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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

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FORM 10-K/A
Amendment No. 3

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|x                                             | ANNUAL   REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934    
|--------------------------------------------- | ------------------------------------------------------------------------------------------
|                                              |                                                                                           
|for the fiscal year ended - DECEMBER 31, 2005
|                                              |                                                                                           
|OR                                           
|                                              |                                                                                           
|o                                             | TRANSITION   REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                              |                                                                                           
|for the transition period from               

|Commission file number 0-024828
|-------------------------------
|                               
|SORL AUTO   PARTS, INC.        
|(Name of Issuer in Its Charter)

|DELAWARE                                                         |  | 30-0091294                             
|---------------------------------------------------------------- |  | ---------------------------------------
|(State or Other jurisdiction   of Incorporation or Organization) |  | (I.R.S.  Employer   Identification No.)

|NO. 1169 YUMENG ROAD                                           
|---------------------------------------------------------------
|RUIAN ECONOMIC DEVELOPMENT DISTRICT                            
|RUIAN CITY, ZHEJIANG PROVINCE                                  
|PEOPLES REPUBLIC OF CHINA                                     
|(Address of Principal Executive Offices, including zip   code.)
|                                                               
|86-577-65817720                                                
|(Issuers Telephone Number, Including Area Code)               

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

|TITLE OF   EACH CLASS |  | NAME OF   EACH   EXCHANGE ON WHICH REGISTERED
|--------------------- |  | ---------------------------------------------
|                      |  |                                              
|NONE                  |  | NONE                                         

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

|TITLE   OF EACH CLASS |  | COMMON   STOCK
|--------------------- |  | --------------

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

|Yes
o | No
x
|----- | ----

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

|Yes
o | No
x
|----- | ----

Indicate by check mark whether the issuer (1) 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 check mark if no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by referenced in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

| | Large accelerated filer
o | Accelerated   filer
o | Non-accelerated
x | 
| | ------------------------- | --------------------- | ----------------- | 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

|Yes
o | No
x
|----- | ----

State issuers revenues for its most fiscal year December 31, 2005:  $64.0 Million

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity as of the last business day of registrants most recently completed second fiscal quarter.  As of June 30, 2006, the value was $12,530,000.

State the number of shares outstanding of each of the issuers classes of common equity:  13,346,555 as of March 8, 2006.

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Reason For Amendment

This filing is being amended to include, revise or omit information necessary to improve the disclosures as follows:

| |  | The column headings in the   statements of cash flows for the years ended December 31, 2005 and 2004   have been modified to clearly label them as restated.  This revision was necessitated by a   reclassification of cash flows from notes receivable for those years from   investing cash flows to operating cash flows.                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Disclosure has been added   to the financial statements under Note 20, Restatement to describe the   effects of the restatement (of the cash flows from the changes in notes   receivable balances from investing cash flows to operating cash flows) on   income before extraordinary items, net income, related per share amounts, and   stockholders equity.                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | The auditors report   covering the financial statements for the years ended December 31, 2005 and   2004 has been revised to refer to the restatement and the related note   disclosure.                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | A current report on Form   8K has been simultaneously filed to notify readers or potential readers that   the financial statements previously filed for the years ended December 31,   2005 and 2004 on Form 10K filed on March 27, 2006, Form 10K/A (Amendment #1)   filed on June 22, 2006 and Form 10K/A (Amendment #2) filed on July 27,   2006 should not be relied upon due to the restatement of cash flows from   notes receivable from investing cash flows to operating cash flows.

- i -

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TABEL OF CONTENTS

|PART   II  |                                              
|---------- | ---------------------------------------------
|           |                                              
|ITEM 8.    | FINANCIAL   STATEMENTS AND SUPPLEMENTARY DATA
|           |                                              
|PART   III |                                              
|           |                                              
|ITEM 15.   | EXHIBITS,   AND FINANCIAL STATEMENT SCHEDULES
|           |                                              
|SIGNATURES | 23                                           

- 2 -

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of SORL Auto Parts, Inc. Ruian City, Zhejiang Province Peoples Republic of China

We have audited the accompanying consolidated balance sheets of SORL Auto Parts, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders equity and cash flows for the years then ended.  These financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with The Public Company Accounting Oversight Board Standards.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

