MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Our revenue in the first nine months of 2008 increased by 33.2% over the revenue realized in the first nine months of 2007. The increase was attributable to both our printing business (17.1% increase) and our equipment distribution business (91.8% increase). The increase in printing revenue resulted from our development of new customers and from our investment in added capacity during 2007, which enabled us to market our services more aggressively.

Our revenue for the recent quarter increased 5.2% from $2,988,165 in the three months ended September 30, 2007 to $3,143,424 during the quarter ended September 30, 2008. Our revenue from printing business for the quarter ended September 30, 2008 slightly decreased 2.7% to $2,285,531, compared to the corresponding revenue of $2,349,412 for the three months ended September 30, 2007. However, our revenue from the equipment distribution business for the recent quarter realized an increase of 34.3% from $638,753 for the three months ended September 30, 2007 to $857,892 for the same period ended September 30, 2008. The increase in distribution revenue was primarily the result of our establishing additional selling agents throughout China, which has opened a much larger market for the plasma arc cutting machines that we sell. For the recent quarter, equipment distribution contributed 27.3% of our revenue. For the nine months ended September 30, 2008, plasma arc cutting equipment distribution contributed 31.1% of our revenue.

Continued revenue growth in our printing services business will require further capital investment. During the first quarter of the current year we completed the purchase of a 10,284m2 facility, where we are currently developing expanded production facilities in order to meet the production requirements of our growing sales. In addition, as China's banking industry rapidly modernizes, our customers demand additional product offerings similar to those available to the banking industry in Europe and the U.S. Our ability to meet that demand will determine the long term growth of our business. Immediately, the development of these new products will require substantial capital investment. For that purpose, we are currently exploring financing possibilities, but have not yet received a commitment for the funds.

The 39% and 36% gross margin realized by our subsidiary, Harbin Golden Sea on sales in the first nine months of 2008 and for the three months ended September 30, 2008, respectively, was lower than the 43% gross margin realized in the first nine months of 2007 (45% for the three months ended September 30, 2007).
The reason for the fall-off was the sharp increase in revenue from equipment sales in 2008, since our gross margin on equipment sales is far lower than our gross margin on printing. Our expectation for the future is that our gross margin from printing services will average approximately 40%, albeit within a range of 33% to 50%, depending on the components of the business. If we obtain the funding necessary to expand our printing capacity, we expect the printing portion of its business to grow faster than the equipment sales business. If that occurs, overall gross margin should increase towards the higher margins that printing has historically produced.

Operating expenses as a percentage of revenue decreased from 15.7% in the first nine months of 2007 (7.9% in the third quarter of 2007) to 10.8% in the first nine months of 2008

(12.1% in the third quarter of 2008). The primary reason for the decrease in the nine month period was the issuance of shares to consultants in the 4th quarter of 2006. We utilized our equity in this manner in order to acquire the services of certain leaders in the printing industry. However the issuance added a prepaid asset of $2,219,000 to our balance sheet, which we were required to amortize as expense over the duration of the consulting agreements. This was the primary reason that we incurred depreciation and amortization charges of $816,559 in the first nine months of 2007. Our depreciation and amortization charge for the first nine months of 2008, however, was only $284,557, as several of the consulting contracts expired in 2007 and, as to the remainder of the contracts, the Company and the consultants reached agreement at the end of 2007 to cancel future services. That cancellation, and the corresponding cancellation of a portion of the shares issued in 2006, allowed us to report "other income" of $386,528 during the nine months ended September 30, 2008.

