to March 31, 2009. However, the
Company reflected the contingency loss as other expenses for the quarter ended
March 31, 2009. The cross guarantee is limited to the remaining $101,694
restricted cash held at the bank.
 
 Note
18 - Current Vulnerability Due to Certain Concentrations
 
 The
Company’s operations are all carried out in the PRC.  Accordingly, the
Company’s business, financial condition and results of operations may be
influenced by the political, economic and legal environments in the PRC, and by
the general state of the PRC’s economy.
  22
  Yinlips
Technology, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
18 - Current Vulnerability Due to Certain Concentrations
(continued)
 
 The
Company’s operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe.  These include risks associated with, among
others, the political, economic and legal environments and foreign currency
exchange. The Company’s results may be adversely affected by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation, among other things.
 
 Note
19 - Segment Information
 
 The
segment information for revenue is as follows:
 
 Three
      months endedMarch
      31,2009
                          
                          
                          2008China
      Mainland
                          
                          $
                          5,458,590
                          
                          
                          $
                          3,118,963North
      America
                          
                          
                          623,839
                          
                          
                          
                          1,386,206South
      America
                          
                          
                          389,899
                          
                          
                          
                          1,039,654Asia
      (other than China)
                          
                          
                          155,960
                          
                          
                          
                          693,103Europe
                          
                          
                          1,167,689
                          
                          
                          
                          693,103Total
                          
                          $
                          7,797,986
                          
                          
                          $
                          6,931,030
 
 The
Company has not segregated business units for managing different products and
services that the Company has been carrying and selling on the
market.  The assets and resources of the Company have been utilized,
on a corporate basis, for overall operations of the Company.  All
revenues were from external sources for all reporting periods.
 
 The
following financial information indicates the revenue, cost, gross profit, and
gross margin for major product and service categories for the three months ended
March 31, 2009 and 2008 is as follows:
 
 Three
      months endedMarch
      31,Micro-PC
      Series:
                            
                            2009
                            
                            
                            2008Revenues
                            
                            $
                            383,305
                            
                            
                            $
                            2,068,656Cost
      of sales
                            
                            
                            260,344
                            
                            
                            
                            1,574,667Gross
      Profits
                            
                            $
                            122,961
                            
                            
                            $
                            493,989Gross
      margin
                            
                            
                            32.07
                            %
                            
                            
                            23.88
                            %
 
 Three
      months endedMarch
      31,MP4
      Series:
                                        
                                        2009
                                        
                                        
                                        2008Revenues
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        1,214,518Cost
      of sales
                                        
                                        
                                        -
                                        
                                        
                                        
                                        972,128Gross
      Profits
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        242,389Gross
      margin
                                        
                                        
                                        -
                                        
                                        
                                        
                                        19.96
                                        %Three
      months endedMarch
      31,MP4
      +GARE Series:
                                        
                                        2009
                                        
                                        
                                        2008Revenues
                                        
                                        $
                                        727,854
                                        
                                        
                                        $
                                        1,270,516Cost
      of sales
                                        
                                        
                                        541,020
                                        
                                        
                                        
                                        1,026,180Gross
      Profits
                                        
                                        $
                                        186,834
                                        
                                        
                                        $
                                        244,336Gross
      margin
                                        
                                        
                                        25.67
                                        %
                                        
                                        
                                        19.23
                                        %
  23
  Yinlips
Technology, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
 
 Note
19- Segment Information (continued)
 
 Three
      months endedMarch
      31,MP5+GARE
      Series:
                                            
                                            2009
                                            
                                            
                                            2008Revenues
                                            
                                            $
                                            5,352,584
                                            
                                            
                                            $
                                            1,814,680Cost
      of sales
                                            
                                            
                                            4,134,760
                                            
                                            
                                            
                                            1,438,139Gross
      Profits
                                            
                                            $
                                            1,217,824
                                            
                                            
                                            $
                                            376,541Gross
      margin
                                            
                                            
                                            22.75
                                            %
                                            
                                            
                                            20.75
                                            %Three
      months endedMarch
      31,Digital
      Frame Series:
                                            
                                            2009
                                            
                                            
                                            2008Revenues
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            562,661Cost
      of sales
                                            
                                            
                                            -
                                            
                                            
                                            
                                            452,701Gross
      Profits
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            109,960Gross
      margin
                                            
                                            
                                            -
                                            
                                            
                                            
                                            19.54
                                            %
 
 Three
      months endedMarch
      31,MP6+GARE
      Series:
                                          
                                          2009
                                          
                                          
                                          2008Revenues
                                          
                                          $
                                          1,053,620
                                          
                                          
                                          $
                                          -Cost
      of sales
                                          
                                          
                                          709,307
                                          
                                          
                                          
                                          -Gross
      Profits
                                          
                                          $
                                          344,313
                                          
                                          
                                          $
                                          -Gross
      margin
                                          
                                          
                                          32.68
                                          %
                                          
                                          
                                          -Three
      months endedMarch
      31,Mobile
      TV Series:
                                          
                                          2009
                                          
                                          
                                          2008Revenues
                                          
                                          $
                                          280,623
                                          
                                          
                                          $
                                          -Cost
      of sales
                                          
                                          
                                          189,748
                                          
                                          
                                          
                                          -Gross
      Profits
                                          
                                          $
                                          90,875
                                          
                                          
                                          $
                                          -Gross
      margin
                                          
                                          
                                          32.38
                                          %
                                          
                                          
                                          -
 
 Note
20 - Condensed Parent Company Financial Information
 
 Basis of
Presentation
 
 The
condensed parent company financial statements have been prepared in accordance
with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of
the subsidiaries of Yinlips Technology, Inc. exceed 25% of the consolidated net
assets of Yinlips Technology, Inc.. The ability of our Chinese operating
subsidiaries to pay dividends may be restricted due to the foreign exchange
control policies and availability of cash balances of the Chinese operating
subsidiaries. Because substantially all of our operations are conducted in China
and a substantial majority of our revenues are generated in China, a majority of
our revenue being earned and currency received are denominated in Renminbi
(RMB). RMB is subject to the exchange control regulation in China, and, as a
result, we may be unable to distribute any dividends outside of China due to PRC
exchange control regulations that restrict our ability to convert RMB into US
Dollars.
 
 The
condensed parent company financial statements have been prepared using the same
accounting principles and policies described in the notes to the consolidated
financial statements, with the only exception being that the parent company
accounts for its subsidiaries using the equity method. Refer to the consolidated
financial statements and notes presented above for additional information and
disclosures with respect to consolidate these financial
statements.
  24
  Yinlips
Technology, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
  Note 20 - Condensed Parent Company
Financial Information (continued)
  Yinlips
Technology, Inc.
 (Formerly
SRKP 17, Inc.)
 
 Condensed
Parent Company Balance Sheets
 (Dollars
In Thousands)
 
 March
      31,
                                                
                                                
                                                December
      31,2009
                                                
                                                
                                                2008(Unaudited)ASSETSInvestment
      in subsidiaries, at equity in net assets
                                                
                                                $
                                                9,864
                                                
                                                
                                                $
                                                9,526Total
      Assets
                                                
                                                
                                                9,864
                                                
                                                
                                                
                                                9,526LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIESAccrued
      liabilities and other payable
                                                
                                                
                                                
                                                
                                                
                                                
                                                50Total
      Current Liabilities
                                                
                                                
                                                -
                                                
                                                
                                                
                                                50COMMITMENTS
      AND CONTINGENCIES
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -STOCKHOLDERS'
      EQUITYPreferred
      stock, $0.0001 par value, 10,000,000 shares authorized, 5,454,545 shares
      undesignated, 0 and 0 shares issued and outstanding at March 31, 2009 and
      December 31, 2008, respectively.Preferred
      stock Series A Convertible, $0.0001 par value, 4,545,455
      shares authorized, 4,473,583 and 0 shares issued and outstanding at
      March 31, 2009 and Decemebr 31, 2008, respectively. Liquidation
      preference and redemption value of $4,920,945 at March 31,
      2009.
                                                
                                                
                                                1
                                                
                                                
                                                
                                                1Common
      stock, $0.0001 par value, 100,000,000 shares authorized, 7,690,795
      and 7,690,795 shares issued and outstanding at March 31, 2009 and
      December 31, 2008, respectively.
                                                
                                                
                                                1
                                                
                                                
                                                
                                                1Additional
      paid-in capital
                                                
                                                
                                                5,033
                                                
                                                
                                                
                                                5,033Accumulated
      other comprehensive income
                                                
                                                
                                                693
                                                
                                                
                                                
                                                692Statutory
      surplus reserve fund
                                                
                                                
                                                71
                                                
                                                
                                                
                                                71Retained
      earnings (unrestricted)
                                                
                                                
                                                4,065
                                                
                                                
                                                
                                                3,678Total
      Stockholders' Equity
                                                
                                                
                                                9,864
                                                
                                                
                                                
                                                9,476Total
      Liabilities and Stockholders' Equity
                                                
                                                $
                                                9,864
                                                
                                                
                                                $
                                                9,526
  25
  Yinlips
Technology, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
  Note 20 - Condensed Parent Company
Financial Information (continued)
  Yinlips
Technology, Inc.
 (Formerly
SRKP 17, Inc.)
 
 Condensed
Parent Company Statements of Operations
 (Dollars
In Thousands)
 
 For
      The Three Months EndedMarch
      31,2009
                        
                        
                        2008(Unaudited)
                        
                        
                        (Unaudited)Revenue
                        
                        $
                        -
                        
                        
                        $
                        -Merger
      cost
                        
                        
                        
                        
                        
                        
                        -Bridge
      loans warrants interest expenseOther
      general and administrative
                        
                        
                        89
                        
                        
                        
                        -Total
      Expenses
                        
                        
                        89
                        
                        
                        
                        -Equity
      in undistributed income of subsidiaries
                        
                        
                        476
                        
                        
                        
                        687Income
      before income taxes
                        
                        
                        387
                        
                        
                        
                        687Provision
      for income tax
                        
                        
                        -
                        
                        
                        
                        -Net
      income
                        
                        $
                        387
                        
                        
                        $
                        687
  26
  Yinlips
Technology, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Amounts
and disclosures at and for the three months ended March 31, 2009 and
2008)
  Note 20 - Condensed Parent Company
Financial Information (continued)
  Yinlips
Technology, Inc.
 (Formerly
SRKP 17, Inc.)
 
 Condensed
Parent Company Statement of Cash Flows
 (Dollars
In Thousands)
 
 For
      The Three Months EndedMarch
      31,2009
                                
                                
                                2008(Unaudited)
                                
                                
                                (Unaudited)Cash
      Flows from Operating ActivitiesNet
      income
                                
                                $
                                387
                                
                                
                                $
                                687Adjustments
      to reconcile net income to net cash provided (used) by operating
      activities:Increase
      in accrued liabilities and other payable
                                
                                
                                (50
                                )Equity
      in undistributed income of subsidiaries
                                
                                
                                (476
                                )
                                
                                
                                (687
                                )Net
      Cash Provided (Used) by Operating Activities
                                
                                
                                (139
                                )
                                
                                
                                -Cash
      Flows from Investing ActivitiesCapital
      contribution to subsidiaries
                                
                                
                                139
                                
                                
                                
                                -Net
      Cash Provided (Used) by Investing Activities
                                
                                
                                139
                                
                                
                                
                                -Net
      Increase in Cash and Cash Equivalents
                                
                                
                                -
                                
                                
                                
                                -Cash
      and Cash Equivalents, beginning of period
                                
                                
                                -
                                
                                
                                
                                -Cash
      and Cash Equivalents, end of period
                                
                                $
                                -
                                
                                
                                $
                                -
  27
  ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





The
following discussion relates to the financial condition and results of
operations of Yinlips Technology, Inc. (the “Company”or “Yinlips US”) and its
wholly-owned subsidiary Podium Technology Limited, a company organized under the
laws of the British Virgin Islands (“Podium”), and its wholly-owned subsidiary
Yinlips Digital Technology (Shenzhen) Co., Ltd., a company organized under the
laws of the People’s Republic of China (“Shenzhen Yinlips”). Although Shenzhen
Yinlips is a subsidiary of Yinlips US, the acquisition of Podium and its
subsidiary Shenzhen Yinlips by Yinlips US, which was consummated on October 17,
2008, has been treated as a reverse merger of Shenzhen Yinlips. This means that
Shenzhen Yinlips is the continuing entity for financial reporting
purposes. This management’s discussion and analysis of financial condition
and results of operations should be read in conjunction with the Company’s
financial statements and the related notes included in this report.





Forward-Looking
Statements





This
report contains forward-looking statements. The words “anticipated,” “believe,”
“expect, “plan,” “intend,” “seek,” “estimate,” “project,” “could,” “may,” and
similar expressions are intended to identify forward-looking statements. These
statements include, among others, information regarding future operations,
future capital expenditures, and future net cash flow. Such statements reflect
our management’s current views with respect to future events and financial
performance and involve risks and uncertainties, including, without limitation,
general economic and business conditions, changes in foreign, political, social,
and economic conditions, regulatory initiatives and compliance with governmental
regulations, the ability to achieve further market penetration and additional
customers, and various other matters, many of which are beyond our control.
Should one or more of these risks or uncertainties occur, or should underlying
assumptions prove to be incorrect, actual results may vary materially and
adversely from those anticipated, believed, estimated or otherwise indicated.
Consequently, all of the forward-looking statements made in this report are
qualified by these cautionary statements and there can be no assurance of the
actual results or developments.




Overview





We engage
in the development, production and sales of portable electronic products such as
Micro PCs, HD hard disk multimedia players, MP6s, MP5s, MP4s with gaming
features, MP3s and digital photo frames. Our digital products have a solid
reputation and established brand name in the PRC and abroad.





We sell
our products to wholesalers and distributors of electronic products. For export
sales and ODM production, we produce based on customer demand and orders. For
products with our own brand names, customers generally do not provide us with
any long-term commitments. As a result it is necessary for us to estimate, based
in part on non-binding estimates by our customers and potential customers, the
requirements for our products. In addition, in some instances, we develop
products based on anticipated customer demand with no assurance that we will
receive the anticipated orders. To the extent that we do not receive the
anticipated orders or that our customers require products in greater quantities
than anticipated, our revenue and margins will be affected.





