U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Mark One

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

For the nine month period ended March 31, 2011

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 number: 000-33195

Xinhua China Ltd.

(Name of small business issuer in its charter)

Nevada		88-0437644
(State or other jurisdiction of incorporationor organization)		(I.R.S. Employer Identification No.)

B-26F, Oriental Kenzo Dongcheng District

Beijing 100027

People’s Republic of China

(Address of principal executive offices)

86-10-64168816 or 86-10-64168916

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:		Name of each exchange on which registered:
None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.00001 par value

(Title of Class)

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

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

Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years.

N/A

Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes o Noo

Applicable Only to Corporate Registrants

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

Class		Outstanding as of May 17, 2011
Common Stock $0.00001 par value		499,911,400

XINHUA CHINA LTD.

FORM 10-Q

		PART I – FINANCIAL INFORMATION

Item 1.		Financial Statements	F-1

Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations	5

Item 3.		Quantitative and Qualitative Discloses About Market Risk	12

Item 4.		Controls and Procedures	13

Item 4T.		Controls and Procedures	14

	.	PART II – OTHER INFORMATION

Item 1.		Legal Proceedings	15

Item 1A.		Risk Factors	15

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 3.		Defaults Upon Senior Securities	15

Item 4.		Removed and Reserved	15

Item 5.		Other Information	15

Item 6.		Exhibits	15

FORWARD LOOKING STATEMENTS

Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Available Information

Xinhua China Ltd. files annual, quarterly, current reports, proxy statements, and other information with the Securities and Exchange Commission (the “Commission”). You may read and copy documents referred to in this Quarterly Report on Form 10-Q that have been filed with the Commission at the Commission’s Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission filings by going to the Commission’s website at http://www.sec.gov.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XINHUA CHINA LTD.

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2011 AND JUNE 30, 2010

(Stated in US Dollars)

F-1

Xinhua China Ltd.

Contents	Pages

Report of Registered Independent Public Accounting Firm		F-3

Unaudited Balance Sheets		F-4

Unaudited Statements of Income		F-5

Unaudited Statements of Stockholders’ Equity		F-6

Unaudited Statements of Cash Flows		F-7

Notes to the Unaudited Financial Statements		F-8

F-2

To the Board of Directors and

Stockholders of Xinhua China Ltd.

Report of Registered Independent Public Accounting Firm

We have reviewed the accompanying interim balance sheets of Xinhua China Ltd. (“the Company”) as of March 31, 2011 and June 30, 2010, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for the nine-month periods ended March 31, 2011 and 2010. These interim financial statements are the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

San Mateo, California		Samuel H. Wong & Co., LLP
May 5, 2011		Certified Public Accountants

F-3

Xinhua China Ltd.

Unaudited Balance Sheets

As of March 31, 2011 and June 30, 2010

(Stated in US Dollars)

				(Audited)
	Notes	March 31, 2011		June 30, 2010
ASSETS
Current Assets
Cash and Cash Equivalents	3D	$	-	$	255,810
Accounts Receivable, net	3E		-		75,125
Other Receivables and Prepayments	4		10,655		241,353
Total Current Assets			10,655		572,288

Long-term Assets
Property, Plant & Equipment, net	3F,5		-		204,062
Intangible Assets, net	5		-		78,242
Total Long-term Assets			-		282,304

Total Assets		$	10,655	$	854,592

LIABILITIES & STOCKHOLDERS' EQUITY

Liabilities
Current Liabilities
Accounts Payable and Accrued Liabilities	6	$	265,449	$	570,834
Current portion of Loans Payable	7		1,498,075		1,472,311
Total Current Liabilities			1,763,525		2,043,145

Long-term Liabilities
Loans Payable	7		1,058,261		1,058,261
Loans from Shareholders	8		10,588,854		10,176,526
Total Long-term Liabilities			11,647,115		11,234,787

Total Liabilities		$	13,410,640	$	13,277,932

Stockholders' Equity

Common Stock $0.00001 Par Value 500,000,000 Shares Authorized; 499,911,400 and 499,911,400 shares issued and outstanding at March 31, 2011 and June 30, 2010, accordingly.	9	$	4,999	$	4,999
Additional Paid-In Capital			12,159,080		11,831,075
Accumulated Other Comprehensive Income			(30,392		40,149
Accumulated Deficit			(25,533,672		(24,299,563	)
Total Stockholders' (Deficit)/Equity			(13,399,985		(12,423,340	)

Total Liabilities & Stockholders' Equity		$	10,655	$	854,592

See Accompanying Notes to the Financial Statements and Accountant’s Report

F-4

Xinhua China Ltd.

Unaudited Statements of Income

For the nine-month periods ended March 31, 2011 and 2010

(Stated in US Dollars)

	Note	Three-month period ended						Nine-month period ended
		March 31,						March 31,
Revenue		2011			2010			2011			2010

Revenue, net	3H	$	-		$	-			-			-
Cost of Sales, net	3I		-			-			-			-
Gross Profit			-			-			-			-

Operating Expenses

Selling, General, and Administrative Expenses			134,058			181,241			328,443			477,634
Total Operating Expense			134,058			181,241			328,443			477,634

Operating Income/(Loss)			(134,058	)		(181,241	)		(328,443	)		(477,634	)

Other Income (Expenses)
Other Income			-			-			-			-
Interest Income			-			402			-			442
Interest Expense			(121,021	)		(120,156	)		(366,615	)		(349,406	)
Loss on disposal of subsidiaries	12		-			-			(4,118,173	)		-
(Loss) before minority interest and income tax			(255,079	)		(300,995	)		(4,484,788	)		(826,598	)


Loss before Income Tax			(255,079	)		(300,995	)		(4,813,231	)		(826,598	)

Income Tax	3		-			-			-			-

Discontinued Operations, net of tax	14		-			-			(71,086	)		-

Net (Loss)		$	(255,079	)	$	(300,995	)	$	(4,884,317	)	$	(826,598	)

Basic & Diluted (Loss) Per Share	3N,13		(0.0005	)		(0.0006	)		(0.0098	)		(0.0017	)

Weighted Average Shares Outstanding			499,911,400			499,911,400			499,911,400			499,911,400

See Accompanying Notes to the Financial Statements and Accountant’s Report

F-5

Xinhua China Ltd.