Our efforts to improve the efficiency of our marketing operations continued to yield benefits. During the first nine months of 2008, despite the 33.2% increase in revenue, our selling expenses ($254,012 - 2.4% of revenue) decreased by 19.2% from the selling expenses recorded in the first nine months of 2007 ($314,360 - 3.9% of revenue). Similarly, during the third quarter of 2008, despite the 5.2% increase in revenue, our selling expenses ($79,497 - 2.5% of revenue) decreased by 9.2% from the selling expenses recorded in the third quarter of 2007 ($87,547 - 2.9% of revenue). The disparity between our fixed costs and our revenue reflected our ability to increase our production without a proportionate increase in our administrative overhead. Similarly we expect that if we obtain the funds needed to increase our printing production capacity, the resulting increase in our revenue will not require a corresponding increase in administrative expense, with the exception that new investment in equipment will cause an increase in depreciation expense.

In 2006 our operating subsidiary qualified for a two year exemption from Chinese income taxes. Commencing in 2008, we will be eligible for three years of taxation at 50% of the statutory rate. As a result of this government allowance, we incurred no income tax in the first nine months of 2007, but were taxed at a 9% rate in the first nine months of 2008, causing an expense of $303,712. The tax burden for the quarter ended September 30, 2008 was $361.

The operations of our subsidiary, Harbin Golden Sea, produced $3,070,870 in income during the first nine months of 2008, and $947,420 during the quarter ended September 30, 2008. However, because we own only 90% of Harbin Golden Sea, we deducted a "minority interest" of $307,087 for the nine month period and $94,742 for the quarter before recognizing net income on our Statement of Income and Comprehensive Income. After that deduction and taking into account the income and expenses incurred by the parent corporation, our net income for the first nine months of 2008 was $2,780,041, representing $.14 per share, a 43% increase over the net income we achieved in the first nine months of 2007. Net income for the quarter ended September 30, 2008 was $671,176 ($.03 per share), a decline of 31% from our net income in the third quarter of 2007. The principal reason for the decline was the low profit margin on equipment sales, which represented a larger percentage of our revenue in the third quarter of 2008 than we usually experience.

Our business operates primarily in Chinese RMB, but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to Dollars results in translation adjustments, which are reported as a middle step between net income and

comprehensive income. The net income is added to the retained earnings on our balance sheet; while the translation adjustment is added to a line item on our balance sheet labeled "accumulated other comprehensive income," since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. In the first nine months of 2008, the effect of converting our financial results to Dollars was to add $976,820 to our comprehensive income. In the three months ended September 30, 2008, $35,798 was added to our comprehensive income.

Liquidity and Capital Resources

Since our subsidiary, Harbin Golden Sea, was organized in 1998, the growth of its operations has been funded by contributions to capital by our Chairman, Mrs. Tian. With the $2.4 million that she invested, Harbin Golden Sea built its facilities and funded its operations, resulting in profitable operations for the past several years. As a result, at September 30, 2008 we had working capital totaling $8,117,244 (an increase of $5,872,721 since the end of 2007) and no debt.

Despite net income of $2,780,041 during the first nine months of 2008, our operations consumed $168,019 in cash. The disparity between our net income and cash flow from operations was primarily attributable to:

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the $2,282,748 increase in our trade receivables, which resulting from the increase in sales during the nine months ended September 30, 2008; and

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the $616,591 increase in our inventories and $304,855 increase in our other receivables, deposits and prepayments, all of which reflects our preparation for increased sales.

Our cash position fell by $1,004,407 during the nine months ended September 30, 2008, due primarily to the cash used in operations and the $958,197 that we applied to the development of our new manufacturing facility. In addition, during the first six months of 2008 we applied cash to the acquisition of a 12 story office building in Harbin that we purchased for $3,483,465, of which we paid $2,699,850 during 2007. In August 2008, however, we cancelled that project, and sold the building to an unrelated third party for an amount equal to our original purchase price.

Harbin Golden Sea's business plan calls for significant investment in the growth of Harbin Golden Sea during 2008. We plan to purchase new equipment for our new production facility. We also plan to invest in the development of additional product lines, although the amount that we apply to that purpose will depend on our success in obtaining investment capital. To date, however, we have not received any commitment of funds.