As described more fully in Note 20, the financial statements for the years ended December 31, 2005 and 2004 have been restated to present the cash flows from changes in notes receivable arising from trade customers as a component of operating cash flows rather than investing cash flows as previously reported.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SORL Auto Parts, Inc. as of December 31, 2005 and 2004 and the results of its operations and its cash flows for the years then ended in conformity with generally accounting principles accepted in the United States of America.

|/s/ Rotenberg and Co. LLP                                                    | 
|---------------------------------------------------------------------------- | 
|                                                                             | 
|ROTENBERG AND COMPANY, LLP                                                   | 
|Rochester, New York                                                          | 
|March 9, 2006 (Except for   Note 20 as to which the date is August 10, 2006) | 

- 3 -

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Ruili Group Corporation China

We have audited the accompanying statements of income, changes in stockholders equity, and cash flows for the year ended December 31, 2003, of Ruili Group Corporation China, a Peoples Republic of China limited liability company, (the Company).  These financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2003, in conformity with generally accepted accounting principles in the United States of America.

|/s/ Clancy and Co.,   P.L.L.C. | 
|------------------------------ | 
|                               | 
|Clancy and Co., P.L.L.C.       | 
|Phoenix, Arizona               | 
|                               | 
|April 1, 2004                  | 

- 4 -

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SORL Auto Parts, Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2005 and 2004

|                                                                                                                          |  | 2005 |            | 2004 | 
|------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | 
|                                                                                                                          |  |      |            |      | 
|Assets                                                                                                                    |  |      |            |      | 
|Current Assets                                                                                                            |  |      |            |      | 
|Cash and cash   equivalents                                                                                               |  | US$  | 961,131    |      | 
|Accounts   receivable, net of allowance                                                                                   |  |      | 25,339,774 |      | 
|Notes receivable                                                                                                          |  |      | 1,488,104  |      | 
|Inventory                                                                                                                 |  |      | 2,512,583  |      | 
|Prepayments                                                                                                               |  |      | 1,801,829  |      | 
|Other current   assets                                                                                                    |  |      | 48,115     |      | 
|                                                                                                                          |  |      |            |      | 
|Total Current   Assets                                                                                                    |  |      | 32,151,536 |      | 
|Fixed Assets                                                                                                              |  |      |            |      | 
|Property, plant   and equipment                                                                                           |  |      | 10,140,947 |      | 
|Less: Accumulated   depreciation                                                                                          |  |      | (3,024,281 | )    | 
|                                                                                                                          |  |      |            |      | 
|Fixed Assets, Net                                                                                                         |  |      | 7,116,666  |      | 
|Other Assets                                                                                                              |  |      |            |      | 
|Intangible assets                                                                                                         |  |      | 44,297     |      | 
|Less: Accumulated   amortization                                                                                          |  |      | (11,873    | )    | 
|                                                                                                                          |  |      |            |      | 
|Intangible Assets,   Net                                                                                                  |  |      | 32,424     |      | 
|                                                                                                                          |  |      |            |      | 
|Total Other Assets                                                                                                        |  |      | 32,424     |      | 
|                                                                                                                          |  |      |            |      | 
|Total Assets                                                                                                              |  | US$  | 39,300,626 |      | 
|                                                                                                                          |  |      |            |      | 
|Liabilities   and Shareholders Equity                                                                                    |  |      |            |      | 
|Current Liabilities                                                                                                       |  |      |            |      | 
|Accounts payable   and other payables                                                                                     |  | US$  | 3,746,666  |      | 
|Deposits received   from customers                                                                                        |  |      | 1,324,085  |      | 
|Short term bank   loans                                                                                                   |  |      | 16,026,717 |      | 
|Accrued expenses                                                                                                          |  |      | 482,982    |      | 
|                                                                                                                          |  |      |            |      | 
|Total Liabilities                                                                                                         |  |      | 21,580,450 |      | 
|Minority Interest                                                                                                         |  |      | 1,735,818  |      | 
|Shareholders Equity                                                                                                      |  |      |            |      | 
|Common stock,   $0.002 par value, 50,000,000 authorized, 13,346,555 and 13,282,253 issued and   outstanding, respectively |  |      | 26,693     |      | 
|Additional Paid-In   capital                                                                                              |  |      | 4,444,118  |      | 
|Accumulated other   comprehensive income                                                                                  |  |      | 336,993    |      | 
|Retained earnings                                                                                                         |  |      | 11,176,554 |      | 
|                                                                                                                          |  |      |            |      | 
|                                                                                                                          |  |      | 15,984,358 |      | 
|                                                                                                                          |  |      |            |      | 
|Total   Liabilities and Shareholders Equity                                                                              |  | US$  | 39,300,626 |      | 
|                                                                                                                          |  |      |            |      | 