Unaudited Statements of Stockholders’ Equity

For the nine-month period ended March 31, 2011 and year ended June 30, 2010

(Stated in US Dollars)

					Additional					Other
	Number of		Common		Paid in		Comprehensive			Comprehensive			Accumulated
	Shares		Stock		Capital		Income(Loss)			Income(Loss)			Deficit			Total

Balance, July 1, 2009		490,311,400		4,903		11,399,960		(20,253,432	)		38,756			(20,292,189	)		(8,848,570	)
Additional Paid-in Capital		-		-		419,775		-			-			-			419,775
Imputed interest on interest free advances from related party		-		-		11,340		-			-			-			11,340
Issuance of shares to Highgate		9,600,000		96		-		-			-			-			96
Foreign Currency translation		-		-		-		1,393			1,393			-			1,393
Net Loss for year		-		-		-		(4,007,374	)		-			(4,007,374	)		(4,007,374	)
Balance, June 30, 2010		499,911,400		4,999		11,831,075		(24,259,413	)		40,149			(24,299,563	)		(12,423,340	)


Balance, July 1, 2010		499,911,400		4,999		11,831,075		(24,259,413	)		40,149			(24,299,563	)		(12,423,340	)
Additional Paid-in Capital on conversion		-		-		-		-			-			-			-
Imputed interest on interest free advances from related party		-		-		328,005		-			-			-			328,005
Foreign Currency translation		-		-		-		(70,541	)		(70,541	)		-			(70,541	)
Deconsolidation of disposed subsidiaries								3,650,208			-			3,650,208			3,650,208
Net Loss for period		-		-		-		(4,884,317	)		-			(4,884,317	)		(4,884,317	)
Balance, March 31, 2011		499,911,400		4,999		12,159,080		(25,533,672	)		(30,392	)		(25,533,672	)		(13,399,985	)

	March 31, 2011			June 30, 2010			Total
Comprehensive Income(Loss)
Net Loss	$	(4,884,317	)	$	(4,007,374	)	$	(8,891,691	)

Other Comprehensive Income

Foreign Currency Translation Adjustment		(70,541	)		1,393			(69,148	)

Total Comprehensive Income	$	(4,954,858	)	$	(4,005,981	)	$	(8,960,839	)

See Accompanying Notes to the Financial Statements and Accountant’s Report

F-6

Xinhua China Ltd.

Unaudited Statements of Cash Flows

For the nine-month periods ended March 31, 2011 and 2010

(Stated in US Dollars)

	Three-month period ended						Nine-month period ended
	March 31,						March 31,
	2011			2010			2011			2010
Cash Flow from Operating Activities:
Net (Loss)	$	(255,079	)	$	(300,995	)		(4,884,317	)	$	(826,598	)
Adjustments to reconcile net earnings(loss) to net cash used in operating activities:
Depreciation		-			8,410			-			17,872
Imputed interest expense		-			120,076			-			348,404

Changes in assets and liabilities:
Decrease/(Increase) Accounts receivable		534			12,245			19,345			348
Decrease/(Increase) Other receivable and prepayments		-			(3,139	)		19,345			(3,139	)
Decrease/(Increase) Accounts Payable and accrued liabilities		106,095			(2,348	)		(328,133	)		(294,709	)
Cash Sourced/(Used) in Operating Activities		(148,450	)		(165,751	)		(5,193,105	)		(757,821	)

Cash Flows from Investing Activities:
Purchase of leasehold improvements		-			-			-			(21,235	)
Purchase of plant and equipment		-			(82,429	)					(82,429	)
Purchase of intangible assets		-			(39,260	)					(39,260	)
Disposal of subsidiaries		-			-			1,998,464			-
Cash Used/(Sourced) in Investing Activities		-			(121,689	)		1,998,464			(142,924	)

Cash Flows from Financing Activities:
Stock Issue to Highgate on debt conversion		-			-			-			96
Adjustment/(Repayment) of Loan to Highgate		-			-			18,600			(11,436	)
Loans from shareholders		40,000			30,000			2,848,036			1,328,186
Additional Paid-in Capital		108,450			-			328,005			11,340
Cash Sourced/(Used) in Financing Activities		148,450			30,000			3,194,641			1,328,186

Net Increase/(Decrease) in Cash & Cash Equivalents for the Period		-			(257,440	)		-			427,449

Effect of Currency Translation		-			313			-			8

Cash & Cash Equivalents at Beginning of Period		-			730,345			-			45,769

Cash & Cash Equivalents at End of Period	$	-		$	473,218			-		$	473,218

Cash paid for interest expenses	$	-		$	-		$	-		$	-

See Accompanying Notes to the Financial Statements and Accountant’s Report

F-7

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

ORGANIZATION AND BUSINESS BACKGROUND

Xinhua China Ltd. (the “Company”, formerly Camden Mines Limited) was incorporated in the State of Nevada, United States of America, on September 14, 1999. Until September 2004, the Company was a non-operating shell company and considered as a development stage enterprise since its inception. Effective from October 12, 2004, the Company changed to its current name. The Company established an office in Vancouver, Canada; however, this office was closed down in December 2006. The Company established its principal executive office at B26-F, Oriental Kenzo, No. 48 Dongzhimenwai Street, Dongcheng District, Beijing 100027 People’s Republic of China.

As of May 31, 2006, the Company reduced its equity interest in Xinhua C&D from 56.14% to 7.98%. Subsequent to the deconsolidation of Xinhua C&D, the Company commenced the internet book distribution business through Beijing Joannes Information Technology Co., Ltd. (“Joannes”).

As of September 30, 2010, the Company disposed both subsidiaries at a loss. See note 12 – Loss on Disposal of Subsidiaries.