A small
number of customers account for a very significant percentage of our revenue.
For the three months ended March 31, 2009, we had nine customers that each
accounted for at least 5% of the revenues that we generated. These nine
customers accounted for a total of approximately 58% of our revenue for that
period. During the three months ended March 31, 2008, we had six customers that
generated revenues of at least 5% of our revenues. These six customers accounted
for a total of approximately 42% of our revenue for that period. Unless we
replace a customer, the loss of any of these customers could have a material
adverse effect upon our revenue and net income. We have long term supply
contracts with stable supply source. This practice reduces our risk on shortage
of raw material supply. But any future purchase price fluctuations will affect
our production costs and gross margin





Recent
Events





On
September 22, 2008, we entered into a share and warrant exchange agreement (the
“Exchange Agreement”), with Podium Technology Limited, a company organized in
the British Virgin Islands (“Podium”), and the sole shareholder and all of the
warrantholders of Podium, pursuant to which the shareholder would transfer all
of the issued and outstanding shares of Podium to the Company in exchange for
65,795 shares our common stock and the warrantholders would transfer all of the
issued and outstanding warrants of Podium to the Company in exchange for
warrants to purchase 300,000 shares of our common stock at an exercise price of
$1.10 per share (the “Exchange”). On October 17, 2008, the Exchange closed and
Podium became our wholly-owned subsidiary and we immediately changed our name
from “SRKP 17, Inc.” to “Yinlips Technology, Inc.” A total of 65,795 shares and
300,000 warrants were issued to the former shareholder and warrantholders of
Podium, respectively.


28





In
addition, on October 31, 2008, we closed a private placement transaction (the
“Private Placement”). Pursuant to subscription agreements entered into with the
investors, we sold an aggregate of 4,473,583 shares of Series A Convertible
Preferred Stock at $1.10 per share. As a result, we received gross proceeds in
the amount of approximately $4.9 million.





On
November 14, 2008, Zhao Zifeng, our Chief Executive Officer and Chairman of the
Board, purchased 6,500,000 shares of our common stock at a per share purchase
price of $0.415 (the “Purchase Right”). Each of the shareholders and
warrantholders of the Company prior to the Exchange agreed to cancel 0.91867
shares of common stock and warrants to purchase 0.98943 shares of common stock
held by each of them for each one (1) share of common stock purchased by Mr.
Zhao pursuant to the Purchase Right (the “Share and Warrant
Cancellation”).  As a result of the Purchase Right and Share and
Warrant Cancellation, we cancelled an aggregate of 5,971,390 shares of common
stock and warrants to purchase 6,431,299 shares of common stock held by certain
of our stockholders and warrantholders prior to the Exchange and Mr. Zhao owns
approximately 53.43% of our outstanding common stock (assuming the full
conversion of the maximum number of shares of Series A Convertible Preferred
Stock issued in the Private Placement).





Our BVI
subsidiary, Podium, was owned by a non-PRC individual. Podium obtained all the
equity interests of Shenzhen Yinlips, further to an Equity Transfer Agreement
dated December 28, 2007 (the “Original Equity Agreement”) by and among Podium,
Zhao Zifeng, our Chief Executive Officer and Chairman of the Board, and Zhang
Weiqiang. The Original Equity Agreement was amended and restated in September
2008 (the “Restated Equity Agreement”) to increase the total purchase price of
the equity interests of Shenzhen Yinlips to RMB 19,200,000.





Critical
Accounting Policies and Estimates





The
discussion and analysis of our financial condition and results of operations is
based upon our financial statements which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets and liabilities. On an on-going basis, we
evaluate our estimates including the allowance for doubtful accounts, the
salability and recoverability of inventory, income taxes and contingencies. We
base our estimates on historical experience and on other assumptions that we
believes to be reasonable under the circumstances, the results of which form our
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.





We cannot
predict what future laws and regulations might be passed that could have a
material effect on our results of operations. We assess the impact of
significant changes in laws and regulations on a regular basis and update the
assumptions and estimates used to prepare our financial statements when we deem
it necessary.





Revenue
recognition. We recognize revenue from the sales of products. Sales are
recognized when the following four revenue criteria are met: persuasive evidence
of an arrangement exists, delivery has occurred, the selling price is fixed or
determinable, and collectivity is reasonably assured. Sales revenue is presented
net of value added tax (VAT), sales rebates and returns. No return allowance is
made as product returns are insignificant based on historical
experience.





Allowance for
doubtful accounts. In estimating the collectability of accounts
receivable we analyze historical write-offs, changes in our internal credit
policies and customer concentrations when evaluating the adequacy of our
allowance for doubtful accounts. Differences may result in the amount and timing
of expenses for any period if we make different judgments or use different
estimates. Our accounts receivable represent a significant portion of our
current assets and total assets. Our realization on accounts receivable,
expressed in terms of United States dollars may be affected by fluctuations in
currency rates since the customer’s currency is frequently a currency other than
United States dollars.





Inventories.
Inventories comprise raw materials and finished goods are stated at the lower of
cost or market. Substantially all inventory costs are determined using the
weighted average basis. Costs of finished goods include direct labor, direct
materials, and production overhead before the goods are ready for sale.
Inventory costs do not exceed net realizable value.





Taxation.
Under the tax laws of PRC, Shenzhen Yinlips has had tax advantages granted by
local government for corporate income taxes and sales taxes commencing from the
establishment of the Company.  As
a manufacturing enterprise established in Shenzhen, PRC, the Company was
entitled to a preferential Enterprise Income Tax (“EIT”) rate of 15%. On March
16, 2007, the National People’s Congress of China enacted a new PRC Enterprise
Income Tax Law, under which foreign invested enterprises and domestic companies
will be subject to enterprise income tax at a uniform rate of 25%. The new law
became effective on January 1, 2008. Since 2008, the local government has
increased the EIT rate from 15% to 18%. During the transition period for
enterprises established before March 16, 2007, the tax rate will be gradually
increased starting in 2008 and be equal to the new tax rate in 2012. We believe
that our profitability will be negatively affected in the near future as a
result of the new EIT Law.


29




Recently
Issued Accounting Pronouncements
  In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4
amends SFAS 157 and provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value
measurements. This FSP shall be applied prospectively with retrospective
application not permitted. This FSP shall be effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. An entity early adopting this FSP must
also early adopt FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). Additionally,
if an entity elects to early adopt either FSP FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1 and APB
28-1) or FSP FAS 115-2 and FAS 124-2, it must also elect to early adopt this
FSP. The Company is currently evaluating this new FSP but do not believe that it
will have a significant impact on the determination or reporting of the
Company’s financial results.
  In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation
of Other-Than-Temporary Impairment” (FSP 115-2/124-2). FSP 115-2/124-2 amends
the requirements for the recognition and measurement of other-than-temporary
impairment for debt securities by modifying the pre-existing “intent and
ability” indicator. Under FSP 115-2/124-2, an other-than-temporary impairment is
triggered when there is an intent to sell the security, it is more likely then
not that the security will be required to be sold before recovery, or the
security is not expected to recover the entire amortized cost basis of the
security. Additionally, FSP 115-2/124-2 changes the presentation of an
other-than-temporary impairment in the income statement for those impairments
involving credit losses. The credit loss component will be recognized in
earnings and the remainder of the impairment will be recorded in other
comprehensive income. FSP 115-2/124-2 is effective for the Company beginning in
the second quarter of fiscal year 2009. Upon implementation at the beginning of
the second quarter of 2009, FSP 115-2/124-2 is not expected to have a
significant impact on the Company’s consolidated financial
statements.
 
 In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosure about Fair
Value of Financial Instruments” (“FSP 107-1/APB 28-1”). FSP 107-1/APB 28-1
requires interim disclosures regarding the fair values of financial instruments
that are within the scope of FAS 107, “Disclosures about the Fair Value of
Financial Instruments,” Additionally, FSP 107-1/APB 28-1 requires
disclosures of the methods and significant assumptions used to estimate the fair
value of financial instruments on an interim basis as well as changes in the
methods and significant assumptions from prior periods. FSP 107-1/APB 28-1
does not change the accounting treatment for these financial instruments and is
effective for the Group beginning in the second quarter of fiscal year
2009.
 
 Recently
Adopted Accounting Pronouncements
  In the
first quarter of 2009, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 141 (revised 2007), “Business Combinations” (SFAS No.
141(R)) as mended by FASB staff position FSP 141(R)-1, “Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination.” SFAS No. 141(R)
generally requires an entity to recognize the assets acquired, liabilities
assumed, contingencies, and contingent consideration at their fair value on the
acquisition date. In circumstances where the acquisition-date fair value for a
contingency cannot be determined during the measurement period and it is
concluded that it is probable that an asset or liability exists as of the
acquisition date and the amount can be reasonably estimated, a contingency is
recognized as of the acquisition date based on the estimated amount. It
further requires that acquisition related costs be recognized separately from
the acquisition and expensed as incurred, restructuring costs generally be
expensed in periods subsequent to the acquisition date, and changes in
accounting for deferred tax asset valuation allowances and acquired income tax
uncertainties after the measurement period impact income tax expenses. In
addition, acquired in-process research and development is capitalized as an
intangibles asset and amortized over its estimated useful life. SFAS No. 141(R)
is applicable to business combinations on a prospective basis beginning in the
first quarter of 2009. The Company did not complete any business combination in
the first quarter of 2009.
  30
  In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”). SFAS 157 defines fair value, establishes a framework and gives guidance
regarding the methods used for measuring fair value, and expands disclosures
about fair value measurements. In February 2008, the FASB issued FASB Staff
Position 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13
and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13 (“FSP 157-1”)
and FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157” (“FSP
157-2”). FSP 157-1 amends SFAS 157 to remove certain leasing transactions from
its scope. FSP 157-2 delays the effective date of SFAS 157 for all non-financial
assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), until fiscal years beginning after November 15, 2008. SFAS 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Group
adopted SFAS 157 effective January 1, 2008 for all financial assets and
liabilities as required. The adoption of SFAS 157 was not material to the
Company’s financial statements or results of operations.
  Effective
January 1, 2009, the Group adopted the provisions of EITF 07-5,"Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”). EITF 07-5 applies to any freestanding financial instruments or embedded
features that have the characteristics of a derivative, as defined by SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities,”
and to any freestanding financial instruments that are potentially settled in an
entity’s own common stock. The adoption of EITF 07-5 was not material to the
Company's financial statements or results of operations.
 
 In July
2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for
Uncertainty in Income Taxes,” which prescribes a comprehensive model for how a
company should recognize, measure, present and disclose in its financial
statements uncertain tax positions that the company has taken or expects to take
on a tax return (including a decision whether to file or not to file a return in
a particular jurisdiction). The accounting provisions of FIN No. 48 are
effective for fiscal years beginning after December 15, 2006. The adoption of
this Interpretation had no impact on the Company’s financial position or results
of operations.




Results
of Operations


Three
Months Ended March 31, 2009 and 2008
 
 Revenue Mix for the Three
Months Ended March 31, 2009 and 2008
 Revenues
                    
                    
                    Micro-PC
                    
                    
                    MP4
                    
                    
                    MP4+
                    
                    
                    MP5+
                    
                    
                    Digital Frame
                    
                    
                    MP6+
                    
                    
                    Mobile TVTotal
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series2009
                    
                    $
                    7,797,986
                    
                    
                    $
                    383,305
                    
                    
                    $
                    -
                    
                    
                    $
                    727,854
                    
                    
                    $
                    5,352,584
                    
                    
                    $
                    -
                    
                    
                    $
                    1,053,620
                    
                    
                    $
                    280,6232008
                    
                    $
                    6,931,030
                    
                    
                    $
                    2,068,656
                    
                    
                    $
                    1,214,518
                    
                    
                    $
                    1,270,516
                    
                    
                    $
                    1,814,680
                    
                    
                    $
                    562,660
                    
                    
                    $
                    -
                    
                    
                    $
                    -%
      of Change
                    
                    
                    12.51
                    %
                    
                    
                    -81.47
                    %
                    
                    
                    n/a
                    
                    
                    
                    -42.71
                    %
                    
                    
                    194.96
                    %
                    
                    
                    n/a
                    
                    
                    
                    n/a
                    
                    
                    
                    n/a
  Revenues,
which consist of sales of our products, were $ 7,797,986 for the three months
ended March 31, 2009, an increase of $866,956, or 12.5%, compared to $$6,931,030
for the same period in 2008. The increase in revenue was attributed mainly to
our new products, MP6+ series and Mobile TV series, and the increased sales of
our MP5+ products.
 
 Cost of Sales for the Three
Months Ended March 31, 2009 and 2008
  Cost
                    
                    
                    Micro-PC
                    
                    
                    MP4
                    
                    
                    MP4+
                    
                    
                    MP5+
                    
                    
                    Digital Frame
                    
                    
                    MP6+
                    
                    
                    Mobile TVTotal
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series
                    
                    
                    Series2009
                    
                    $
                    5,835,179
                    
                    
                    $
                    260,344
                    
                    
                    $
                    -
                    
                    
                    $
                    541,020
                    
                    
                    $
                    4,134,760
                    
                    
                    $
                    -
                    
                    
                    $
                    709,307
                    
                    
                    $
                    189,7482008
                    
                    $
                    5,463,815
                    
                    
                    $
                    1,574,667
                    
                    
                    $
                    972,128
                    
                    
                    $
                    1,026,180
                    
                    
                    $
                    1,438,139
                    
                    
                    $
                    452,701
                    
                    
                    $
                    -
                    
                    
                    $
                    -%
      of Change
                    
                    
                    6.80
                    %
                    
                    
                    -83.47
                    %
                    
                    
                    n/a
                    
                    
                    
                    -47.28
                    %
                    
                    
                    187.51
                    %
                    
                    
                    n/a
                    
                    
                    
                    n/a
                    
                    
                    
                    n/a
   Cost of
sales, which include raw material, labor and manufacturing overhead, were
$5,835,179 for the three months ended March 31, 2009, an increase of $371,364,
or 6.8%, compared to $5,463,815 for the same period in 2008.  This
increase in cost of sales was in line with the increase of our
sales.
 
