Xinyinhai Tech (PINK:XNYH)

Over the longer term, the continued revenue growth in our printing services business will require further capital investment. As China’s banking industry rapidly modernizes, our customers will demand higher quality products similar to those available to the banking industry in Europe and the U.S. Our ability to meet that demand will determine the long term growth of our business. Immediately, the development of these new products will require substantial capital investment. For that purpose, we secured a $2.9 million collateralized loan during the third quarter of 2009, which we replaced during the third quarter of 2010 with a $4.43 million collateralized bank loan with an interest rate of 5.841%. We applied $748,379 to improvements in our plant and equipment during the second half of 2009. In 2010 we used a portion of the funds to increase our inventory in anticipation of growth, and used another portion to temporarily increase our loan to Heilongjiang Jindi. At the end of 2010, however, we had signed commitments to purchase $1,334,715 in plant and machinery. Since Heilongjiang Jindi repaid its loan in full early in 2011, we will apply a portion of those funds to payment for that capital improvement.

We held $3,692,174 in cash and equivalents at December 31, 2010, and $2,199,189 in trade receivables, of which only $376,205 were more than 90 days old. We have a $4.5 million debt payment due in 2011, but our liquid assets are more than adequate, and we expect to pay the loan in full at the end of June. We are cash positive in our operations, are operating profitably and hold over $6.4 million in fixed assets free of lien. Accordingly, we expect to be able to secure bank financing when our operations warrant capital expansion. For that reason, we expect our liquidity will be sufficient in the next year to fund our ongoing operations as well as our near-term growth.