GOING CONCERN UNCERTAINTIES

These financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

As of March 31, 2011, the Company had no working capital but current liabilities exceeding current assets by $1,752,870 and an accumulated deficit of $25,533,672 because the Company continued to incur losses over the past several years. Management has taken certain action and continues to implement changes designed to improve the Company’s financial results and operating cash flows. The actions involve certain cost-saving initiatives and growing strategies, including (a) reductions in headcount and corporate overhead expenses; and (b) development of e-commerce business. Management believes that these actions will enable the Company to improve future profitability and cash flow in its continuing operations through March 31, 2011. As a result, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A.)	Basis of Presentation These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

F-8

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

(B.)	Use of Estimates In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these Estimates.

(C.)	Basis of Consolidation After disposal of the two subsidiaries on September 16, 2010, the Company has no subsidiaries; therefore, no consolidation is necessary.

(D.)	Cash and Cash Equivalents Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

(E.)

Accounts Receivable, Net

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business, but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness, and the economic environment.

(F.)

Property, Plant, and Equipment, Net

Property, plant, and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational.

Asset Classification		Depreciable Life
Land Use right		50 years
Buildings		50 years
Motor Vehicles		8 – 10 years
Equipment and Machinery		5 – 8 years
Intangible Assets		3 years
Leasehold Improvement		2 years

Expenditure for maintenance and repairs is expensed as incurred. The gain or loss on the disposal of property, plant, and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the consolidated statement of income.

F-9

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

(G.)

Impairment of Long-life Assets

In accordance with ASC 360, “Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of’, a long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. The Company reviews long-lived assets, if any, to determine whether the carrying values are not impaired.

(H.)

Revenue Recognition

Sales revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed and final, delivery has occurred and there is reasonable assurance of collection of the sales proceeds. The Company generally obtains purchase authorizations from its customers for a specified amount of products at a specified price and considers delivery to have occurred when the customer takes possession of the products. Net sales incorporate offsets for discounts and sales returns. Revenue is recognized upon delivery, risk and ownership of the title is transferred and a reserve for sales returns is recorded even though invoicing may not be completed. The Company has demonstrated the ability to make reasonable and reliable estimates of products returns in accordance with SFAS No. 48, “Revenue Recognition When Right of Return Exists”.

Shipping and handling fees billed to customers are included in sales. Costs related to shipping and handling are part of selling, general, and administrative expenses in the consolidated statements of operations. EITF No. 00-10, “Accounting for Shipping and Handling Fees and Costs” allows for the presentation of shipping and handling expenses in line items other than cost of sales. For the period ended March 31, 2011, there were no shipping and handling costs included in selling, general and administrative expenses in the accompanying consolidated statements of income.

(I.)	Cost of Sales Cost of sales includes depreciation of property, plant, and equipment and purchase costs.

F-10

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

(J.)

Value-Added Tax

The Company is subject to value added tax (“VAT”) imposed by the PRC on sales. The output VAT is charged to customers who purchase books from the Company and the input VAT is paid when the Company purchases books from publishers. The VAT rate is 13%. The input VAT can be offset against the output VAT.

(K.)	Advertising Expenses The Company expenses advertising costs as incurred. For the period ended March 31, 2011, advertising expenses amount to zero.

(L.)

Comprehensive Income

ASC 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components, and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying statement of changes in owners’ equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

(M.)

Income Taxes

The Company uses the accrual method of accounting to determine and report its taxable reduction of income taxes for the year in which they are available. The Company has implemented ASC 740 - Accounting for Income Taxes. Income tax liabilities computed according to the United States and People’s Republic of China (PRC) tax laws are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.

The Company is subject to United States Tax according to Internal Revenue Code Sections 951 and 957. Corporate income tax is imposed on progressive rates in the range of: -

F-11

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

Taxable Income
Rate		Over		But Not Over		Of Amount Over
	15%		0		50,000		0
	25%		50,000		75,000		50,000
	34%		75,000		100,000		75,000
	39%		100,000		335,000		100,000
	34%		335,000		10,000,000		335,000
	35%		10,000,000		15,000,000		10,000,000
	38%		15,000,000		18,333,333		15,000,000
	35%		18,333,333		-		-

Based on the consolidated net income/(loss) for the period ended March 31, 2011, the Company shall not be subject to income tax.

(N.)

Loss Per Share

The Company calculates loss per share in accordance with ASC 260, “Earnings per Share”. Basic loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. The effect of outstanding stock options, stock purchase warrants and convertible debenture, which could result in the issuance of 499,911,400 and 499,911,400 of common stock at March 31, 2011 and June 30, 2010, respectively, are anti-dilutive. As a result, diluted loss per share data does not include the assumed exercise of outstanding stock options, stock purchase warrants, or conversion of convertible debenture and has been presented jointly with basic loss per share.

(O.)

Foreign Currencies Translation

The functional and reporting currency of the Company is the United States dollars (“U.S. dollars”). The accompanying consolidated financial statements have been expressed in U.S. dollars.

The functional currency of the Company’s foreign subsidiaries is the Renminbi Yuan (“RMB”). The balance sheet is translated into United States dollars based on the rates of exchange ruling at the balance sheet date. The statement of operations is translated using a weighted average rate for the year. Translation adjustments are reflected as cumulative translation adjustments in stockholders’ equity.

Exchange Rates	March 31, 2011		June 30, 2010		March 31, 2010
Period/year end RMB : US$ exchange rate		6.5564		6.8086		6.8263
Average period/year RMB : US$ exchange rate		6. 6656		6.8347		6.8285

F-12

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

(P.)	Fair Value of Financial Instruments The carrying value of the Company’s financial instruments, which include cash and cash equivalents, accounts receivables, other payable and accrued liabilities, approximate their fair values due to the short-term maturity of these instruments.

(Q.)

Related Parties

For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

(R.)