 Gross Profit Rate for the
Three Months Ended March 31, 2009 and 2008
  Total
                      
                      
                      Micro-PC
                      
                      
                      MP4
                      
                      
                      MP4+
                      
                      
                      MP5+
                      
                      
                      Digital Frame
                      
                      
                      MP6+
                      
                      
                      Mobile TVProducts
                      
                      
                      Series
                      
                      
                      Series
                      
                      
                      Series
                      
                      
                      Series
                      
                      
                      Series
                      
                      
                      Series
                      
                      
                      Series2009
                      
                      
                      25.17
                      %
                      
                      
                      32.07
                      %
                      
                      
                      0.00
                      %
                      
                      
                      25.67
                      %
                      
                      
                      22.75
                      %
                      
                      
                      0.00
                      %
                      
                      
                      32.68
                      %
                      
                      
                      32.38
                      %2008
                      
                      
                      21.17
                      %
                      
                      
                      23.88
                      %
                      
                      
                      19.96
                      %
                      
                      
                      19.23
                      %
                      
                      
                      20.75
                      %
                      
                      
                      19.54
                      %
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %%
      of Change
                      
                      
                      18.89
                      %
                      
                      
                      34.30
                      %
                      
                      
                      n/a
                      
                      
                      
                      33.49
                      %
                      
                      
                      9.64
                      %
                      
                      
                      n/a
                      
                      
                      
                      n/a
                      
                      
                      
                      n/a
  Gross
profit for the three months ended March 31, 2009 was $1,962,807, or 25.17% of
revenues, compared to $1,467,215, or 21.17% of revenues, for the comparable
period in 2008. Gross profit rate improved by 4.00 percentage points, or
increased by 18.89%. Management considers gross profit to be a key performance
indicator in managing our business. The increase in our gross profit margin for
the three months ended March 31, 2009 is attributable to the new products sales,
such as MP6+ series and Mobile TV series, which have higher gross margin than
that of our other products.
 31
 Operating Expenses for the
Three Months Ended March 31, 2009 and 2008
 
 For the Three Months Ended% of
                    
                    
                    March 31,Change
                    
                    
                    2009
                    
                    
                    2008Operating Expenses:Selling
      expenses
                    
                    
                    -27.63
                    %
                    
                    $
                    152,783
                    
                    
                    $
                    211,112Other
      general and administrative expenses
                    
                    
                    196.16
                    %
                    
                    
                    357,474
                    
                    
                    
                    120,705Research
      and development expenses
                    
                    
                    179.20
                    %
                    
                    
                    650,030
                    
                    
                    
                    232,822Depreciation
      expense
                    
                    
                    -12.72
                    %
                    
                    
                    16,118
                    
                    
                    
                    18,468Total
      Operating Expenses
                    
                    
                    101.75
                    %
                    
                    $
                    1,176,405
                    
                    
                    $
                    583,107
 
 Selling
expenses, which mainly include marketing, shipping, insurance, wage and other
expenses, were $152,783 for the three months ended March 31, 2009, decreased by
58,329, or 27.63%, compared to $211,112 for the same period in 2008. The
decrease in selling expenses was resulted from our reduced expenditures on
advertisement during the first quarter of 2009.
 
 Research
and development expenses, which were $650,030for the three months ended
March 31, 2009, an increase of $417,208, or 179%, compared to $232,822 for the
same period in 2008. The increase was due to the development of new
products.  We expect research and development expenses to increase as
a result of increasing efforts to develop more sophisticated technology
products.
 
 Other
general and administrative expenses, which include wage, benefit, bad debts,
utility, consulting, professional fees, various taxes and levies and other
expenses, were $357,474 for the three months ended March 31, 2009, an increase
of $236,769 , or 196%, compared to $ 120,705  for the same period in
2008.  The increase was caused by increase in professional service
fees and wages. We expect our professional service fee is to increase
continually in the next year as a result of being a publicly reporting company
in the United States.
 
 Other Income (Expenses) for
the Three Months Ended March 31, 2009 and 2008
 
 For the Three Months EndedMarch 31,2009
                            
                            
                            2008Other
      Income (Expenses)Interest
      income (expense), net
                            
                            $
                            (29,269
                            )
                            
                            $
                            18Penalty
      on renovation contract
                            
                            
                            -
                            
                            
                            
                            (41,931
                            )Miscellaneous
      other income (expenses), net
                            
                            
                            (177,271
                            )
                            
                            
                            28Total
      Other Income (Expenses)
                            
                            $
                            (206,540
                            )
                            
                            $
                            (41,885
                            )
  Total
other expenses was $206,540 for the three months ended March 31, 2009, increased
by $164,655, compared to $41,885 for the three months ended March 31, 2008. The
increase in other expenses was attributable to the
$191,731 finance charge paid to the bank (see Note 9 and Note 17 to
consolidated financial statements). It was offset by $14,460 in rental income
received for the three months ended March 31, 2009.
 
 Provision
for Income tax was $193,287 for the three months ended March 31, 2009, an
increase of $37,933, as compared to $155,354 for the three months ended March
31, 2008. Shenzhen Yinlips is registered in the PRC and has had tax advantages
granted by local government for corporate income taxes and sales taxes
commencing in 2001. Our effective income tax rates for the three months ended
March 31, 2009 and 2008 were 20% and 18%, respectively. On March 16, 2007, the
National People’s Congress of China enacted a new PRC Enterprise Income Tax Law
(“EIT Law”), under which foreign invested enterprises and domestic companies
will be subject to an enterprise income tax at a uniform rate of 25%. The new
law became effective on January 1, 2008. During the transition period for
enterprises established before March 16, the tax rate will be gradually
increased starting in 2008 and be equal to the new tax rate in 2012. We believe
that our profitability will be negatively affected in the near future as a
result of the new EIT Law.
  We had
net income of $386,575 for the three months ended March 31, 2009,  a
decrease of $300,294, compared to net income of $686,869 for the same period in
2008. The decrease was primary attributable to the increase in research and
development expenses.
 
 Liquidity
and Capital Resources
 
 We had
working capital of $7,135,630 and $6,788,201 as of March 31, 2009 and December
31, 2008, respectively.  The increase of working capital was the
result of increased revenues.
 
 Our
accounts receivable has been an increasingly significant portion of our current
assets, representing $6,559,300 and $4,692,956, or 59% and 49%, of current
assets, as of March 31, 2009 and December 31, 2008, respectively. If customers
responsible for a significant amount of accounts receivable were to become
insolvent or otherwise unable to pay for our products, or to make payments in a
timely manner, our liquidity and results of operations could be materially
adversely affected. An economic or industry downturn could materially adversely
affect the servicing of these accounts receivable, which could result in longer
payment cycles, increased collections costs and defaults in excess of
management’s expectations. A significant deterioration in our ability to collect
on accounts receivable could affect our cash flow and working capital position
and could also impact the cost or availability of financing available to
us.
  32
  Percentage of aged accounts
receivable
 
 Total
                    
                    
                    Current
                    
                    
                    
                    31-90
                    
                    
                    
                    91-120
                    
                    
                    
                    121-360
                    
                    
                    Over 361March
      31, 2009
                    
                    
                    100.00
                    %
                    
                    
                    56.00
                    %
                    
                    
                    33.00
                    %
                    
                    
                    9.00
                    %
                    
                    
                    2.00
                    %
                    
                    
                    0.00
                    %December
      31, 2008
                    
                    
                    100.00
                    %
                    
                    
                    60.00
                    %
                    
                    
                    30.00
                    %
                    
                    
                    8.00
                    %
                    
                    
                    2.00
                    %
                    
                    
                    0.00
                    %December
      31, 2007
                    
                    
                    100.00
                    %
                    
                    
                    90.00
                    %
                    
                    
                    10.00
                    %
                    
                    
                    0.00
                    %
                    
                    
                    0.00
                    %
                    
                    
                    0.00
                    %
  As of
March 31, 2009, there was seven customers’ receivables, totaled $595,088, over
90 days and three customers’ receivables, totaled $90,280 over 121 days,
compared to six customers’ receivables, totaled $358,872, over 90 days and one
customer’s receivable, $80,093 over 121 days as of December 31, 2008. The
prolonged aged accounts receivable was resulted from  increased sales
in the Chinese domestic market. We typically offer major of our customers 30 to
90 days credit terms for payment. We maintain an allowance for doubtful accounts
for estimated losses resulting from the inability of our customers to make
required payments. Allowance for doubtful accounts is based on our assessment of
the collectability of specific customer accounts, the aging of accounts
receivable, our history of bad debts, and the general condition of the industry.
If a major customer’s credit worthiness deteriorates, or our customers’ actual
defaults exceed historical experience, our estimates could change and impact our
reported results. We have not experienced any significant amount of bad debt
since the inception of our operation.
  As of
March 31, 2009, inventories amounted to $2,784,480, compared to $2,910,703 at
December 31, 2008. Our production lead time is approximately three weeks, from
the inspection of incoming materials, to production, testing and packaging. We
need to keep a large supply of raw materials and work in process and finished
goods inventory on hand to ensure timely delivery of our products to our
customers. We keep certain reserve amounts of raw materials in our inventories
and engage in long-term agreements with certain suppliers to assure minimum
additional expense from any condition of rising prices and shortages of raw
materials used to manufacture our products.
 
 As of
March 31, 2009, accounts receivable amounted to $6,559,300, compared to
$4,692,956 as of December 31, 2008. Accounts receivable increased with the
increase of our sales volume accordingly.
 
 As of
March 31, 2009, accounts payable and accrued liabilities amounted to $1,993,276,
compared to $952,488 as of December 31, 2008.  The increase in
accounts payable and accrued liabilities compared to end of last year was due to
the increase in payables to our suppliers.
 
 As of
March 31, 2009, various taxes payable amounted to $153,086, compared to $187,381 as of
December 31, 2008. The decrease in various taxes payable was due to the decrease
in VAT payable.
 
 As of
March 31, 2009, wages payable amounted to $501,299, compared to $506,450 as of
December 31, 2008.
 
 As of
March 31, 2009, corporate taxes payable amounted to $225,125, compared to
$31,877 as of December 31, 2008. The increase in corporate taxes payable was due
to the increased accrual for corporate tax.
 
 On
October 31, 2008, upon the closing of a private placement transaction (the
“Private Placement”), we received gross proceeds of approximately $4.9 million.
Pursuant to subscription agreements entered into with the investors, we sold an
aggregate of 4,473,583 shares of Series A Convertible Preferred Stock at $1.10
per share. We agreed to file a registration statement covering the common stock
underlying the Series A Convertible Preferred Stock sold in the Private
Placement within 60 days of the closing of the Share and Warrant Exchange
pursuant to the subscription agreement with each investor. For its services as
placement agent, WestPark received an aggregate commission equal to 9% of the
gross proceeds from the financing, in addition to a $90,000 success fee for the
Share and Warrant Exchange, for an aggregate fee of $533,000.
 
 We are
required to contribute a portion of our employees’ total salaries to the Chinese
government’s social insurance funds, including pension insurance, medical
insurance, unemployment insurance, and job injuries insurance, and maternity
insurance, in accordance with relevant regulations. Total company contributions
to the funds are approximately $2,400 and $1,800, for the three months ended
March 31, 2009 and 2008, respectively. We expect that the amount of our
contribution to the government’s social insurance funds will increase in the
future as we expand our workforce and operations and commence contributions to
an employee housing fund.
 
 The
ability of Shenzhen Yinlips to pay dividends may be restricted due to the
foreign exchange control policies and availability of cash balance. A majority
of our revenue being earned and currency received are denominated in RMB, which
is subject to the exchange control regulation in China, and, as a result, we may
be unable to distribute any dividends outside of China due to PRC exchange
control regulations that restrict our ability to convert RMB into US Dollars.
Accordingly, Shenzhen Yinlips’ funds may not be readily available to us to
satisfy obligations which have been incurred outside the PRC, which could
adversely affect our business and prospects or our ability to meet our cash
obligations.
  33
 
 Net cash
provided by operating activities was $1,628,461 for the three months ended March
31, 2009, compared to net cash used in operations of $105,774 for the three
months ended March 31, 2008. The $1,734,235 increase was due to the decrease in
advances, inventory and plant deposit during the three months ended March 31,
2009.
  Net cash
used in investing activities amounted to $1,142,307 for the three months ended
March 31, 2009, compared to net cash used in investing activities of $928 for
the same period of 2008. The change was due to the increase of expenditures on
leasehold improvement.
 
 Net cash
used in financing activities amounted to $110,904 for the three months ended
March 31, 2009, compared to none for the same period of 2008. During the three
months ended March 31, 2009, the Company repaid $176,834 short term loan payable
and received $65,930 from Mr. Zhao, Zifeng, a related party.
 
 Our
ability to maintain sufficient liquidity depends partially on our ability to
achieve anticipated levels of revenue, while continuing to control costs. If we
did not have sufficient available cash, we would have to seek additional debt or
equity financing through other external sources, which may not be available on
acceptable terms, or at all. Failure to maintain financing arrangements on
acceptable terms would have a material adverse effect on our business, results
of operations and financial condition.
  Seasonality
  Sales of
our products are somewhat seasonal due to consumer spending patterns, which tend
to result in significantly stronger sales in our third and fourth fiscal
quarters, especially as a result of the holiday season. This pattern will
probably not change significantly in the future. Although we believe that the
seasonality of our business is based on the timing of consumer demand for our
products, fluctuations in operating results can also result from other factors
affecting us and our competitors, including new product developments or
introductions, availability of products for resale, competitive pricing
pressures, changes in product mix, pricing and product reviews and other media
coverage.
 
 Off-Balance
Sheet Arrangements
 
 On
October 28, 2008, the Company acquired a short term loan (that cross guarantees
four other companies’ loans) (refer to Note 9 of the consolidated financial
statements).  On March 23, 2009, one of the other company’s loans went into
default and the Company received a notice from the bank for a penalty fee of
$191,731.  This amount will be deducted from the restricted cash held at
the bank subsequent to March 31, 2009.  However, the Company reflected the
contingency loss as other expenses for the quarter ended March 31, 2009. 
The cross guarantee is limited to the remaining $101,694 restricted cash held at
the bank   34
 ITEM
      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
 
 Not
applicable.
 
 ITEM
4.  CONTROLS AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 We
maintain disclosure controls and procedures, which are designed to ensure that
information required to be disclosed in the reports we file or submit under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer, or CEO,
and Chief Financial Officer, or CFO, as appropriate to allow timely decisions
regarding required disclosure.
 
 Based on
an evaluation carried out as of the end of the period covered by this quarterly
report, under the supervision and with the participation of our management,
including our CEO and CFO, our CEO and CFO have concluded that, as of the end of
such period, our disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934) were not effective as of March 31, 2009.  Factors which led our
management to conclude that our disclosure controls and procedures were not
effective include, but are not limited to:
 
 ·
              the
      late filing of our Annual Report on Form 10-K for the year ended December
      31, 2008; and
  ·
              the
      late filing of our Quarterly Report on Form 10-Q for the quarter ended
      March 31, 2009.
  Changes
in Internal Control Over Financial Reporting
 
 Based on
the evaluation of our management as required by paragraph (d) of Rule 13a-15 or
15d-15 of the Exchange Act, there were no changes in our internal control over
financial reporting that occurred during the first quarter of the fiscal year
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. However, we recognize certain
weaknesses in our control procedures and are in the process of implementing
remediation measures to correct them.
  35
  PART
II.  OTHER INFORMATION
 
 ITEM
1.  LEGAL PROCEEDINGS
 
 We are
not currently a party to any material legal proceedings.
 