Our capital is sufficient to fund our operations at their current level for the foreseeable future. Significant growth, however, will require that we obtain additional capital or incur debt.

Off-Balance Sheet Arrangements

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

Risk Factors That May Affect Future Results

You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.

I. Risks attendant to our business

We may not be able to adequately protect our intellectual property, which could cause us to be less competitive.

We are continuously designing and developing new technology. We rely on a combination of copyright and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Unauthorized use of our technology could damage our ability to compete effectively. In China, monitoring unauthorized use of our products is difficult and costly. In addition, intellectual property law in China is less developed than in the United States and historically China has not protected intellectual property to the same extent as it is protected in other jurisdictions, such as the United States. Any resort to litigation to enforce our intellectual property rights could result in substantial costs and diversion of our resources, and might be unsuccessful.

Currency fluctuations may adversely affect our business.

We generate revenues and (with one exception) incur expenses and liabilities in Chinese RMB. However we report our financial results in the United States in U.S. Dollars. As a result, we are subject to the effects of exchange rate fluctuations between these currencies. Recently, there have been suggestions made to the Chinese government that it should adjust the exchange rate and end the linkage that in recent years has held the RMB-U.S. dollar exchange rate constant. If the RMB exchange rate is adjusted or is allowed to float freely against the U.S. dollar, our revenues, which are denominated in RMB, may fluctuate significantly in U.S. dollar terms. We have not entered into agreements or purchased instruments to hedge our exchange rate risks.

Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.

Our future success depends on our ability to attract and retain highly skilled engineers, draftsmen, and technicians, as well as sales personnel experienced in international sales. Qualified individuals are in high demand in China, and there are insufficient experienced personnel to fill the demand. Therefore we may not be able to successfully attract or retain the personnel we need to succeed.

We may have difficulty establishing adequate management and financial controls in China.

The People's Republic of China has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with. We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company. If we cannot establish such controls, we may

experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.

Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.

The People's Republic of China has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to fund our business activities outside China or to pay dividends to our shareholders.

We have limited business insurance coverage.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

Our bank deposits are not insured.

There is no insurance program in the PRC that protects bank deposits, in the way that bank deposits in the U.S. are given limited protection by the FDIC. If the bank in which we maintain our cash assets were to fail, it is likely that we would lose most or all of our deposits.

II. Risks attendant to our management

The absence of independent directors on our board of directors may limit the quality of management decision making.

Each of the three members of our Board of Directors is also an employee of Harbin Golden Sea. There is no audit committee of the board and no compensation committee. This situation means that the Board will determine the direction of our company without the benefit of an objective perspective and without the contribution of insights from outside observers. This may limit the quality of the decisions that are made. In addition, the absence of independent directors in the determination of compensation may result in the payment of inappropriate levels of compensation.

Our business development would be hindered if we lost the services of our Chairman.

Tian Ling is the Chief Executive Officer of Xinyinhai Technology, Ltd. and of its operating subsidiary, Harbin Golden Sea Technology Printing Co., Ltd. Mrs. Tian is

responsible for strategizing not only our business plan but also the means of financing it. If Mrs. Tian were to leave Xinyinhai or become unable to fulfill her responsibilities, our business would be imperiled. At the very least, there would be a delay in the development of Xinyinhai until a suitable replacement for Mrs. Tian could be retained.

Xinyinhai is not likely to hold annual shareholder meetings in the next few years.

Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved. The current members of the Board of Directors were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that the current directors will appoint them. As a result, the shareholders of Xinyinhai will have no effective means of exercising control over the operations of Xinyinhai.

Your ability to bring an action against us or against our directors, or to enforce a judgment against us or them, will be limited because we conduct all of our operations in China and because our management resides outside of the United States.

We conduct all of our operations in China through our wholly-owned subsidiary. All of our directors and officers reside in China and all of the assets of those Chinese residents are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the United States and of China may render you unable to enforce a judgment against our assets or the assets of our directors.

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