Convertible Debenture Issued with Stock Purchase Warrants

The Company accounts for the issuance of and modifications to the convertible debt issued with stock purchase warrants in accordance with ASC 470, Accounting for Convertible Debt.

Due to the indeterminate number of shares, which might be issued under the embedded convertible host debt conversion feature of these debentures, the Company is required to record a liability relating to both the detachable warrants and embedded convertible feature of the notes payable (included in the liabilities as a "derivative liability").

The accompanying consolidated financial statements comply with current requirements relating to warrants and embedded derivatives as described in SFAS 133 as follows:

The Company treats the full fair market value of the derivative and warrant liability on the convertible secured debentures as a discount on the debentures (limited to their face value). The excess, if any, is recorded as an increase in the derivative liability and warrant liability with a corresponding increase in loss on adjustment of the derivative and warrant liability to fair value.

Subsequent to the initial recording, the change in the fair value of the detachable warrants, determined under the Black-Scholes option pricing formula and the change in the fair value of the embedded derivative (utilizing the Black-Scholes option pricing formula) in the conversion feature of the convertible debentures are recorded as adjustments to the liabilities as of September 30, 2006.

§	The expense relating to the change in the fair value of the Company's stock reflected in the change in the fair value of the warrants and derivatives is included in interest expense in the accompanying consolidated statements of income.

F-13

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

(S.)	Going Concern Uncertainties These consolidated financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

(T.)

Recently Issued Accounting Standard

In April 2010, the FASB issued an Accounting Standard Update (“ASU”) No.2010-13,”Compensation-Stock Compensation” (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades,” which address the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied, as if the amendments had been applied consistently since the inception of the award. ASU 2010-13 is effective for interim and annual periods beginning on or after December 15, 2010. The Company has adopted the above recent accounting pronouncements without any material impact on the financial statements presented herein.

4.	OTHER RECEIVABLES AND PREPAYMENT

	March 31, 2011		June 30, 2010

Prepayments	$	10,655	$	241,353

The carrying amounts of prepayments approximate their fair value.

5.	PROPERTY, PLANT, AND EQUIPMENT, NET Property, plant, and equipment consist of the following:

	March 31, 2011		June 30, 2010
Equipment and machinery	$	-	$	174,428
Motor vehicles		-		81,959
Leasehold Improvement		-		37,756
		-		294,143
Less: Accumulated Depreciation		-		(90,081	)
	$	-	$	204,062

F-14

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

Depreciation expense for March 31, 2011 and June 30, 2010 were $0 and $28,000 respectively.

During the period ended March 31, 2011, the Company disposed all fixed assets which includes property, plant, and equipment due to the disposal of their investment in subsidiaries as noted in Note 12 – Discontinued Operations.

6.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of March 31, 2011 and June 30, 2010 consists of the following:

		March 31, 2011				June 30, 2010
Accounts Payable		$	265,449			$	570,834

LOANS PAYABLE/CONVERTIBLE DEBENTURE

On November 23, 2005, the Company entered into a debt financing agreement (the “Agreement”) with an institutional investor, and on March 23, 2006, the Agreement was modified to include an additional institutional investor, who is an affiliate of the original institutional investor (both institutional investors collectively referred to as “the Investors”). The Investors committed to purchase up to $4,000,000 of a secured convertible debenture (“the debenture”) that shall be convertible into shares of the Company’s common stock.

After two closings on December 13, 2005 and March 23, 2006, the Company received gross proceeds of $3,250,000 (net proceeds $2,989,460) for the secured convertible debenture. The Company and debenture-holders entered into a Forbearance and Settlement Agreement on December 29, 2006 because of default in debt service, whereby the Company agreed to make cash payment and to grant rights to the creditors to cashless purchase the Company’s common stock by exercising the warrant at 200,000 shares in every three month period beginning on December 29, 2006 according to the following payment plan:

Payment Date	Cash Payment		Conversion of Debenture
March 10, 2007	$	250,000		250,000
September 30, 2007		375,000		375,000
October 31, 2007		375,000		375,000
January 31, 2008		250,000		250,000
July 31, 2008		625,000		625,000
	$	1,875,000		1,875,000

F-15

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

The Company paid $250,000 for the payment due March 10, 2007 and the debenture holders exercised 100,000 shares and 125,000 shares on March 1, 2007 and April 18, 2007, respectively. During the period ended March 31, 2010 and year ended June 30, 2009; the debenture holders converted 9,600,000 and 266,655,667 shares against outstanding loan at a total conversion price of $11,436 and $144,532, respectively.

Loans Payable outstanding as of March 31, 2011 amount to $2,556,336 of which $1,498,075 and $1,058,261 were attributed to current portion and long-term, respectively.

Loans Payable outstanding as of June 30, 2010 amount to $2,530,573 of which $1,472,311 and $1,058,261 were attributed to current portion and long-term, respectively.

LOANS FROM SHAREHOLDERS

The total outstanding amount of $10,588,854 represents cash advanced from shareholders of the Company.

These shareholders’ loans are unsecured and not repayable within the next twelve months. For the period ended March 31, 2011, there was $328,005 imputed interest, at 6.00% annum, recorded. For the year ended June 30, 2010, there was $419,775 imputed interest, at 6.00% per annum, recorded.

9.	COMMON STOCK AND WARRANTS

A.	Common Stock During 2005, the authorized capital stock of the Company increased from $1,000 consisting of 100,000,000 shares of common stock of par value $0.00001 each to $5,000 consisting of 500,000,000 shares of common stock of par value $0.00001 each.

Warrants

(1)

The Company completed a private placement in 2005 with certain individuals for 622,690 units at $3.25 per unit for total cash proceeds of $2,023,800. Each unit consists of one share of common stock and one-half of one non-transferable share purchase warrant. The warrant will expire on the earlier of:

(i)	two years from the date of issuance; and
(ii)	fifteen business days from date that the Company provides notice in writing to the subscriber that the Company’s common shares have been trading or traded at a price of $7 or more for a period of ten days.