 ITEM
1A.  RISK FACTORS
 
 Any
investment in our common stock involves a high degree of risk. Potential
investors should carefully consider the material risks described below and all
of the information contained in this Quarterly Report on Form 10-Q before
deciding whether to purchase any of our securities. Our business, financial
condition or results of operations could be materially adversely affected by
these risks if any of them actually occur. None of our securities are currently
listed or quoted for trading on any national securities exchange or national
quotation system. If and when our securities are traded, the trading price could
decline due to any of these risks, and an investor may lose all or part of his
investment. Some of these factors have affected our financial condition and
operating results in the past or are currently affecting us. This report also
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks
faced described below and elsewhere in this Quarterly Report on Form
10-Q.
 
 RISKS
RELATED TO OUR OPERATIONS
 
 If
we are unsuccessful in establishing and increasing awareness of our brand and
recognition of our products, or if we incur excessive expense promoting and
maintaining our brand or our products, our potential revenues could be limited,
our costs could increase and our operating results and financial condition would
be harmed.
 
 We
believe that acceptance of our digital products by an expanding customer base
depends in large part on increasing awareness of the Yinlips brand and that
brand recognition will be even more important as competition in our market
increases. Successful promotion of our brand depends largely on the
effectiveness of our marketing efforts and on our ability to develop reliable
and quality products at competitive prices. In addition, globalizing and
extending our brand and recognition of our products and services is costly and
involves extensive management time to execute successfully. Further, the markets
in which we operate are highly competitive and some of our competitors already
have substantially more brand name recognition and greater marketing resources
than we do. Our future brand promotion activities may involve significant
expense and may not generate desired levels of increased revenue, and even if
such activities generate some increased revenue, such increased revenue may not
offset the expenses we incurred in endeavoring to build our brand. If we fail to
successfully promote and maintain our brand, or incur substantial expenses in
our attempts to promote and maintain our brand, we may fail to attract enough
new customers or retain our existing customers to the extent necessary to
realize a sufficient return on our brand-building efforts, and as a result our
operating results and financial condition would suffer.
 
 We
derive a substantial portion of our revenues from sales in the PRC and any
downturn in the Chinese economy could have a material adverse effect on our
business and financial condition.
 
 A
substantial portion of our revenues are generated from sales in the PRC. We
anticipate that revenues from sales of our products in the PRC will continue to
represent a substantial proportion of our total revenues in the near future. Our
sales and earnings can also be affected by changes in the general economy since
purchases of portable electronic devices are generally discretionary for
consumers. Our success is influenced by a number of economic factors which
affect disposable consumer income, such as employment levels, business
conditions, interest rates, oil and gas prices and taxation rates. Adverse
changes in these economic factors, among others, may restrict consumer spending,
thereby negatively affecting our sales and profitability.
 
 We
are and will continue to be subject to rapidly declining average selling prices
which may harm our results of operations.
 
 Consumer
electronic devices such as those we offer are subject to rapid declines in
average selling prices due to rapidly evolving technologies, industry standards
and consumer preferences. Consumer electronics products are subject to rapid
technological changes which often cause product obsolescence. Companies within
the consumer electronics industry are continuously developing new products with
heightened performance and functionality. This puts pricing pressure on existing
products and constantly threatens to make them, or causes them to be, obsolete.
Our typical product’s life cycle is extremely short, generating lower average
selling prices as the cycle matures. If we fail to accurately anticipate the
introduction of new technologies, we may possess significant amounts of obsolete
inventory that can only be sold at substantially lower prices and profit margins
than we anticipated. In addition, if we fail to accurately anticipate the
introduction of new technologies, we may be unable to compete effectively due to
our failure to offer products most demanded by the marketplace. If any of these
failures occur, our sales, profit margins and profitability will be adversely
affected.
  36
 
 In
addition, electronic device distributors expect suppliers, such as our Company,
to cut their costs and lower the price of their products to lessen the negative
impact on the electronic device distributor’s own profit margins. As a result,
we have previously reduced the price of some of our portable electronic products
and expect to continue to face market-driven downward pricing pressures in the
future. Our results of operations will suffer if we are unable to offset any
declines in the average selling prices of our products by developing new or
enhanced products with higher selling prices or gross profit margins, increasing
our sales volumes or reducing our production costs.
 
 We
are subject to intense competition in the industry in which we operate, which
could cause material reductions in the selling price of our products or losses
of our market share.
 
 The
consumer electronics industry is highly competitive, especially with respect to
pricing and the introduction of new products and features. Our products compete
in the medium- to high- priced sector of the consumer electronics market and
compete primarily on the basis of:
 
 ·
              reliability;
  ·
              brand
      recognition;
  ·
              quality;
  ·
              price;
  ·
              design;
  ·
              consumer
      acceptance of our trademark; and
  ·
              quality
      service and support to retailers and our
  customers.
  In recent
years, we and many of our competitors, have regularly lowered prices, and we
expect these pricing pressures to continue. If these pricing pressures are not
mitigated by increases in volume, cost reductions from our supplier or changes
in product mix, our revenues and profits could be substantially reduced. As
compared to us, many of our competitors have:
 
 ·
              significantly
      longer operating histories;
  ·
              significantly
      greater managerial, financial, marketing, technical and other competitive
      resources; and
  ·
              greater
      brand recognition.
  As a
result, our competitors may be able to:
 
 ·
              adapt
      more quickly to new or emerging technologies and changes in customer
      requirements;
  ·
              devote
      greater resources to the promotion and sale of their products and
      services; and
  ·
              respond
      more effectively to pricing
pressures.
  These
factors could materially adversely affect our operations and financial
condition. In addition, competition could increase if:
 
 ·
              new
      companies enter the market;
  ·
              existing
      competitors expand their product mix;
or
  ·
              we
      expand into new markets.
  An
increase in competition could result in material price reductions or loss of our
market share.
  37
 
 Our
revenues and earnings could be materially and adversely affected if we cannot
anticipate market trends or enhance existing products or achieve market
acceptance of new products.
 
 Consumers
for portable electronic devices have many products to choose from and we must
compete with these devices in order to sell our products and generate revenues.
Our success is dependent on our ability to successfully anticipate and respond
to changing consumer demands and trends in a timely manner, as well as expanding
into new markets and developing new products. In addition, to increase our
penetration of current markets and gain footholds in new markets for our
products, we must maintain our existing products as well as integrate them with
new products. We may not be successful in developing, marketing and releasing
new products that respond to technological developments or changing customer
needs and preferences. We may also experience difficulties that could delay or
prevent the successful development, introduction and sale of these new products.
In addition, these new products may not adequately meet the requirements of the
marketplace and may not achieve any significant degree of market acceptance. If
release dates of any future products or enhancements to our products are
delayed, or if these products or enhancements fail to achieve market acceptance
when released, our sales volume may decline and earnings would be materially and
adversely affected. In addition, new products or enhancements by our competitors
may cause customers to defer or forego purchases of our products, which could
also materially and adversely affect our revenues and earnings.
 
 If
we do not correctly forecast demand for our products, we could have costly
excess production or inventories and we may not be able to secure sufficient or
cost effective quantities of our products or production materials and our
revenues, cost of revenues and financial condition could be adversely
affected.
 
 The
demand for our products depends on many factors, including pricing and inventory
levels, and is difficult to forecast due in part to variations in economic
conditions, changes in consumer and business preferences, relatively short
product life cycles, changes in competition, seasonality and reliance on key
third party carriers. It is particularly difficult to forecast demand by
individual product. Significant unanticipated fluctuations in demand, the timing
and disclosure of new product releases or the timing of key sales orders could
result in costly excess production or inventories or the inability to secure
sufficient, cost-effective quantities of our products or production materials.
This could adversely impact our revenues, cost of revenues and financial
condition.
 
 Our products may contain errors or
defects, which could result in the rejection of our products, damage to our
reputation, lost revenues, diverted development resources and increased service
costs, warranty claims and litigation.
 
 Our
products are complex and must meet stringent user requirements. In addition, we
must develop our products to keep pace with the rapidly changing portable
electronic device market. Sophisticated electronic products like ours are likely
to contain undetected errors or defects, especially when first introduced or
when new models or versions are released. Our products may not be free from
errors or defects after commercial shipments have begun, which could result in
the rejection of our products and jeopardize our relationship with carriers. End
users may also reject or find issues with our products and have a right to
return them even if the products are free from errors or defects. In either
case, returns or quality issues could result in damage to our reputation, lost
revenues, diverted development resources, increased customer service and support
costs, and warranty claims and litigation which could harm our business, results
of operations and financial condition.
 
 The
loss or significant reduction in business of any of our key customers could
materially and adversely affect our revenues and earnings.
 
 We are
highly dependent upon sales of our products to certain of our customers,
including Shenzhen Yuanjinda Import & Export Co., Ltd., Beijing Jin Suo Neng
Technology, Co., Ltd, Shenzhen Prance Electronics Technology Co. Ltd., Shenzhen
Baoheng Digital Technology Co., Ltd., Shanghai Siwan Electronics Technology Co.
Ltd., Shenzhen Lixin Technology Co., Ltd., Shenzhen Lufang Technology Co., Ltd.,
Shenzhen Chuang Rong Fa Digital Technology Co., Ltd and Lanzhou JiaHeng Dianqi
Co.,Ltd.. During the quarter ended March 31, 2009, they accounted for
approximately 10%, 8%, 7%, 7%, 6%, 5%, 5%, 5% and 5% of our net revenue,
respectively.   No other customer accounted for greater than 5%
of our net revenues for the periods. All purchases of our products by customers
are made through purchase orders and we do not have long-term contracts with any
of our customers. The loss of the above customers, or any of our other customers
to which we sell a significant amount of our products or any significant portion
of orders from the above customers, or such other customers or any material
adverse change in the financial condition of such customers could negatively
affect our revenues and decrease our earnings.
 
 We cannot
rely on long-term purchase orders or commitments to protect us from the negative
financial effects of a decline in demand for our products. The limited certainty
of product orders can make it difficult for us to forecast our sales and
allocate our resources in a manner consistent with our actual sales. Moreover,
our expense levels are based in part on our expectations of future sales and, if
our expectations regarding future sales are inaccurate, we may be unable to
reduce costs in a timely manner to adjust for sales shortfalls. Furthermore,
because we depend on a small number of customers for the vast majority of our
sales, the magnitude of the ramifications of these risks is greater than if our
sales were less concentrated with a small number of customers. As a result of
our lack of long-term purchase orders and purchase commitments we may experience
a rapid decline in our sales and profitability.
  38
 
 We depend on a limited number of
suppliers for components for our products. The inability to secure components
for our products could reduce our revenues and adversely affect our relationship
with our customers.
 
 We rely
on a limited number of suppliers for our component parts and raw materials.
Although there are many suppliers for each of our component parts and raw
materials, we are dependent on a limited number of suppliers for many of the
significant components and raw materials. This reliance involves a number of
significant potential risks, including:
 
 ·
              lack
      of availability of materials and interruptions in delivery of components
      and raw materials from our
suppliers;
  ·
              manufacturing
      delays caused by such lack of availability or interruptions in
      delivery;
  ·
              fluctuations
      in the quality and the price of components and raw materials, in
      particular due to the petroleum price impact on such materials;
      and
  ·
              risks
      related to foreign operations.
  We
generally do not have any long-term or exclusive purchase commitments with any
of our suppliers.  Shenzhen Huaxinhang Indusrial Co.,Ltd, Shenzhen
Huashike Industrial Co., Ltd and Shenzhen Yachuangwei Technology Co., Ltd are
our largest suppliers of components for our products, each of which accounted
for more than 10% of our purchases of components for our products for the
quarter ended March 31, 2009. Our failure to maintain
existing relationships with our suppliers or to establish new relationships in
the future could also negatively affect our ability to obtain our components and
raw materials used in our products in a timely manner. If we are unable to
obtain ample supply of products from our existing suppliers or alternative
sources of supply, we may be unable to satisfy our customers’ orders which could
materially and adversely affect our revenues and our relationship with our
customers.
 
 Certain
disruptions in supply of and changes in the competitive environment for raw
materials integral to our products may adversely affect our
profitability.
 
 We use a
broad range of materials and supplies, including displays, control ICs, flashes,
WiFi modules, GPS modules and other electronic components in our products. A
significant disruption in the supply of these materials could decrease
production and shipping levels, materially increase our operating costs and
materially adversely affect our profit margins. Shortages of materials or
interruptions in transportation systems, labor strikes, work stoppages, war,
acts of terrorism or other interruptions to or difficulties in the employment of
labor or transportation in the markets in which we purchase materials,
components and supplies for the production of our products, in each case may
adversely affect our ability to maintain production of our products and sustain
profitability. If we were to experience a significant or prolonged shortage of
critical components from any of our suppliers and could not procure the
components from other sources, we would be unable to meet our production
schedules for some of our key products and to ship such products to our
customers in a timely fashion, which would adversely affect our sales, margins
and customer relations.
 
 Substantial
defaults by our customers on accounts receivable or the loss of significant
customers could have a material adverse effect on our business.
 
 A
substantial portion of our working capital consists of accounts receivable from
customers. If customers responsible for a significant amount of accounts
receivable were to become insolvent or otherwise unable to pay for products and
services, or to make payments in a timely manner, our business, results of
operations or financial condition could be materially adversely affected. An
economic or industry downturn could materially adversely affect the servicing of
these accounts receivable, which could result in longer payment cycles,
increased collection costs and defaults in excess of management’s expectations.
A significant deterioration in our ability to collect on accounts receivable
could also impact the cost or availability of financing available to
us.
 
 In
addition, our business is characterized by long periods for collection from our
customers and short periods for payment to our suppliers, the combination of
which may cause us to have liquidity problems. We experience an average accounts
settlement period ranging from one month to as high as four months from the time
we sell our products to the time we receive payment from our customers. In
contrast, we typically need to place certain deposits and advances with our
suppliers on a portion of the purchase price in advance and for some suppliers
we must maintain a deposit for future orders. Because our payment cycle is
considerably shorter than our receivable cycle, we may experience working
capital shortages. Working capital management, including prompt and diligent
billing and collection, is an important factor in our results of operations and
liquidity. We cannot assure you that system problems, industry trends or other
issues will not extend our collection period, adversely impact our working
capital.
  39
 
 Our
operations would be materially adversely affected if third-party carriers were
unable to transport our products on a timely basis.
 
 All of
our products are shipped through third party carriers. If a strike or other
event prevented or disrupted these carriers from transporting our products,
other carriers may be unavailable or may not have the capacity to deliver our
products to our customers. If adequate third party sources to ship our products
were unavailable at any time, our business would be materially adversely
affected.
 