- 5 -

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SORL Auto Parts, Inc. and Subsidiaries Consolidated Statements of Income  Years Ended December 31, 2005, 2004, and 2003

|                                                  |  | 2005 |            | 2004 |   | (Rounded)   2003 |  
|------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------------- | -
|                                                  |  |      |            |      |   |                  |  
|Sales                                             |  | US$  | 64,182,544 |      |   | 46,815,037       |  
|Cost of Sales                                     |  |      | 49,865,235 |      |   | 35,904,232       |  
|                                                  |  |      |            |      |   |                  |  
|Gross Profit                                      |  |      | 14,317,309 |      |   | 10,910,805       |  
|Expenses:                                         |  |      |            |      |   |                  |  
|Selling and   Distribution Expenses               |  |      | 3,919,996  |      |   | 2,737,652        |  
|General and   Administrative Expenses             |  |      | 4,169,460  |      |   | 2,489,604        |  
|Financial Expenses                                |  |      | 688,811    |      |   | 287,433          |  
|                                                  |  |      |            |      |   |                  |  
|                                                  |  |      | 8,778,267  |      |   | 5,514,689        |  
|Operating Income                                  |  |      | 5,539,042  |      |   | 5,396,116        |  
|Other Income                                      |  |      | 52,592     |      |   |                 |  
|Non-Operating Expenses                            |  |      | (92,067    | )    |   | (55,067          | )
|                                                  |  |      |            |      |   |                  |  
|Income Before Provision for Income Taxes          |  |      | 5,499,567  |      |   | 5,341,049        |  
|Provision for Income Taxes                        |  |      |           |      |   |                 |  
|                                                  |  |      |            |      |   |                  |  
|Income From Continuing Operations                 |  |      | 5,499,567  |      |   | 5,341,049        |  
|Loss From Discontinued Operations                 |  |      |           |      |   |                 |  
|Minority Interest                                 |  |      | 549,957    |      |   | 534,105          |  
|                                                  |  |      |            |      |   |                  |  
|Net Income Attributable to Shareholders           |  |      | 4,949,610  |      |   | 4,806,944        |  
|Other Comprehensive Income                        |  |      |            |      |   |                  |  
|Foreign Currency Translation Adjustment           |  |      | 374,437    |      |   |                 |  
|Minority Interests Share                         |  |      | 37,444     |      |   |                 |  
|                                                  |  |      |            |      |   |                  |  
|Comprehensive Income (Loss)                       |  | US$  | 5,286,603  |      |   | 4,806,944        |  
|                                                  |  |      |            |      |   |                  |  
|Earnings per Share From Continuing   Operations   |  |      |            |      |   |                  |  
|Basic                                             |  | $    | 0.37       |      | $ | 0.37             |  
|Diluted                                           |  | $    | 0.37       |      | $ | 0.37             |  
|Earnings per Share From Discontinued   Operations |  |      |            |      |   |                  |  
|Basic                                             |  | $    |           |      | $ |                 |  
|Diluted                                           |  | $    |           |      | $ |                 |  
|Weighted average common shares - Basic            |  |      | 13,302,763 |      |   | 13,165,241       |  
|Weighted average common shares - Diluted          |  |      | 13,302,763 |      |   | 13,165,241       |  