The warrant shares shall have an exercise price of $4.50 per warrant share for the first twelve months, and if still available after twelve months, the warrant shares shall have an exercise price of $4.60 per warrant share starting on the first day of the second twelve month period and increasing by $0.10 on the first day of each subsequent month thereafter until expiration of the warrants.

F-16

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

(2)	Share purchase warrant issued from convertible debenture

On December 13, 2005, the Company issued to the holder of the convertible debenture 1,035,000 warrants. One share purchase warrant is exercisable for one common share at $0.00001 per share, until expiration on November 22, 2010. As of March 31, 2011, zero shares of common stock were converted by the convertible debenture holders.

(3)	Share warrant issued for service

On May 1, 2006, the Company issued 100,000 warrants at $1.47 per share to Mr. Peter Shandro, the VP Business Strategy of the Company, in association with the planning and execution of the on-line ecommerce initiative of the Company. Compensation expense of $94,775 was recorded with the issuance of these warrants.

10.	STATUTORY RESERVES

The Company is required to make appropriations to reserves funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the People’s Republic of China (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after-tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the Company’s registered capital. Appropriation to the statutory public welfare fund is 10% of the after-tax net income determined in accordance with the PRC GAAP. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. The statutory public welfare fund is established for providing employee facilities and other collective benefits to the employees and is non-distributable other than in liquidation. The Company made no appropriations to the statutory reserve, as it did not have a pre-tax profit.

11.	LOSS ON DISPOSAL OF SUBSIDIARIES

The Company disposed its subsidiaries; namely, Beijing Joannes Information Technology Co., Ltd. and Pac-Poly Investment Ltd. during the six-month period and resulted in a loss of $4,118,173, which is reflected in the Income Statement.

F-17

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

12.	NET LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of the ordinary shares outstanding during the year. Diluted net loss per share is computed using the weighted average number of ordinary shares and ordinary share equivalents outstanding during the year.

The following table sets forth the computation of basic and diluted net loss per share for the period indicated:

	For the three months ended						For the nine months ended
Basic and diluted net loss per share calculation:	March 31, 2011			March 31, 2010			March 31, 2011			March 31, 2010

(a). Numerator:
Net loss used in computing basic net loss per share	$	(255,079	)	$	(300,995	)	$	(4,884,317	)		(826,598	)

(b). Denominator:
Weighted-average ordinary shares outstanding		499,911,399			499,911,399			499,911,400			498,689,581

Basic and diluted net loss per share	$	(.0005	)	$	(.0006	)	$	(0.0097	)		(.0017	)

For the period ended March 31, 2011 and 2010 in which the Company had a net loss, inclusion of warrants outstanding would have been anti-dilutive and therefore not included in the computation of diluted losses per share.

F-18

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

13.	DISCONTINUED OPERATION

During the quarter ended September 30, 2010, the Company ceased operation of its subsidiaries; namely, Beijing Joannes Information Technology Co., Ltd. and Pac-Poly Investment Ltd, which were eventually disposed of before the quarter ended. Their operation results, net of tax effect are reported in detail as follow:

Results of Operations
for the three months ended
September 30, 2010				Pac Poly
	Beijing Joannes			Investment Ltd.			Total
Revenue		-			-			-
Cost of revenue		-			-			-
Gross profit		-			-			-

Selling expenses		-			-			-
General and administrative expenses		64,086			7,000			71,086
Total operating expenses		64,086			7,000			71,086

Other income		-			-			-
Interest income		-			-			-
Other expense		-			-			-
Interest expense		-			-			-

Earnings/(Losses) before tax		(64,086	)		(7,000	)		(71,086	)
Income tax		-			-			-
Minority interest income		-			-			-
		(64,086	)		(7,000	)		(71,086	)

F-19

Xinhua China Ltd.

Notes to Unaudited Financial Statements

For the nine-month period ended March 31, 2011

and year ended June 30, 2010

(Stated in US Dollars)

14.	CONCENTRATION OF RISK

	A.	Credit risk

		Since the Company’s inception, the age of account receivables have been less than one year indicating that the Company is subject to minimal risk borne from credit extended to customers.

	B.	Interest risk

		The company subject to the interest rate risk when their short term loans become due and require refinancing.

	C.	Economic and political risks

		The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in the PRC.

		The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.


	D.	Environmental risks

		The Company has procured environmental licenses required by the PRC government. The Company has both a water treatment facility for water used in its production process and secure transportation to remove waste off site. In the event of an accident, the Company has purchased insurance to cover potential damage to employees, equipment, and local environment.

	E.	Inflation Risk

		Management monitors changes in prices levels. Historically inflation has not materially impacted the company’s financial statements; however, significant increases in the price of raw materials and labor that cannot be passed on the Company’s customers could adversely impact the Company’s results of operations.

F-20

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

BUSINESS DEVELOPMENT

Xinhua China Ltd. was incorporated September 14, 1999 under the laws of the State of Nevada as Camden Mines Limited (“Camden”). On October 12, 2004, Camden changed its name from “Camden Mines Limited” to its current corporate name “Xinhua China Ltd.” We have certain digital media distribution and related rights in "China" where we mostly operate and seek to pursue our business. We are in the development stage seeking to grow our company.

Disposal of Subsidiaries

Pac-Poly Investments Limited

Beijing Joannes Information Technology Co. Ltd.

During the three month period ended September 30, 2010, we disposed of our subsidiaries, Pac-Poly Investments Limited and Beijing Joannes Information Technology Co. Ltd., which resulted in a loss of $4,118,173.

RECENT BUSINESS OPERATIONS

We are a company establishing ourselves as a leader in the digital media industry. We have refocused our strategic business operation plans to maximize our strategic position in the publishing industry. We believe that we will be able to establish ourselves as a leader in the digital media industry. In accordance with our refocused strategic plan, we intend to enter into certain contractual relationships.

We are subject to many risks and there is no assurance of success in our plans.