 The
seasonality of our business, as well as changes in consumer spending and
economic conditions, may cause our quarterly operating results to fluctuate and
cause our stock price to decline.
 
 Fluctuations
in operating results or the failure of operating results to meet the
expectations of public market analysts and investors may negatively impact the
value of our securities. Quarterly operating results may fluctuate in the future
due to a variety of factors that could affect revenues or expenses in any
particular quarter. Fluctuations in quarterly operating results could cause the
value of our securities to decline. Investors should not rely on
quarter-to-quarter comparisons of results of operations as an indication of
future performance. As a result of the factors listed below, it is possible that
in future periods results of operations may be below the expectations of public
market analysts and investors. This could cause the market price of our
securities to decline. Factors that may affect our quarterly results
include:
 
 ·
              seasonal
      variations in operating results;
  ·
              variations
      in the sales of our products to our significant
  customers;
  ·
              increases
      in returned consumer electronics products in the first quarter which
      follows our peak third and fourth quarter
sales;
  ·
              variations
      in manufacturing and supplier
relationships;
  ·
              if
      we are unable to correctly anticipate and provide for inventory
      requirements from quarter to quarter, we may not have sufficient inventory
      to deliver our products to our customers in a timely fashion or we may
      have excess inventory that we are unable to
  sell;
  ·
              the
      discretionary nature of our customers’ demands and spending
      patterns;
  ·
              fluctuation
      and unpredictability of costs related to the raw material used to
      manufacture our products;
  ·
              changes
      in the laws of the PRC that affect our
  operations;
  ·
              our
      ability to obtain necessary government certifications and/or licenses to
      conduct our business;
  ·
              changes
      in market and economic conditions;
  ·
              vulnerability
      of our business to a general economic downturn in China and globally;
      and
  ·
              competition.
  In
addition, our quarterly operating results could be materially adversely affected
by political instability, war, acts of terrorism or other
disasters.
 
 Sales of
our products are somewhat seasonal due to consumer spending patterns, which tend
to result in significantly stronger sales in our third and fourth fiscal
quarters, especially as a result of the holiday season. This pattern will
probably not change significantly in the future. Although we believe that the
seasonality of our business is based primarily on the timing of consumer demand
for our products, fluctuations in operating results can also result from other
factors affecting us and our competitors, including new product developments or
introductions, availability of products for resale, competitive pricing
pressures, changes in product mix, pricing and product reviews and other media
coverage. Due to the seasonality of our business, our results for interim
periods are not necessarily indicative of our results for the year.
 
 As a
result of these and other factors, revenues for any quarter are subject to
significant variation, which may adversely affect our results of operations and
the market price for our common stock.
  40
  We
depend upon patents we license from a third party, Zhao Zifeng, our Chief
Executive Officer and Chairman of the Board. The loss of these licenses, an
increase in the costs of these licenses or Mr. Zhao’s failure to properly
maintain or enforce the patents underlying such licenses may require us to
suspend our operations until we obtain replacements and/or redesign our
products.
  We rely
upon certain patents licensed from our Chief Executive Officer and Chairman of
the Board, Zhao Zifeng, which gives us rights to third party intellectual
property that is necessary or useful for our business. We may also enter into
additional licenses to third party intellectual property in the future. In
addition, because we do not own any patents relating to our technologies, we do
not have the right to defend perceived infringements of patents relating to such
technologies. Thus, our success will depend in part on the ability and
willingness of our licensors to obtain, maintain and enforce patent protection
for our licensed intellectual property, in particular, those patents to which we
have secured exclusive rights. Our licensors may not successfully prosecute the
patent applications for the intellectual property we have licensed. Even if
patents are issued in respect of these patent applications, our licensors may
fail to maintain these patents, may determine not to pursue litigation against
other companies that are infringing these patents, or may pursue such litigation
less aggressively than we would. Without protection for the intellectual
property we license, other companies might be able to offer substantially
identical products for sale, which could adversely affect our competitive
business position and harm our business prospects.
 
 Our
ability to compete partly depends on the superiority, uniqueness and value of
our technologies, including both internally developed technology and technology
licensed from third parties. To protect our proprietary rights, we rely on a
combination of trademark, patent, copyright and trade secret laws,
confidentiality agreements with our employees and third parties, and protective
contractual provisions. Despite our efforts to protect our intellectual
property, any of the following occurrences may reduce the value of our
intellectual property:
 
 ·
              our
      applications for trademarks or patents may not be granted and, if granted,
      may be challenged or invalidated;
  ·
              issued
      patents, copyrights and trademarks may not provide us with any competitive
      advantages;
  ·
              our
      efforts to protect our intellectual property rights may not be effective
      in preventing misappropriation of our technology or dilution of our
      trademarks;
  ·
              our
      efforts may not prevent the development and design by others of products
      or technologies similar to or competitive with, or superior to those that
      we develop; or
  ·
              another
      party may obtain a blocking patent that would force us to either obtain a
      license or design around the patent to continue to offer the contested
      feature or service in our
technologies.
  We
rely on trade secret protections through confidentiality agreements with our
employees, customers and other parties; the breach of such agreements could
adversely affect our business and results of operations.
 
 We also
rely on trade secrets, which we seek to protect, in part, through
confidentiality and non-disclosure agreements with our employees, customers and
other parties. There can be no assurance that these agreements will not be
breached, that we would have adequate remedies for any such breach or that our
trade secrets will not otherwise become known to or independently developed by
competitors. To the extent that consultants, key employees or other third
parties apply technological information independently developed by them or by
others to our proposed projects, disputes may arise as to the proprietary rights
to such information that may not be resolved in our favor. We may be involved
from time to time in litigation to determine the enforceability, scope and
validity of our proprietary rights. Any such litigation could result in
substantial cost and diversion of effort by our management and technical
personnel.
 
 We
may need additional capital to implement our current business strategy, which
may not be available to us, and if we raise additional capital, it may dilute
your ownership in us.
 
 We
currently depend on bank loans and net revenues to meet our short-term cash
requirements. In order to grow revenues and sustain profitability, we will need
additional capital.  We intend to conduct a public offering of shares
of common stock registered in a registration statement and we may conduct
additional financing transactions in the future.  Obtaining additional
financing will be subject to a number of factors, including market conditions,
our operating performance and investor sentiment. These factors may make the
timing, amount, terms and conditions of additional financing unattractive to us.
We cannot assure you that we will be able to obtain any additional financing. If
we are unable to obtain the financing needed to implement our business strategy,
our ability to increase revenues will be impaired and we may not be able to
sustain profitability.
  41
 
 Adverse
capital and credit market conditions may significantly affect our ability to
meet liquidity needs, access to capital and cost of capital.
 
 The
capital and credit markets have been experiencing extreme volatility and
disruption for more than twelve months. In recent months, the volatility and
disruption have reached unprecedented levels. In some cases, the markets have
exerted downward pressure on availability of liquidity and credit capacity for
certain issuers. We have historically relied on credit to fund our business and
we need liquidity to pay our operating expenses. Without sufficient liquidity,
we will be forced to curtail our operations, and our business will suffer.
Disruptions, uncertainty or volatility in the capital and credit markets may
also limit our access to capital required to operate our business. Such market
conditions may limit our ability to replace, in a timely manner, maturing
liabilities and access the capital necessary to operate and grow our business.
As such, we may be forced to delay raising capital or bear an unattractive cost
of capital which could decrease our profitability and significantly reduce our
financial flexibility. Our results of operations, financial condition, cash
flows and capital position could be materially adversely affected by disruptions
in the financial markets.
 
 Our
failure to effectively manage growth could harm our business.
  We have
rapidly and significantly expanded the number and types of products we sell, and
we will endeavor to further expand our product portfolio. We must continually
introduce new products and technologies, enhance existing products in order to
remain competitive, and effectively stimulate customer demand for new products
and upgraded versions of our existing products.
  This
expansion of our products places a significant strain on our management,
operations and engineering resources. Specifically, the areas that are strained
most by our growth include the following:
 
 ·
              New Product Launch:
      With the growth of our product portfolio, we experience increased
      complexity in coordinating product development, manufacturing, and
      shipping. As this complexity increases, it places a strain on our ability
      to accurately coordinate the commercial launch of our products with
      adequate supply to meet anticipated customer demand and effective
      marketing to stimulate demand and market acceptance. If we are unable to
      scale and improve our product launch coordination, we could frustrate our
      customers and lose retail shelf space and product
  sales;
  ·
              Forecasting, Planning and
      Supply Chain Logistics: With the growth of our product portfolio,
      we also experience increased complexity in forecasting customer demand and
      in planning for production, and transportation and logistics management.
      If we are unable to scale and improve our forecasting, planning and
      logistics management, we could frustrate our customers, lose product sales
      or accumulate excess inventory; and
  ·
              Support Processes: To
      manage the growth of our operations, we will need to continue to improve
      our transaction processing, operational and financial systems, and
      procedures and controls to effectively manage the increased complexity. If
      we are unable to scale and improve these areas, the consequences could
      include: delays in shipment of product, degradation in levels of customer
      support, lost sales, decreased cash flows, and increased inventory. These
      difficulties could harm or limit our ability to
  expand.
  We
are dependent on certain key personnel and loss of these key personnel could
have a material adverse effect on our business, financial condition and results
of operations.
 
 Our
success is, to a certain extent, attributable to the management, sales and
marketing, and operational and technical expertise of certain key personnel.
Each of the named executive officers performs key functions in the operation of
our business. The loss of a significant number of these employees could have a
material adverse effect upon our business, financial condition, and results of
operations.
 
 We
are dependent on a technically trained workforce and an inability to retain or
effectively recruit such employees could have a material adverse effect on our
business, financial condition and results of operations.
 
 We must
attract, recruit and retain a sizeable workforce of technically competent
employees to develop and manufacture our products and provide service support.
Our ability to implement effectively our business strategy will depend upon,
among other factors, the successful recruitment and retention of additional
highly skilled and experienced engineering and other technical and marketing
personnel. There is significant competition for technologically qualified
personnel in our business and we may not be successful in recruiting or
retaining sufficient qualified personnel consistent with our operational
needs.
  42
 
 We
do not carry any business interruption insurance, products liability insurance
or any other insurance policy except for a limited property insurance
policy.  As a result, we may incur uninsured losses, increasing the
possibility that you would lose your entire investment in our
Company.
 
 We could
be exposed to liabilities or other claims for which we would have no insurance
protection.  We do not currently maintain any business interruption
insurance, products liability insurance, or any other comprehensive insurance
policy except for property insurance policies with limited
coverage.  As a result, we may incur uninsured liabilities and losses
as a result of the conduct of our business.  There can be no guarantee
that we will be able to obtain additional insurance coverage in the future, and
even if we are able to obtain additional coverage, we may not carry sufficient
insurance coverage to satisfy potential claims. Should uninsured losses occur,
any purchasers of our common stock could lose their entire
investment.
 
 Because
we do not carry products liability insurance, a failure of any of the products
marketed by us may subject us to the risk of product liability claims and
litigation arising from injuries allegedly caused by the improper functioning or
design of our products.  We cannot assure that we will have enough
funds to defend or pay for liabilities arising out of a products liability
claim.  To the extent we incur any product liability or other
litigation losses, our expenses could materially increase
substantially.  There can be no assurance that we will have sufficient
funds to pay for such expenses, which could end our operations and you would
lose your entire investment.
 
 We
are subject to market risk through our sales to international
markets.
 
 A growing
percentage of our sales are being derived from international markets. These
international sales are primarily focused in Europe, Southeast Asia, and North
America. These operations are subject to risks that are inherent in operating in
foreign countries, including the following:
 
 ·
              foreign
      countries could change regulations or impose currency restrictions and
      other restraints;
  ·
              changes
      in foreign currency exchange rates and hyperinflation or deflation in the
      foreign countries in which we
operate;
  ·
              exchange
      controls;
  ·
              some
      countries impose burdensome tariffs and
quotas;
  ·
              political
      changes and economic crises may lead to changes in the business
      environment in which we operate;
  ·
              international
      conflict, including terrorist acts, could significantly impact our
      financial condition and results of operations;
  and
  ·
              economic
      downturns, political instability and war or civil disturbances may disrupt
      distribution logistics or limit sales in individual
    markets.
  In
addition, we utilize third-party distributors to act as our representative for
the geographic region that they have been assigned. Sales through distributors
represent approximately 18% of total revenue.  Significant terms and
conditions of distributor agreements include FOB source, net 30 days payment
terms, with no return or exchange rights, and no price protection. Since the
product transfers title to the distributor at the time of shipment by us, the
products are not considered inventory on consignment. Our success is dependent
on these distributors finding new customers and receiving new orders from
existing customers.
 
 Our
facilities and information systems could be damaged as a result of disasters or
unpredictable events, which could have an adverse effect on our business
operations.
  Our
headquarters and major facilities including manufacturing plants, sales offices
and research and development centers are located in China. We also operate
procurement, logistics, sales and marketing facilities in other parts of the
world. If major disasters such as earthquakes, fires, floods, wars, terrorist
attacks, computer viruses, transportation disasters or other events occur, or
our information system or communications network breaks down or operates
improperly as a result of such events, our facilities may be seriously damaged,
and we may have to stop or delay production and shipment. We may incur expenses
relating to such damages.
  43
  RISKS
RELATED TO DOING BUSINESS IN CHINA
 
 Substantially
all of our assets are located in the PRC and substantially all of our revenues
are derived from our operations in China, and changes in the political and
economic policies of the PRC government could have a significant impact upon the
business we may be able to conduct in the PRC and accordingly on the results of
our operations and financial condition.
 
 Our
business operations may be adversely affected by the current and future
political environment in the PRC. The Chinese government exerts substantial
influence and control over the manner in which we must conduct our business
activities. Our ability to operate in China may be adversely affected by changes
in Chinese laws and regulations, including those relating to taxation, import
and export tariffs, raw materials, environmental regulations, land use rights,
property and other matters. Under the current government leadership, the
government of the PRC has been pursuing economic reform policies that encourage
private economic activity and greater economic decentralization. There is no
assurance, however, that the government of the PRC will continue to pursue these
policies, or that it will not significantly alter these policies from time to
time without notice.
 
 Our
operations are subject to PRC laws and regulations that are sometimes vague and
uncertain. Any changes in such PRC laws and regulations, or the interpretations
thereof, may have a material and adverse effect on our business.
 