- 6 -

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SORL Auto Parts, Inc. and Subsidiaries Consolidated Statements of Changes in Shareholders Equity Years Ended December 31, 2005, 2004, and 2003

|                                                        |  | Number   of Shares |            | Common   Stock |  | Additional   Paid-in   Capital |  | Retained   Earnings |             | Accumulated   Other   Comprehensive   Income |  | Shareholders   Equity |  | Minority   Interest |        
|------------------------------------------------------- |  | ------------------ | ---------- | -------------- |  | ------------------------------ |  | ------------------- | ----------- | -------------------------------------------- |  | ---------------------- |  | ------------------- | -------
|                                                        |  |                    |            |                |  |                                |  |                     |             |                                              |  |                        |  |                     |        
|Balance - January 1, 2003                               |  |                    | 12,953,720 |                |  | 25,908                         |  |                     | 17,122,092  |                                              |  | 270,000                |  |                     |       
|Capital Contribution                                    |  |                    |           |                |  |                               |  |                     | 9,736,000   |                                              |  |                       |  |                     |       
|Net Income                                              |  |                    |           |                |  |                               |  |                     |            |                                              |  | 1,150,000              |  |                     |        
|                                                        |  |                    |            |                |  |                                |  |                     |             |                                              |  |                        |  |                     |        
|Balance - December 31,   2003                           |  |                    | 12,953,720 |                |  | 25,908                         |  |                     | 26,858,092  |                                              |  | 1,420,000              |  |                     |       
|Corporate Reorganization:                               |  |                    |            |                |  |                                |  |                     |             |                                              |  |                        |  |                     |        
|Distribution of discontinued operations to shareholders |  |                    |           |                |  |                               |  |                     | (22,775,189 | )                                            |  |                       |  |                     |       
|Acquisition of Enchanted Village                        |  |                    | 328,533    |                |  | 657                            |  |                     | (657        | )                                            |  |                       |  |                     |       
|Capital contributed by Minority   Shareholder           |  |                    |           |                |  |                               |  |                     |            |                                              |  |                       |  |                     |       
|Net Income                                              |  |                    |           |                |  |                               |  |                     |            |                                              |  | 4,806,944              |  |                     |       
|                                                        |  |                    |            |                |  |                                |  |                     |             |                                              |  |                        |  |                     |        
|Balance - December 31,   2004                           |  |                    | 13,282,253 |                |  | 26,565                         |  |                     | 4,082,246   |                                              |  | 6,226,944              |  |                     |       
|Adjustment for fractional shares                        |  |                    | 4802       |                |  | 9                              |  |                     | (9          | )                                            |  |                       |  |                     |       
|Common Stock issued to consultants                      |  |                    | 10,000     |                |  | 20                             |  |                     | 64,980      |                                              |  |                       |  |                     |       
|Common Stock issued to employees                        |  |                    | 49,500     |                |  | 99                             |  |                     | 296,901     |                                              |  |                       |  |                     |       
|Net Income                                              |  |                    |           |                |  |                               |  |                     |            |                                              |  | 4,949,610              |  |                     |       
|Other Comprehensive Income                              |  |                    |           |                |  |                               |  |                     |            |                                              |  |                       |  |                     | 336,993
|                                                        |  |                    |            |                |  |                                |  |                     |             |                                              |  |                        |  |                     |        
|Balance - December 31,   2005                           |  |                    | 13,346,555 |                |  | 26,693                         |  |                     | 4,444,118   |                                              |  | 11,176,554             |  |                     | 336,993
|                                                        |  |                    |            |                |  |                                |  |                     |             |                                              |  |                        |  |                     |        

- 7 -

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SORL Auto Parts, Inc. and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 2005, 2004, and 2003