RESULTS OF OPERATION

The summarized consolidated financial data set forth in the tables below and discussed in this section should be read in conjunction with our consolidated financial statements and related notes for the nine period ended March 31, 2011 and 2010, which financial statements are included elsewhere in this Quarterly Report.

	For Nine Month Period Ended March 31, 2011 (unaudited)			For Nine Month Period Ended March 31, 2010 (unaudited)
Revenue
Net revenue		-0-			-0-
Cost of Sales		-0-			-0-
Gross Profit		-0-			-0-

Operating Expenses
Selling, general and administrative expenses	$	328,443		$	477,634
Operating Income (loss)		(328,443	)		(477,634	)

Other Income (Expenses)
Other income		-0-			-0-
Interest income		-0-			442
Interest expense		(366,615	)		(349,406	)
Loss on disposal of subsidiaries		(4,118,173	)		-0-
Loss Before Income Tax		(4,484,788	)		(826,598	)
Discontinued Operations net of tax		(71,086	)		-0-
Net Loss		(4,884,317	)		(826,598	)

RESULTS OF OPERATION

For Nine Month Period Ended March 31, 2011 Compared to Nine Month Period Ended March 31, 2010.

Revenues and Gross Margin and Cost of Sales

We had net sales of $-0- for both nine month periods ended March 31, 2011 and March 31, 2010.

Operating Expenses

Our total operating expenses were $328,443 for the nine month period ended March 31, 2011 as compared to total operating expenses of $477,634 for the nine month period ended March 31, 2010. The decrease in operating expenses during the nine month period ended March 31, 2011 as compared to the nine month period ended March 31, 2010 was due to a decrease in a variety of expenditures relating to our ongoing restructuring efforts. During the nine month period ended March 31, 2011, our selling, general and administrative expenses consisted of: (i) legal and professional fees of $19,000 (2010: $30,322); (ii) office expenses of $9,322 (2010: $12,061); (iii) salaries and benefits of $97,852 (2010: $171,000); (iv) management fees of $90,000 (2010: $90,000); (v) vehicle expense of $21,284 (2010: $22,300); and (vii) other expenses of $90,985 (2010: $15,863).

Selling, general and administrative expenses primarily decreased during the nine month period ended March 31, 2011 compared to the nine month period ended March 31, 2010 based on the incurrence of expenses during the nine month period ended March 31, 2010 relating to the reorganization of our subsidiaries and personnel following the move to relocate our office.

Interest Expense

We incurred $366,615 in interest expense during the nine month period ended March 31, 2011 as compared to $349,406 incurred as interest expense during the nine month period ended March 31, 2010. Interest expense of $366,615 incurred during the nine month period ended March 31, 2011 consisted of $366,615 (2009: $349,406) in imputed interest charged on loans from related parties.

Interest Income

During the nine month period ended March 31, 2011, we also recorded $-0- (2010: $442) in interest income.

Loss on Disposal of Subsidiaries

During the nine month period ended March 31, 2011, we disposed of our subsidiaries, Beijing Joannes Information Technology Co., Ltd. and Pac-Poly Investment Ltd., which resulted in a loss of $4,118,173.

Our loss before income tax during the nine month period ended March 31, 2011 was ($4,813,231) compared to loss before income tax during the nine month period ended March 31, 2011 of ($826,598). During the nine month period ended March 31, 2011, we incurred a loss of $71,086 (2010: $-0-) relating to discontinued operations, net of tax.

Thus, our net loss during the nine month period ended March 31, 2011 was ($4,884,317) or ($0.0098) per share compared to a net loss of ($826,598) or ($0.0017) per share incurred during the nine month period ended March 31, 2011. The substantial increase in net loss during the nine month period ended March 31, 2011 was due primarily to the loss on the disposal of our subsidiaries of $4,118,173 recorded during the nine month period ended March 31, 2011.

For Three Month Period Ended March 31, 2011 Compared to Three Month Period Ended March 31, 2010.

Revenues and Gross Margin and Cost of Sales

We had net sales of $-0- for both three month periods ended March 31, 2011 and March 31, 2010.

Operating Expenses

Our total operating expenses were $134,058 for the three month period ended March 31, 2011 as compared to total operating expenses of $181,241 for the three month period ended March 31, 2010. The slight decrease in operating expenses during the three month period ended March 31, 2011 as compared to the three month period ended March 31, 2010 was due to a decrease in a variety of expenditures relating to our ongoing restructuring efforts. During the three month period ended March 31, 2011, our selling, general and administrative expenses consisted of: (i) legal and professional fees of $5,000 (2010: $9,170); (ii) office expenses of $2,982 (2010: $6,502); (iii) salaries and benefits of $46,220 (2010: $66,443); (iv) management fees of $30,000 (2010: $30,000); (v) vehicle expense of $8,675 (2010: $9,391); and (vii) other expenses of $41,180 (2010: $6,304).

Interest Expense

We incurred $121,021 in interest expense during the three month period ended March 31, 2011 as compared to $120,156 incurred as interest expense during the three month period ended March 31, 2010. Interest expense of $121,021 incurred during the three month period ended March 31, 2011 consisted of $121,021 (2009: $120,156) imputed interest charged on loans from related parties.

Interest Income

During the three month period ended March 31, 2011, we also recorded $-0- (2010: $402) in interest income.

Thus, our net loss during the three month period ended March 31, 2011 was ($255,079) or ($0.0005) per share compared to a net loss of ($300,995) or ($0.0006) per share incurred during the three month period ended March 31, 2010.

LIQUIDITY AND CAPITAL RESOURCES

Nine Month Period Ended March 31, 2011

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

As at the nine month period ended March 31, 2011, our current assets were $10,655 and our current liabilities were $1,763,525, resulting in a working capital deficit of $1,752,870. As at the nine month period ended March 31, 2011, current assets were comprised of $10,655 in other receivables and prepayments. As at the nine month period ended March 31, 2011, our current liabilities were comprised of: (i) $265,449 in accounts payable and accrued liabilities; and (ii) $1,498,075 in current portion of loans payable. See “ – Material Commitments.”