 The PRC’s
legal system is a civil law system based on written statutes. Unlike the common
law system prevalent in the United States, decided legal cases have little value
as precedent in China. There are substantial uncertainties regarding the
interpretation and application of PRC laws and regulations, including but not
limited to, the laws and regulations governing our business, or the enforcement
and performance of our arrangements with customers in the event of the
imposition of statutory liens, death, bankruptcy or criminal proceedings.
The Chinese government has been developing a comprehensive system of commercial
laws, and considerable progress has been made in introducing laws and
regulations dealing with economic matters such as foreign investment, corporate
organization and governance, commerce, taxation and trade. However, because
these laws and regulations are relatively new, and because of the limited volume
of published cases and judicial interpretation and their lack of force as
precedents, interpretation and enforcement of these laws and regulations involve
significant uncertainties. New laws and regulations that affect existing and
proposed future businesses may also be applied retroactively.
 
 Our
principal operating subsidiary, Yinlips Digital Technology (Shenzhen) Co., Ltd.,
(“Shenzhen Yinlips”) is considered a foreign invested enterprise under PRC laws,
and as a result is required to comply with PRC laws and regulations, including
laws and regulations specifically governing the activities and conduct of
foreign invested enterprises. We cannot predict what effect the interpretation
of existing or new PRC laws or regulations may have on our businesses. If the
relevant authorities find us in violation of PRC laws or regulations, they would
have broad discretion in dealing with such a violation, including, without
limitation:
 
 ·
              levying
      fines;
  ·
              revoking
      our business license, other licenses or
  authorities;
  ·
              requiring
      that we restructure our ownership or operations;
  and
  ·
              requiring
      that we discontinue any portion or all of our
  business.
  Investors
may experience difficulties in effecting service of legal process, enforcing
foreign judgments or bringing original actions in China based upon U.S. laws,
including the federal securities laws or other foreign laws against us or our
management.
 
 Most of
our current operations, including the manufacturing and distribution of our
products, are conducted in China. Moreover, all of our directors and officers
are nationals and residents of China or Hong Kong. All or substantially all of
the assets of these persons are located outside the United States and in the
PRC. As a result, it may not be possible to effect service of process within the
United States or elsewhere outside China upon these persons. In addition,
uncertainty exists as to whether the courts of China would recognize or enforce
judgments of U.S. courts obtained against us or such officers and/or directors
predicated upon the civil liability provisions of the securities laws of the
United States or any state thereof, or be competent to hear original actions
brought in China against us or such persons predicated upon the securities laws
of the United States or any state thereof.
  44
 
 The
scope of our business license in China is limited, and we may not expand or
continue our business without government approval and renewal,
respectively.
 
 Our
principal operating subsidiary, Shenzhen Yinlips, is a wholly foreign-owned
enterprise, commonly known as a WFOE. A WFOE can only conduct business within
its approved business scope, which ultimately appears on its business license.
Our license permits us to design, manufacture, sell and market portable
electronic products throughout the PRC and we have also obtained approval for
foreign trade rights.  Any amendment to the scope of our business
requires further application and government approval. In order for us to expand
our business beyond the scope of our license, we will be required to enter into
a negotiation with the PRC authorities for the approval to expand the scope of
our business. We cannot assure investors that Shenzhen Yinlips will be able to
obtain the necessary government approval for any change or expansion of its
business.
 
 Our
labor costs are likely to increase as a result of changes in Chinese labor
laws.
  We expect
to experience an increase in our cost of labor due to recent changes in Chinese
labor laws which are likely to increase costs further and impose restrictions on
our relationship with our employees.  In June 2007, the National
People’s Congress of the PRC enacted new labor law legislation called the Labor
Contract Law and more strictly enforced existing labor laws.  The new
law, which became effective on January 1, 2008, amended and formalized workers’
rights concerning overtime hours, pensions, layoffs, employment contracts and
the role of trade unions.  As a result of the new law, the Company has
had to reduce the number of hours of overtime its employees can work,
substantially increase the salaries of its employees, provide additional
benefits to its employees, and revise certain other of its labor practices.The increase in labor
costs has increased the Company’s operating costs, which increase the Company
has not always been able to pass through to its customers. As a result, the
Company has incurred certain operating losses as its cost of manufacturing
increased.  In addition, under the new law, employees who either have
worked for the Company for 10 years or more or who have had two consecutive
fixed-term contracts must be given an “open-ended employment contract” that, in
effect, constitutes a lifetime, permanent contract, which is terminable only in
the event the employee materially breaches the Company’s rules and regulations
or is in serious dereliction of his duty. Such non-cancelable employment
contracts will substantially increase its employment related risks and limit the
Company’s ability to downsize its workforce in the event of an economic
downturn. No assurance can be given that the Company will not in the future be
subject to labor strikes or that it will not have to make other payments to
resolve future labor issues caused by the new laws.  Furthermore,
there can be no assurance that the labor laws will not change further or that
their interpretation and implementation will vary, which may have a negative
effect upon our business and results of operations.
 
 We
are subject to a variety of environmental laws and regulations related to our
manufacturing operations. Our failure to comply with environmental laws and
regulations may have a material adverse effect on our business and results of
operations.
 
 We are
subject to various environmental laws and regulations that require us to obtain
environmental permits for our manufacturing operations. Our environmental permit
from the Shenzhen Environment Protection Bureau covering our manufacturing
operations are currently in effect and do not expire until February 5, 2010. If
we are unable to renew our permit when it expires or we fail to comply with the
provisions of the permit, we could be subject to fines, criminal charges or
other sanctions by regulators, including the suspension or termination of our
manufacturing operations.
 
 We cannot
assure you that at all times we will be in compliance with environmental laws
and regulations or our environmental permits or that we will not be required to
expend significant funds to comply with, or discharge liabilities arising under,
environmental laws, regulations and permits.
 
 Recent
PRC regulations relating to acquisitions of PRC companies by foreign entities
may create regulatory uncertainties that could restrict or limit our ability to
operate. Our failure to obtain required prior approval for the Share and Warrant
Exchange, and the listing and trading of our common stock could have a material
adverse effect on our business, operating results, reputation and trading price
of our common stock.
 
 The PRC
State Administration of Foreign Exchange, or “SAFE,” issued a public notice in
November 2005, known as Circular 75, concerning the use of offshore holding
companies controlled by PRC residents in mergers and acquisitions in China. This
circular requires that (1) a PRC resident shall register with a local branch of
the SAFE before he or she establishes or controls an overseas special purpose
vehicle, or SPV, for the purpose of overseas equity financing (including
convertible debt financing); (2) when a PRC resident contributes the assets of
or his or her equity interests in a domestic enterprise to an SPV, or engages in
overseas financing after contributing assets or equity interests to an SPV, such
PRC resident must register his or her interest in the SPV and any changes in
such interest with a local branch of the SAFE; and (3) when the SPV undergoes a
material change outside of China, such as a change in share capital or merger or
acquisition, the PRC resident shall, within 30 days from the occurrence of the
event that triggers the change, register such change with a local branch of the
SAFE.  In addition, SAFE issued updated internal implementing rules,
or the Implementing Rules in relation to Notice 75. The Implementing Rules were
promulgated and became effective on May 29, 2007. Such Implementing Rules
provide more detailed provisions and requirements regarding the overseas
investment foreign exchange registration procedures. However, even after the
promulgation of Implementing Rules there still exist uncertainties regarding the
SAFE registration for PRC residents’ interests in overseas
companies.
  45
  In
connection with the Purchase Right (as described below), Mr. Zhao made a SAFE
registration with respect to his investment in the Company.  However,
as of the date hereof, such registration has not been approved and there can be
no assurance that it will be approved.  If Mr. Zhao's SAFE
registration is not approved or if any other PRC resident stockholder fails to
make the required SAFE registration, the onshore PRC subsidiaries of that
offshore company may be prohibited from distributing their profits and the
proceeds from any reduction in capital, share transfer or liquidation to the
offshore entity. Failure to comply with the SAFE registration and amendment
requirements described above could result in liability under PRC laws for
evasion of applicable foreign exchange restrictions. Because of uncertainty in
how the SAFE notice will be interpreted and enforced, we cannot be sure how it
will affect our business operations or future plans. For example, Shenzhen
Yinlips’ ability to conduct foreign exchange activities, such as the remittance
of dividends and foreign currency-denominated borrowings, may be subject to
compliance with the SAFE notice by Mr. Zhao and any other of our PRC resident
beneficial holders over whom we have no control. In addition, we cannot assure
you that either Mr. Zhao or any other such PRC residents will be able to
complete the necessary approval and registration procedures required by the SAFE
regulations. Failure by Mr. Zhao or any other PRC resident beneficial holder to
register as required with the relevant branch of SAFE could subject these PRC
resident beneficial holders to fines or legal sanctions, restrict our overseas
or cross-border investment activities, limit Shenzhen Yinlips’ ability to make
distributions or pay dividends or affect our ownership structure, which could
adversely affect our business and prospects.
 
 On August
8, 2006, the PRC Ministry of Commerce (“MOFCOM”), joined by the State-owned
Assets Supervision and Administration Commission of the State Council, the State
Administration of Taxation, the State Administration for Industry and Commerce,
the China Securities Regulatory Commission and SAFE, released a substantially
amended version of the Provisions for Foreign Investors to Merge with or Acquire
Domestic Enterprises (the “Revised M&A Regulations”), which took effect
September 8, 2006. These new rules significantly revised China’s regulatory
framework governing onshore-to-offshore restructurings and foreign acquisitions
of domestic enterprises. These new rules signify greater PRC government
attention to cross-border merger, acquisition and other investment activities,
by confirming MOFCOM as a key regulator for issues related to mergers and
acquisitions in China and requiring MOFCOM approval of a broad range of merger,
acquisition and investment transactions. Further, the new rules establish
reporting requirements for acquisition of control by foreigners of companies in
key industries, and reinforce the ability of the Chinese government to monitor
and prohibit foreign control transactions in key industries.
 
 Among
other things, the revised M&A Regulations include new provisions that
purport to require that an offshore special purpose vehicle, or a SPV, formed
for listing purposes and controlled directly or indirectly by PRC companies or
individuals must obtain the approval of the CSRC prior to the listing and
trading of such SPV’s securities on an overseas stock exchange. On September 21,
2006, the CSRC published on its official website procedures specifying documents
and materials required to be submitted to it by SPVs seeking CSRC approval of
their overseas listings. However, the application of this PRC regulation remains
unclear with no consensus currently existing among the leading PRC law firms
regarding the scope and applicability of the CSRC approval
requirement.
 
 According
to the M&A Regulations, a “Related Party Acquisition” is defined as having
taken place when a PRC business that is owned by PRC individual(s) is sold to a
non-PRC entity that is established or controlled, directly or indirectly, by
those same PRC individual(s). Under the M&A Regulations, any Related Party
Acquisition must be approved by MOFCOM and any indirect arrangement or series of
arrangements which achieves the same end result without the approval of MOFCOM
is a violation of PRC law.
 
 Our BVI
subsidiary, Podium, was owned by a non-PRC individual. Podium obtained all the
equity interests of Shenzhen Yinlips further to an Equity Transfer Agreement
dated December 28, 2007 (the “Original Equity Agreement”) by and among Podium,
Zhao Zifeng, our Chief Executive Officer and Chairman of the Board, and Zhang
Weiqiang. The Original Equity Agreement received approval by the Shenzhen Bureau
of Trade and Industry on January 15, 2008 and Shenzhen Yinlips filed all
required applications and received all appropriate SAFE approvals from the
Shenzhen branch of MOFCOM. The Original Equity Agreement was amended and
restated in September 2008 (the “Restated Equity Agreement”) to increase the
total purchase price of the equity interests of Shenzhen Yinlips to RMB
19,200,000 although no additional governmental approvals were obtained for the
Restated Equity Agreement.  The Original Equity Agreement was amended
because the purchase price of the equity interests of Shenzhen Yinlips as set
forth in the Original Equity Agreement was not based upon the valuation value of
the equity interests.  In the Restated Equity Agreement, the parties
agreed to change the purchase price of the equity interests of Shenzhen Yinlips
from RMB 1,000,000, as set forth in the Original Equity Agreement, to RMB
19,200,000 based on a valuation report issued by Shenzhen Guosong Assets
Appraisal Co., Ltd. on June 27, 2008.
 
 Our Chief
Executive Officer, Zhao Zifeng, purchased 6,500,000 shares of our common stock
at a per share purchase price of $0.415 (the “Purchase Right”). Each of the
stockholders and warrantholders of the Company prior to the Share and Warrant
Exchange agreed to cancel 0.91867 shares of common stock and warrants to
purchase 0.98943 shares of common stock held by each of them for each one (1)
share of common stock purchased by Mr. Zhao pursuant to the Purchase Right. As a
result of the full exercise of the Purchase Right, Mr. Zhao owns approximately
53.43% of our outstanding common stock (assuming the full conversion of the
maximum number of shares of Series A Convertible Preferred Stock issued in the
Private Placement).
  46
  The PRC
regulatory authorities may take the view that the acquisition of Shenzhen
Yinlips by Podium, the Share and Warrant Exchange and the Purchase Right are
part of an overall series of arrangements which constitute a Related Party
Acquisition, because at the end of these transactions, PRC individuals become
majority owners and effective controlling parties of a foreign entity that
acquired ownership of Shenzhen Yinlips. The PRC regulatory authorities may also
take the view that the registration of the acquisition of Shenzhen Yinlips by
Podium with the Shenzhen Bureau of Trade and Industry and the filings with the
Shenzhen SAFE and MOFCOM may not evidence that the acquisition has been properly
approved because the relevant parties did not fully disclose to the Shenzhen
Bureau of Trade and Industry, SAFE or MOFCOM of the overall restructuring
arrangements, the existence of the Share and Warrant Exchange and its link with
the acquisition of Shenzhen Yinlips by Podium. The PRC legal counsel of Shenzhen
Yinlips, Han Kun Law Offices, has opined that: (1) the Original Equity Agreement
and the transactions thereunder have received all requisite approvals from the
competent authorities, and all required registrations, certifications and
approvals for the Original Equity Agreement and the transactions thereunder have
been received by Shenzhen Yinlips; (2) Shenzhen Yinlips has filed all required
applications for the Original Equity Agreement and the transactions thereunder
and has received any and all required foreign exchange registrations,
certifications and approvals as required, including, but not limited to, those
as required from the appropriate national and local branches of SAFE and MOFCOM;
(3) to their best knowledge, the Original Equity Agreement and the transactions
thereunder do not (a) contravene or circumvent any provision of applicable PRC
laws and regulations, including without limitation, the M&A Regulations, the
Circular on Certain Administrative Measures on Financing and Inbound Investments
by PRC Residents Through Offshore Special Purpose Vehicle effectives as of
November 1, 2005 and its implementing rules; or (b) contravene the articles of
association, business license or other constituent documents of Shenzhen
Yinlips; and (4) to their best knowledge, they are not aware of any issue, fact
or circumstance which would lead them to believe that the PRC regulatory
authorities would revoke the Original Equity Agreement and the transactions
thereunder which the Shenzhen Bureau of Trade and Industry has duly approved and
that although approval of the Restated Equity Agreement has not been obtained,
the Restated Equity Agreement is in compliance with the applicable PRC laws and
regulations.
 