As at the nine month period ended March 31, 2011, our total assets were $10,655 comprised entirely of current assets. The decrease in total assets during the nine month period ended March 31, 2011 from fiscal year ended June 30, 2010 was primarily due to the decrease in valuation of long term assets, including property, plant and equipment and a decrease in current assets, including cash and cash equivalents and other receivables and prepayments.

As at the nine month period ended March 31, 2011, our total liabilities were $13,410,640 comprised of: (i) $1,763,525 in current liabilities; (ii) $1,058,261 in loans payable; and (iii) $10,588,854 in loans from shareholders. The slight increase in total liabilities during the nine month period ended March 31, 2011 from fiscal year ended June 30, 2010 was primarily due to the increase in long term liabilities, primarily including loans from shareholders.

Stockholders’ deficit increased from ($12,423,340) for June 30, 2010 to ($13,399,985) for March 31, 2011.

Operating Activities

We have not generated positive cash flows from operating activities. For the nine month period ended March 31, 2011, net cash flow used in operating activities was ($5,193,105) compared to net cash used operating activities of ($757,821) during the nine month period ended March 31, 2010. Net cash flow from operating activities during the nine month period ended March 31, 2011 consisted primarily of a net loss of ($4,884,317) changed by a decrease of $19,345 in accounts receivable and of $19,345 in other receivable and prepayments and by an increase of $328,133 in accounts payable and accrued liabilities.

Net cash flow from operating activities during the nine month period ended March 31, 2010 consisted primarily of a net loss of ($826,598) adjusted by $17,872 in depreciation and $348,404 in imputed interest expense. Further changes in assets and liabilities consisted of a decrease of $348 in accounts receivable and an increase of $3,139 iin accounts receivable and of $294,709 in payable and accrued liabilities.

Investing Activities

During the nine month period ended March 31, 2011, net cash flow used in investing activities was $1,998,464 compared to net cash flow sourced from investing activities of ($142,924) for the nine month period ended March 31, 2010. The net cash flow used in investing activities of $1,998,464 during the nine month period ended March 31, 2011 consisted of $1,998,464 in disposal of subsidiaries. The net cash flow sourced from investing activities of ($142,924) during the nine month period ended March 31, 2010 consisted of $21,235 in purchase of leasehold improvements, $82,429 in purchase of plant and equipment and $39,260 in purchase of intangible assets .

Financing Activities

During the nine month period ended March 31, 2011, net cash flow sourced from financing activities was $3,194,641 compared to net cash flow sourced from financing activities of $1,328,186 for the nine month period ended March 31, 2010. Net cash flow sourced from financing activities during the nine month period ended March 31, 2011 pertained primarily to: (i) $2,848,036 received as loan from shareholders; (ii) $18,600 in adjustment of loan to Highgate; and (iii) $328,005 in additional paid-in capital. Net cash flow sourced from net cash flow during the nine month period ended March 31, 2010 pertained primarily to: (i) $1,328,186 in loan from shareholders; (ii) $11,340 in additional paid in capital; (iii) $96 in stock issue to Highgate on debt conversion, which was offset by ($11,436) in repayment of loan to Highgate.

PLAN OF OPERATION

Existing working capital, further advances and possible debt instruments, warrant exercises, further private placements, monetization of existing assets, and anticipated cash flow are expected to be adequate to fund our operations over the next two months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt securities and loans from our shareholders. In connection with our business plan, management will delay additional increases in operating expenses and capital expenditures. We intend to utilize our best efforts to settle current finance accounts payables and liabilities with further issuances of securities, debt and or advances, monetization of existing assets, and revenues from operations. We will need to raise additional capital and increase revenues to meet both short term and long-term operating requirements.

We have undertaken certain actions and continue to implement changes designed to improve our financial results and operating cash flows. The actions involve certain cost-saving initiatives and growing strategies, including: (i) reductions in headcounts and corporate overhead expenses; and (ii) continue to develop e-commerce business through Beijing Joannes. We believe that these actions will enable us to improve future profitability and cash flow in our continuing operations through June 30, 2009. Furthermore, the restructure of debt pertaining to Cornell and Highgate has been advantageous to our over financial outlook. Ultimately, we have released the burden on cash flow for further contribution and intend to put our resources in co-publishing and e-commerce business opportunities.

The report of the independent registered public accounting firm that accompanies our June 30, 2010 and June 30, 2009 consolidated financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

MATERIAL COMMITMENTS

Loans Payable/Convertible Debenture

During 2010/11, a material commitment for us relates to the Forbearance and Settlement Agreement with Cornell and Highgate. On December 29, 2006, we completed the debt restructuring with Cornell and Highgate under the Forbearance and Settlement Agreement. Pursuant to the Forbearance and Settlement Agreement, we agreed to make certain payments to Cornell and Highgate with respect to the Securities Purchase Agreement previously entered into by us with Cornell and Highgate dated November 23, 2005 and amended on March 23, 2006, and the two convertible debentures in the amounts of $1,250,000 to Highgate dated November 23, 2005 and $2,000,000 to Cornell dated March 23, 2006 (collectively, the “Convertible Debentures”) in accordance with the terms and conditions set forth in the Forbearance and Settlement Agreement.

In further accordance with the Forbearance and Settlement Agreement, we agreed to use the proceeds from the disposal of Beijing Boheng to repay the principal and interest due to Cornell and Highgate under the Convertible Debentures in exchange for the agreement of Cornell and Highgate to: (i) waive on a one-time basis only any accrued liquidated damages owing to Cornell and Highgate; (ii) no application of the redemption premium on the scheduled repayments; (iii) conversion of the Convertible Debentures in an amount equal to at least the amount of a scheduled repayment subject to certain conditions; (iv) no additional liquidated damages accruing during the term of the Forbearance and Settlement Agreement; (v) permitting us to withdraw the registration statement filed on March 28, 2006 with the Securities and Exchange Commission in connection with the Convertible Debentures; (vi) during the term of the Forbearance and Settlement Agreement, waiving the requirement for us to receive written consent of Cornell and Highgate for any organizational change (as defined in the Securities Purchase Agreement) to be directly or indirectly consummated by us, and that we will not effectuate any stock splits for at least nine months without the consent of Cornell and Highgate; and (vii) terminating the provisions for security shares as set forth in Section 9 of the Securities Purchase Agreement and in Section 2 of the transfer agent instructions upon receipt by Cornell and Highgate of the first scheduled repayment amount.

The payment plan under the Forbearance and Settlement Agreement is as follows:

Payment Date	Cash Payment		Conversion of Debenture
March 10, 2007	$	250,000		250,000
June 30, 2007		375,000		375,000
October 31, 2007		375,000		375,000
January 31, 2008		250,000		250,000
July 31, 2008		625,000		625,000
	$	1,875,000		1,875,000

As of June 30, 2007, we paid $250,000 for the payment due March 10, 2007 and issued 100,000 shares and 125,000 shares of our common stock on March 1, 2007 and April 18, 2007, respectively, pursuant to exercise rights. During fiscal years ended June 30, 2009 and June 30, 2008, Cornell and Highgate converted an aggregate of 266,655,668 and 44,016,843 shares, respectively, against the outstanding amount at a total conversion price of $144,532 and $152,200, respectively. During fiscal year ended June 30, 2010, Cornell and Highgate converted an aggregate of 9,600,000 shares against the outstanding amount at a total conversion price of $11,436. As at March 31, 2011, loans payable outstanding was $2,530,573 of which $1,472,311 and $1,058,261 were attributed to current portion and long-term portion, respectively.

LOANS FROM SHAREHOLDERS

During fiscal year 2010/11, a material commitment for us relates to the loans from shareholders. The outstanding amount of $10,588,854 represents cash advanced to us from our shareholders. These shareholder loans are unsecured, interest-free and not repayable within the next twelve months. For fiscal years ended June 30, 2010 and June 30, 2009, we calculated imputed interest expense of $419,775 and $342,847, respectively, in relation to interest-free shareholders loans at its effective interest rate and accounted for it in the consolidated financial statements. During fiscal year ended June 30, 2009, the shareholders converted an aggregate of 125,000,000 shares against the shareholders’ loan at a total conversion price of $12,500. As at March 31, 2011, there was $328,005 imputed interest at 6.00% per annum recorded.

PURCHASE OF SIGNIFICANT EQUIPMENT

We do not intend to purchase any significant equipment during the next twelve months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse change in foreign currency and interest rates.

Exchange Rate

Our reporting currency is United States Dollars (“USD”). The Chinese Renminbi (“RMB”) has been informally pegged to the USD. However, China is under international pressure to adopt a more flexible exchange rate system. If the RMB were no longer pegged to the USD, rate fluctuations may have a material impact on the Company’s consolidated financial reporting and make realistic revenue projections difficult. Recently (July 2005) the Renminbi was allowed to rise 2%. This has not had an appreciable effect on our operations and seems unlikely to do so.

As Renminbi is the functional currency of Joannes and Boheng, the fluctuation of exchange rates of Renminbi may have positive or negative impacts on the results of operations of the Company. However, since all sales revenue and expenses of these two subsidiary companies are denominated in Renminbi, the net income effect of appreciation and devaluation of the currency against the US Dollar will be limited to the net operating results of the subsidiary companies attributable to us.

Interest Rate

Interest rates in China are low and stable and inflation is well controlled, due to the habit of the population to deposit and save money in the banks (among with other reasons, such as the People’s Republic of China’s perennial balance of trade surplus). Our loans relate mainly to trade payables and are mainly short-term. However our debt is likely to rise with physical plant in connection with expansion and, were interest rates to rise at the same time, this could become a significant impact on our operating and financing activities.

We have not entered into derivative contracts either to hedge existing risks or for speculative purposes.

ITEM 4. CONTROLS AND PROCEDURES

FINANCIAL DISCLOSURE CONTROLS AND PROCEDURES

An evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2011. Based on that evaluation, our Chief Executive Officer/Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officers also confirmed that there was no change in our internal control over financial reporting during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the "Evaluation"), under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures ("Disclosure Controls") as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. The evaluation of our disclosure controls and procedures included a review of the disclosure controls' and procedures' objectives, design, implementation and the effect of the controls and procedures on the information generated for use in this report. In the course of our evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm the appropriate corrective actions, if any, including process improvements, were being undertaken. Our Chief Executive Officer/Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and were operating at the reasonable assurance level.

Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rules 13a-15(f) promulgated under the Exchange Act. The term internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

1.	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

3.	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.

Our management, including our chief executive officer and chief financial officer, does expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Our management, with the participation of the chief executive officer and chief financial officer, assessed the effectiveness of our internal control over financial reporting as of March 31, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in INTERNAL CONTROL-INTEGRATED FRAMEWORK. Our management has concluded that, as of March 31, 2011, our internal control over financial reporting is effective.

This Quarterly Rport does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this Annual Report.

Audit Committee

Our Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by our Board of Directors. We are contemplating establishment of an audit committee during fiscal year 2011. When established, the audit committee's primary function will be to provide advice with respect our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.

ITEM 4T. CONTROLS AND PROCEDURES

Not applicable.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDING

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

No report necessary.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. REMOVED AND RESERVED

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this Quarterly Report:

Exhibit

31.1		Certification under Rule 13a-14(a).
31.2		Certification under Rule 13a-14(a).
32.1		Certification under Section 1350.
32.2		Certification under Section 1350.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	XINHUA CHINA LTD.

Dated: May 19, 2011	By:	/s/XIANPING WANG
		Xianping Wang
		President/Chief Executive Officer



Dated: May 19, 2011	By:	/s/ XIANPING WANG
		Xianping Wang
		Acting as Interim Chief Financial Officer

XINHUA CHINA LTD 10-Q