 We,
however, cannot assure you that the PRC regulatory authorities, MOFCOM in
particular, may take the same view as the PRC legal counsel. If the PRC
regulatory authorities take the view that the acquisition constitutes a Related
Party Acquisition under the M&A Regulations, we cannot assure you we may be
able to obtain the approval required from the national offices of
MOFCOM.
 
 If the
PRC regulatory authorities take the view that the acquisition of Shenzhen
Yinlips by Podium constitutes a Related Party Acquisition without the approval
of the national offices of MOFCOM, they could invalidate our acquisition and
ownership of Shenzhen Yinlips. Additionally, the PRC regulatory authorities may
take the view that the Share and Warrant Exchange constitutes a transaction
which requires the prior approval of the China Securities Regulatory Commission,
or CSRC. If this takes place, we would attempt to find a way to re-establish
control of Shenzhen Yinlips’ business operations through a series of contractual
arrangements rather than an outright purchase of Shenzhen Yinlips. But we cannot
assure you that any such contractual arrangements will be protected by PRC law
or that the Company can receive as complete or effective economic benefit and
overall control of Shenzhen Yinlips’ business than if the Company had direct
ownership of Shenzhen Yinlips. In addition, we cannot assure you that any such
contractual arrangements can be successfully effected under PRC law. If we
cannot obtain MOFCOM or CSRC approval if required by the PRC regulatory
authorities to do so, and if we cannot put in place or enforce relevant
contractual arrangements as an alternative and equivalent means of control of
Shenzhen Yinlips, our business and financial performance will be materially
adversely affected.
 
 If the
CSRC approval is not obtained, we may face regulatory actions or other sanctions
from the CSRC or other PRC regulatory agencies. These regulatory agencies may
impose fines and penalties on our operations in the PRC, limit our operating
privileges in the PRC, delay or restrict the repatriation of the proceeds from
this offering into the PRC, or take other actions that could have a material
adverse effect on our business, financial condition, results of operations,
reputation and prospects, as well as the trading price of our common
stock.
 
 Any
uncertainties and/or negative publicity regarding this CSRC approval requirement
could have a material adverse effect on the trading price of our common stock.
Furthermore, published news reports in China recently indicated that the CSRC
may have curtailed or suspended overseas listings for Chinese private companies.
These news reports have created further uncertainty regarding the approach that
the CSRC and other PRC regulators may take with respect to us.
 
 It is
uncertain how our business operations or future strategy will be affected by the
interpretations and implementation of the aforementioned rules and regulations.
It is anticipated that application of the new rules will be subject to
significant administrative interpretation, and we will need to closely monitor
how MOFCOM and other ministries apply the rules to ensure that our domestic and
offshore activities continue to comply with PRC law. Given the uncertainties
regarding interpretation and application of the new rules, we may need to expend
significant time and resources to maintain compliance.
  47
  The
ability of our Chinese operating subsidiaries to pay dividends may be restricted
due to foreign exchange control and other regulations of China.
 
 Under
applicable PRC regulations, foreign-invested enterprises in China may pay
dividends only out of their accumulated profits, if any, determined in
accordance with PRC accounting standards and regulations. In addition, a
foreign-invested enterprise in China is required to set aside at least 10.0% of
its after-tax profit based on PRC accounting standards each year to its general
reserves until the accumulative amount of such reserves reach 50.0% of its
registered capital. These reserves are not distributable as cash dividends. The
board of directors of a foreign-invested enterprise has the discretion to
allocate a portion of its after-tax profits to staff welfare and bonus funds,
which may not be distributed to equity owners except in the event of
liquidation.
 
 Furthermore,
the ability of our Chinese operating subsidiaries to pay dividends may be
restricted due to the foreign exchange control policies and availability of cash
balance of the Chinese operating subsidiaries. Because substantially all of our
operations are conducted in China and a substantial majority of our revenues are
generated in China, a majority of our revenue being earned and currency received
are denominated in Renminbi (RMB).  RMB is subject to the exchange
control regulation in China, and, as a result, we may unable to distribute any
dividends outside of China due to PRC exchange control regulations that restrict
our ability to convert RMB into US Dollars.
 
 Our
inability to receive dividends or other payments from our Chinese operating
subsidiary could adversely limit our ability to grow, make investments or
acquisitions that could be beneficial to our business, pay dividends, or
otherwise fund and conduct our business.  Shenzhen Yinlips’ funds may
not be readily available to us to satisfy obligations which have been incurred
outside the PRC, which could adversely affect our business and prospects or our
ability to meet our cash obligations.  Accordingly, if we do not
receive dividends from our Chinese operating subsidiary, our liquidity,
financial condition and ability to make dividend distributions to our
stockholders will be materially and adversely affected.
 
 The
foreign currency exchange rate between U.S. Dollars and Renminbi could adversely
affect our financial condition.
 
 To the
extent that we need to convert U.S. Dollars into Renminbi for our operational
needs, our financial position and the price of our common stock may be adversely
affected should the Renminbi appreciate against the U.S. Dollar at that time.
Conversely, if we decide to convert our Renminbi into U.S. Dollars for the
operational needs or paying dividends on our common stock, the dollar equivalent
of our earnings from our subsidiaries in China would be reduced should the U.S.
Dollar appreciate against the Renminbi.
 
 Until
1994, the Renminbi experienced a gradual but significant devaluation against
most major currencies, including U.S. Dollars, and there was a significant
devaluation of the Renminbi on January 1, 1994 in connection with the
replacement of the dual exchange rate system with a unified managed floating
rate foreign exchange system. Since 1994, the value of the Renminbi relative to
the U.S. Dollar has remained stable and has appreciated slightly against the
U.S. Dollar. Countries, including the United States, have argued that the
Renminbi is artificially undervalued due to China’s current monetary policies
and have pressured China to allow the Renminbi to float freely in world markets.
In July 2005, the PRC government changed its policy of pegging the value of the
Renminbi to the U.S. Dollar. Under the new policy the Renminbi is permitted to
fluctuate within a narrow and managed band against a basket of designated
foreign currencies. While the international reaction to the Renminbi revaluation
has generally been positive, there remains significant international pressure on
the PRC government to adopt an even more flexible currency policy, which could
result in further and more significant appreciation of the Renminbi against the
U.S. Dollar.
 
 Inflation
in the PRC could negatively affect our profitability and growth.
 
 While the
PRC economy has experienced rapid growth, such growth has been uneven among
various sectors of the economy and in different geographical areas of the
country. Rapid economic growth can lead to growth in the money supply and rising
inflation. During the past decade, the rate of inflation in China has been as
high as approximately 20% and China has experienced deflation as low as
approximately minus 2%. If prices for our products and services rise at a rate
that is insufficient to compensate for the rise in the costs of supplies such as
raw materials, it may have an adverse effect on our profitability. In order to
control inflation in the past, the PRC government has imposed controls on bank
credits, limits on loans for fixed assets and restrictions on state lending. The
implementation of such policies may impede economic growth. In October 2004, the
People’s Bank of China, the PRC’s central bank, raised interest rates for the
first time in nearly a decade and indicated in a statement that the measure was
prompted by inflationary concerns in the Chinese economy. In April 2006, the
People’s Bank of China raised the interest rate again. Repeated rises in
interest rates by the central bank would likely slow economic activity in China
which could, in turn, materially increase our costs and also reduce demand for
our products and services.  The People’s Bank of China may cut
interest rates in the near future in order to offset the negative effects caused
by the worldwide financial crisis.  This action might have a positive
effect on our market, but such positive effect will not offset the negative
effects on our market caused by financial crisis.
  48
  Because
our funds are held in banks which do not provide insurance, the failure of any
bank in which we deposit our funds could affect our ability to continue in
business.
 
 Banks and
other financial institutions in the PRC do not provide insurance for funds held
on deposit. A significant portion of our assets are in the form of cash
deposited with banks in the PRC, and in the event of a bank failure, we may not
have access to our funds on deposit. Depending upon the amount of money we
maintain in a bank that fails, our inability to have access to our cash could
impair our operations, and, if we are not able to access funds to pay our
suppliers, employees and other creditors, we may be unable to continue our
business.
 
 Failure
to comply with the United States Foreign Corrupt Practices Act could subject us
to penalties and other adverse consequences.
 
 As our
ultimate holding company is a Delaware corporation, we are subject to the United
States Foreign Corrupt Practices Act, which generally prohibits United States
companies from engaging in bribery or other prohibited payments to foreign
officials for the purpose of obtaining or retaining business. Foreign companies,
including some that may compete with us, are not subject to these prohibitions.
Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices
may occur from time-to-time in the PRC. We can make no assurance, however, that
our employees or other agents will not engage in such conduct for which we might
be held responsible. If our employees or other agents are found to have engaged
in such practices, we could suffer severe penalties and other consequences that
may have a material adverse effect on our business, financial condition and
results of operations.
 
 If
we make equity compensation grants to persons who are PRC citizens, they may be
required to register with the State Administration of Foreign Exchange of the
PRC, or SAFE. We may also face regulatory uncertainties that could restrict our
ability to adopt an equity compensation plan for our directors and employees and
other parties under PRC law.
 
 On April
6, 2007, SAFE issued the “Operating Procedures for Administration of Domestic
Individuals Participating in the Employee Stock Ownership Plan or Stock Option
Plan of An Overseas Listed Company,” also known as “Circular 78.” It is not
clear whether Circular 78 covers all forms of equity compensation plans or only
those which provide for the granting of stock options. For any plans which are
so covered and are adopted by a non-PRC listed company after April 6, 2007,
Circular 78 requires all participants who are PRC citizens to register with and
obtain approvals from SAFE prior to their participation in the plan. In
addition, Circular 78 also requires PRC citizens to register with SAFE and make
the necessary applications and filings if they participated in an overseas
listed company’s covered equity compensation plan prior to April 6, 2007. We
intend to adopt an equity compensation plan in the future and make substantial
option grants to our officers and directors, most of who are PRC citizens.
Circular 78 may require our officers and directors who receive option grants and
are PRC citizens to register with SAFE. We believe that the registration and
approval requirements contemplated in Circular 78 will be burdensome and time
consuming. If it is determined that any of our equity compensation plans are
subject to Circular 78, failure to comply with such provisions may subject us
and participants of our equity incentive plan who are PRC citizens, including or
Chief Executive Officer, to fines and legal sanctions and prevent us from being
able to grant equity compensation to our PRC employees. In that case, our
ability to compensate our employees and directors through equity compensation
would be hindered and our business operations may be adversely
affected.
 
 Shenzhen
Yinlips has enjoyed certain preferential tax concessions and the loss of these
preferential tax concessions may cause our tax liabilities to increase and our
profitability to decline.
  Under the
tax laws of the PRC, Shenzhen Yinlips has had tax advantages granted by local
government for corporate income taxes and sales taxes commencing April 6, 2004.
As a manufacturing enterprise established in Shenzhen, PRC, the Company was
entitled to a preferential Enterprise Income Tax (”EIT”) rate.   On
March 16, 2007, the National People’s Congress of China enacted a new PRC
Enterprise Income Tax Law, under which foreign invested enterprises and domestic
companies will be subject to enterprise income tax at a uniform rate of 25%. The
new law became effective on January 1, 2008. During the transition period for
enterprises established before March 16, the tax rate will be gradually
increased starting in 2008 and be equal to the new tax rate in
2012.  Since 2008, the local government has increased the EIT rate
from 15% to 18%.  The expiration of the preferential tax treatment
will increase our tax liabilities and reduce our profitability.
 
 Any
recurrence of Severe Acute Respiratory Syndrome (SARS), Avian Flu, or another
widespread public health problem in the PRC could adversely affect our
operations.
 
 A renewed
outbreak of SARS, Avian Flu or another widespread public health problem in
China, where our manufacturing facilities are located and where the substantial
portion of our sales occur, could have a negative effect on our operations. Our
business is dependent upon its ability to continue to manufacture products. Such
an outbreak could have an impact on our operations as a result
of:
  49
 
 ·
              quarantines
      or closures of some of our manufacturing facilities, which would severely
      disrupt our operations;
  ·
              the
      sickness or death of our key officers and employees;
  or
  ·
              a
      general slowdown in the Chinese
economy.
  Any of
the foregoing events or other unforeseen consequences of public health problems
could adversely affect our operations.
 
 A
downturn in the economy of the PRC may slow our growth and
profitability.
 
 The
growth of the Chinese economy has been uneven across geographic regions and
economic sectors. There can be no assurance that growth of the Chinese economy
will be steady or that any downturn will not have a negative effect on our
business, especially if it results in either a decreased use of our products or
in pressure on us to lower our prices.
 
 Because
our business is located in the PRC, we may have difficulty establishing adequate
management, legal and financial controls, which we are required to do in order
to comply with U.S. securities laws.
 
 PRC
companies have historically not adopted a Western style of management and
financial reporting concepts and practices, which includes strong corporate
governance, internal controls and, computer, financial and other control
systems. Most of our middle and top management staff are not educated and
trained in the Western system, and we may difficulty hiring new employees in the
PRC with such training. In addition, we may have difficulty in hiring and
retaining a sufficient number of qualified employees to work in the PRC. As a
result of these factors, we may experience difficulty in establishing
management, legal and financial controls, collecting financial data and
preparing financial statements, books of account and corporate records and
instituting business practices that meet Western standards. Therefore, we may,
in turn, experience difficulties in implementing and maintaining adequate
internal controls as required under Section 404 of the Sarbanes-Oxley Act of
2002. This may result in significant deficiencies or material weaknesses in our
internal controls which could impact the reliability of our financial statements
and prevent us from complying with SEC rules and regulations and the
requirements of the Sarbanes-Oxley Act of 2002. Any such deficiencies,
weaknesses or lack of compliance could have a materially adverse effect on our
business.
 
 RISKS
RELATED TO OUR CAPITAL STRUCTURE
 
 We
may not be able to achieve the benefits we expect to result from the Share and
Warrant Exchange.
  On
September 22, 2008, we entered into the Exchange Agreement with the sole
stockholder and all of the warrantholders of Podium, pursuant to which we agreed
to acquire 100% of the issued and outstanding securities of Podium in exchange
for shares of our common stock and warrants to purchase our common stock. On
October 17, 2008, the Share and Warrant Exchange closed, Podium became our
100%-owned subsidiary and our sole business operations became that of Podium and
its subsidiaries.  We also have a new board of directors and
management consisting of persons from Podium and Shenzhen Yinlips and we changed
our corporate name from SRKP 17, Inc. to Yinlips Technology, Inc.
 
 We may
not realize the benefits that we hoped to receive as a result of the Share and
Warrant Exchange, which include:
 
 ·
              access
      to the capital markets of the United
States;
  ·
              the
      increased market liquidity expected to result from exchanging stock in a
      private company for securities of a public company that may eventually be
      traded;
  ·
              the
      ability to use registered securities to make acquisition of assets or
      businesses;
  ·
              increased
      visibility in the financial
community;
  ·
              enhanced
      access to the capital markets;
  ·
              improved
      transparency of operations; and
  ·
              perceived
      credibility and enhanced corporate image of being a publicly traded
      company.
  50
  There can
be no assurance that any of the anticipated benefits of the Share and Warrant
Exchange will be realized in respect to our new business operations. In
addition, the attention and effort devoted to achieving the benefits of the
Share and Warrant Exchange and attending to the obligations of being a public
company, such as reporting requirements and securities regulations, could
significantly divert management’s attention from other important issues, which
could materially and adversely affect our operating results or stock price in
the future.
 
 Our
common stock may be considered a “penny stock,” and thereby be subject to
additional sale and trading regulations that may make it more difficult to
sell.
  Our
common stock, which is not currently listed or quoted for trading, may be
considered to be a “penny stock” if it does not qualify for one of the
exemptions from the definition of “penny stock” under Section 3a51-1 of the
Securities Exchange Act for 1934, as amended (the “Exchange Act”) once, and if,
it starts trading. Our common stock may be a “penny stock” if it meets one or
more of the following conditions: (i) the stock trades at a price less than
$5.00 per share; (ii) it is NOT traded on a “recognized” national exchange;
(iii) it is NOT quoted on the Nasdaq Capital Market, or even if so, has a price
less than $5.00 per share; or (iv) is issued by a company that has been in
business less than three years with net tangible assets less than $5
million.
  The
principal result or effect of being designated a “penny stock” is that
securities broker-dealers participating in sales of our common stock will be
subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9
promulgated under the Exchange Act. For example, Rule 15g-2 requires
broker-dealers dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document at least two business days before
effecting any transaction in a penny stock for the investor’s account. Moreover,
Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any
investor for transactions in such stocks before selling any penny stock to that
investor. This procedure requires the broker-dealer to (i) obtain from the
investor information concerning his or her financial situation, investment
experience and investment objectives; (ii) reasonably determine, based on that
information, that transactions in penny stocks are suitable for the investor and
that the investor has sufficient knowledge and experience as to be reasonably
capable of evaluating the risks of penny stock transactions; (iii) provide the
investor with a written statement setting forth the basis on which the
broker-dealer made the determination in (ii) above; and (iv) receive a signed
and dated copy of such statement from the investor, confirming that it
accurately reflects the investor’s financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult and time consuming for holders of our common stock to resell their
shares to third parties or to otherwise dispose of them in the market or
otherwise.
 
 There
is no current trading market for our common stock, and there is no assurance of
an established public trading market, which would adversely affect the ability
of our investors to sell their securities in the public market.
  Our
common stock is not currently listed or quoted for trading on any national
securities exchange or national quotation system. We applied for the listing of
our common stock on the NYSE Amex on March 16, 2009. There is no guarantee that
the NYSE Amex, or any other exchange or quotation system, will permit our shares
to be listed and traded. If we fail to obtain a listing on the NYSE Amex, we may
seek quotation on the OTC Bulletin Board. The NASD has enacted changes that
limit quotations on the OTC Bulletin Board to securities of issuers that are
current in their reports filed with the Securities and Exchange Commission. The
effect on the OTC Bulletin Board of these rule changes and other proposed
changes cannot be determined at this time. The OTC Bulletin Board is an
inter-dealer, over-the-counter market that provides significantly less liquidity
than the NASDAQ Global Market. Quotes for stocks included on the OTC Bulletin
Board are not listed in the financial sections of newspapers as are those for
the NASDAQ Global Market. Therefore, prices for securities traded solely on the
OTC Bulletin Board may be difficult to obtain and holders of common stock may be
unable to resell their securities at or near their original offering price or at
any price.
 
 Shares
eligible for future sale may adversely affect the market price of our common
stock, as the future sale of a substantial amount of outstanding stock in the
public marketplace could reduce the price of our common stock.
 
 Pursuant
to the terms of the Share and Warrant Exchange, we agreed to file a registration
statement with the Securities and Exchange Commission to register the 4,473,583
shares of common stock underlying our Series A Convertible Preferred Stock
issued in an equity financing that was conducted in connection with the Share
and Warrant Exchange.  The registration statement must be filed within
60 days of the closing of the Share and Warrant Exchange.  We also
agreed to register 1,125,000 shares of common stock and 665,091 shares of common
stock issuable upon the exercise of outstanding warrants held by our
stockholders immediately prior to the Share and Warrant Exchange.  Of
these shares, 229,613 shares of common stock and 135,745 shares of common stock
underlying warrants would be covered by the registration statement filed in
connection with the Private Placement, and 895,387 shares of common stock and
529,346 shares of common stock underlying warrants, which are beneficially owned
by affiliates of the placement agent would be included in a subsequent
registration statement filed by us within 10 days after the end of the six-month
period that immediately follows the date on which we file the registration
statement to register the shares issued in the Private
Placement.  Each investor may sell or transfer any shares of the
common stock after the effective date of the registration statement except that
they entered into a lock-up agreement pursuant to which they agreed not to
conduct any sales until 90 days after our common stock is listed or quoted on a
national securities exchange, at which time one-twelfth of the shares purchased
may be sold, and thereafter the shares will be automatically released from the
lock-up restrictions every 30 days in eleven equal installments. In addition,
WestPark, in its discretion, may release some or all the shares earlier than the
schedule set forth in this section.  Any early release by WestPark
will apply equally to each of the investors in the Private
Placement.
  51
 
 Additionally,
the former stockholders of Podium and their designees, may be eligible to sell
all or some of our shares of common stock by means of ordinary brokerage
transactions in the open market pursuant to Rule 144 (“Rule 144”), promulgated
under the Securities Act of 1933, as amended (the “Securities Act”), as early as
October 23, 2009, subject to certain limitations. Under Rule 144, an affiliate
stockholder who has satisfied the required holding period may, under certain
circumstances, sell within any three-month period a number of securities which
does not exceed the greater of 1% of the then outstanding shares of common stock
or the average weekly trading volume of the class during the four calendar weeks
prior to such sale. As of April 15, 2009, 1% of our issued and outstanding
shares of common stock was approximately 121,644 shares (assuming the full
conversion of the maximum number of shares of Series A Convertible Preferred
Stock issued in the Private Placement).  Rule 144 also permits, under
certain circumstances, the sale of securities, without any limitations, by a
non-affiliate that has satisfied a one-year holding
period.   Furthermore, non-affiliate stockholders are not subject
to volume limitations. Any substantial sale of common stock pursuant to any
resale prospectus or Rule 144 may have an adverse effect on the market price of
our common stock by creating an excessive supply.
 
 Our
Chief Executive Officer and Chairman of the Board exercises significant
influence over us.
 
 Our Chief
Executive Officer and Chairman of the Board, Zhao Zifeng, beneficially owns or
controls approximately 53.43% of our outstanding shares (assuming the full
conversion of the maximum number of shares of Series A Convertible Preferred
Stock issued in the Private Placement). Mr. Zhao has a controlling influence in
determining the outcome of any corporate transaction or other matters submitted
to our stockholders for approval, including mergers, consolidations and the sale
of all or substantially all of our assets, election of directors, and other
significant corporate actions. Mr. Zhao may also have the power to prevent or
cause a change in control. In addition, without the consent of Mr. Zhao, we
could be prevented from entering into transactions that could be beneficial to
us. The interests of Mr. Zhao may differ from the interests of our other
stockholders.
 
 Compliance
with changing regulation of corporate governance and public disclosure will
result in additional expenses.
  Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC
regulations, have created uncertainty for public companies and significantly
increased the costs and risks associated with accessing the public markets and
public reporting. Our management team will need to invest significant management
time and financial resources to comply with both existing and evolving standards
for public companies, which will lead to increased general and administrative
expenses and a diversion of management time and attention from revenue
generating activities to compliance activities.
 
 If
we fail to maintain effective internal controls over financial reporting, the
price of our common stock may be adversely affected.
 
 We are
required to establish and maintain appropriate internal controls over financial
reporting. Failure to establish those controls, or any failure of those controls
once established, could adversely impact our public disclosures regarding our
business, financial condition or results of operations. Any failure of these
controls could also prevent us from maintaining accurate accounting records and
discovering accounting errors and financial frauds. Rules adopted by the SEC
pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual
assessment of our internal control over financial reporting, and attestation of
this assessment by our independent registered public accountants. The SEC
extended the compliance dates for non-accelerated filers, as defined by the SEC.
Accordingly, we believe that the annual assessment of our internal controls
requirement first applied to our annual report for the 2007 fiscal year and the
attestation requirement of management’s assessment by our independent registered
public accountants will first apply to our annual report for the 2009 fiscal
year. The standards that must be met for management to assess the internal
control over financial reporting as effective are new and complex, and require
significant documentation, testing and possible remediation to meet the detailed
standards. We may encounter problems or delays in completing activities
necessary to make an assessment of our internal control over financial
reporting. In addition, the attestation process by our independent registered
public accountants is new and we may encounter problems or delays in completing
the implementation of any requested improvements and receiving an attestation of
our assessment by our independent registered public accountants. If we cannot
assess our internal control over financial reporting as effective, or our
independent registered public accountants are unable to provide an unqualified
attestation report on such assessment, investor confidence and share value may
be negatively impacted.
  52
  In
addition, management’s assessment of internal controls over financial reporting
may identify weaknesses and conditions that need to be addressed in our internal
controls over financial reporting or other matters that may raise concerns for
investors. Any actual or perceived weaknesses and conditions that need to be
addressed in our internal control over financial reporting, disclosure of
management’s assessment of our internal controls over financial reporting, or
disclosure of our public accounting firm’s attestation to or report on
management’s assessment of our internal controls over financial reporting may
have an adverse impact on the price of our common stock.
  We
may be exposed to risks relating to our disclosure controls and our internal
controls and may need to incur significant costs to comply with applicable
requirements.
  Based on
the evaluation done by our management at March 31, 2009, our disclosure controls
were deemed ineffective, in that we could not assure that information required
to be disclosed in our SEC reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and communicated to our management, so as to allow
timely decisions regarding required disclosures. Factors which led our
management to conclude that our disclosure controls and procedures were not
effective include, but are not limited to, the late filing of our Annual Report
on Form 10-K for the year ended December 31, 2008 and the late filing of our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.
  We are
seeking to engage experienced professionals, if necessary, to augment our
financial staff to address issues of timeliness and completeness in financial
reporting when we are preparing SEC filings. No assurances can be given that we
will be able to adequately remediate existing deficiencies in disclosure
controls and not have deficiencies when we report on internal controls. Although
we believe that these corrective steps will enable management to conclude that
our disclosure controls are effective and these measures will remediate the
material weaknesses discussed above when all of the additional financial staff
positions are filled and other remediation plans are implemented, we cannot
assure you that this will be sufficient. We may be required to expend additional
resources to identify, assess and correct any additional weaknesses in
disclosure or internal control and to otherwise comply with the internal
controls rules under Section 404 of the Sarbanes-Oxley Act, when
applicable.
 
 Because
most of our sales are made in U.S. Dollars and most of our expenses are paid in
RMB, devaluation of the U.S. Dollar could negatively impact our results of
operations.
 
 The value
of RMB is subject to changes in China’s governmental policies and to
international economic and political developments. In January 1994, the PRC
government implemented a unitary managed floating rate system. Under this
system, the People’s Bank of China, or PBOC, began publishing a daily base
exchange rate with reference primarily to the supply and demand of RMB against
the U.S. Dollar and other foreign currencies in the market during the previous
day. Authorized banks and financial institutions are allowed to quote buy and
sell rates for RMB within a specified band around the central bank’s daily
exchange rate. On July 21, 2005, PBOC announced an adjustment of the
exchange rate of the U.S. Dollar to RMB from 1:8.27 to 1:8.11 and modified the
system by which the exchange rates are determined. This modification has
resulted in an approximate 7.3% appreciation of the RMB against the U.S. Dollar
from July 21, 2005 to May 2, 2007. While the international reaction to
the RMB revaluation has generally been positive, there remains significant
international pressure on the PRC government to adopt an even more flexible
currency policy, which could result in further fluctuations of the exchange rate
of the U.S. Dollar against the RMB, including future devaluations. Because most
of our net sales are made in U.S. Dollars and most of our expenses are paid in
RMB, any future devaluation of the U.S. Dollar against the RMB could negatively
impact our results of operations.
 
 We
do not foresee paying cash dividends in the foreseeable future and, as a result,
our investors’ sole source of gain, if any, will depend on capital appreciation,
if any.
 
 We do not
plan to declare or pay any cash dividends on our shares of common stock in the
foreseeable future and currently intend to retain any future earnings for
funding growth. As a result, investors should not rely on an investment in our
securities if they require the investment to produce dividend income. Capital
appreciation, if any, of our shares may be investors’ sole source of gain for
the foreseeable future. Moreover, investors may not be able to resell their
shares of the Company at or above the price they paid for them.
  53
  ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 
 None.
 
 ITEM
3.  DEFAULT UPON SENIOR SECURITIES
 
 None.
 
 ITEM
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None.
 
 ITEM
5.  OTHER INFORMATION
 
 None.
  ITEM
6.  EXHIBITS
 
 (a)           Exhibits
 
 Exhibit
                  Number
                
                Description of Document31.1
                
                Certification
      of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K,
      as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
                
                Certification
      of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K,
      as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
                
                Certification
      of the Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.*
 
 *
              This
      exhibit shall not be deemed “filed” for purposes of Section 18 of the
      Securities Exchange Act of 1934 or otherwise subject to the liabilities of
      that section, nor shall it be deemed incorporated by reference in any
      filing under the Securities Act of 1933 or the Securities Exchange Act of
      1934, whether made before or after the date hereof and irrespective of any
      general incorporation language in any
filings.
  54
  YINLIPS
TECHNOLOGY, INC.
 
 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.
 
 Yinlips
      Technology, Inc.Date:
      August 20, 2009
                  By:
                  /s/
      Zhao ZifengZhao
      ZifengChief
      Executive Officer and Chairman of the BoardDate:
      August 20, 2009
                  By:
                  /s/
      Wang XingguiWang
      XingguiInterim
      Chief Financial Officer
  55