|                                                                                   |  | (As Restated)   2005 |             | (As Restated)   2004 |   | (Rounded)   2003 |  
|---------------------------------------------------------------------------------- |  | -------------------- | ----------- | -------------------- | - | ---------------- | -
|                                                                                   |  |                      |             |                      |   |                  |  
|Cash Flows from Operating   Activities                                             |  |                      |             |                      |   |                  |  
|Net Income                                                                         |  | US$                  | 4,949,610   |                      |   | 4,806,944        |  
|Adjustments   to reconcile net income to net cash flows from operating activities: |  |                      |             |                      |   |                  |  
|Minority Interest                                                                  |  |                      | 549,957     |                      |   | 534,105          |  
|Bad Debt Expense                                                                   |  |                      | 846,337     |                      |   | 68,384           |  
|Depreciation and   Amortization                                                    |  |                      | 866,558     |                      |   | 554,261          |  
|Stock compensation    employees                                                   |  |                      | 297,000     |                      |   |                 |  
|Stock compensation   - financial advisory                                          |  |                      | 65,000      |                      |   |                 |  
|Changes   in Assets and Liabilities:                                               |  |                      |             |                      |   |                  |  
|Accounts   Receivable                                                              |  |                      | (13,590,206 | )                    |   | (9,507,289       | )
|Other Receivables                                                                  |  |                      | 345,184     |                      |   | (393,300         | )
|Notes Receivables                                                                  |  |                      | (1,358,429  | )                    |   | (129,675         | )
|Inventory                                                                          |  |                      | (637,283    | )                    |   | (38,300          | )
|Prepayments                                                                        |  |                      | (397,119    | )                    |   | 1,197,290        |  
|Account Payables                                                                   |  |                      | (970,989    | )                    |   | 4,717,655        |  
|Deposits Received   from Customers                                                 |  |                      | 462,461     |                      |   | 861,624          |  
|Accrued Expenses                                                                   |  |                      | (142,787    | )                    |   | 625,769          |  
|Net Working   Capital from Discontinued Operations                                 |  |                      |            |                      |   | (960,876         | )
|                                                                                   |  |                      |             |                      |   |                  |  
|                                                                                   |  |                      | (8,714,706  | )                    |   | 2,336,592        |  
|Cash Flows from Investing   Activities                                             |  |                      |             |                      |   |                  |  
|Acquisition of   Property and Equipment                                            |  |                      | (2,623,151  | )                    |   | (593,488         | )
|Investments in   Intangible Assets                                                 |  |                      | (1,123      | )                    |   | (28,720          | )
|Investing   activities - Discontinued operations                                   |  |                      |            |                      |   | (16,427          | )
|                                                                                   |  |                      |             |                      |   |                  |  
|                                                                                   |  |                      | (2,624,274  | )                    |   | (638,635         | )
|Cash Flows from Financing   Activities                                             |  |                      |             |                      |   |                  |  
|Proceeds from   (Repayment of) Bank Loans                                          |  |                      | 11,195,799  |                      |   | (968,082         | )
|Financing   Activities - Discontinued Operations                                   |  |                      |            |                      |   |                 |  
|Capital   Contribution  Owners                                                    |  |                      |            |                      |   |                 |  
|                                                                                   |  |                      |             |                      |   |                  |  
|                                                                                   |  |                      | 11,195,799  |                      |   | (968,082         | )
|Effects on changes in   foreign exchange rate                                      |  |                      | 374,437     |                      |   |                 |  
|Net Change in Cash and Cash Equivalents                                            |  |                      | 231,256     |                      |   | 729,875          |  
|Cash and Cash Equivalents- Beginning of   the year                                 |  |                      | 729,875     |                      |   |                 |  
|                                                                                   |  |                      |             |                      |   |                  |  
|Cash and cash Equivalents   - End of the year                                      |  | US$                  | 961,131     |                      |   | 729,875          |  
|                                                                                   |  |                      |             |                      |   |                  |  
|Supplemental Cash Flow   Disclosures:                                              |  |                      |             |                      |   |                  |  
|Interest Paid                                                                      |  | $                    | 513,776     |                      | $ | 287,433          |  
|                                                                                   |  |                      |             |                      |   |                  |  
|Income Taxes Paid                                                                  |  | $                    |            |                      | $ |                 |  
|                                                                                   |  |                      |             |                      |   |                  |  
|Supplemental Disclosures   of Non-Cash Investing and Financing Activities:         |  |                      |             |                      |   |                  |  
|Common stock   Issued in Exchange for Preferred Stock                              |  | $                    |            |                      | $ | 25,908           |  
|                                                                                   |  |                      |             |                      |   |                  |  
|Distribution of   Discontinued Operations                                          |  | $                    |            |                      | $ | (22,775,189      | )
|                                                                                   |  |                      |             |                      |   |                  |  
|Common stock   issued for advisory service                                         |  | $                    | 65,000      |                      | $ |                 |  
|                                                                                   |  |                      |             |                      |   |                  |  
|Common stock   issued to key employees                                             |  | $                    | 297,000     |                      | $ |                 |  
|                                                                                   |  |                      |             |                      |   |                  |  

- 8 -

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|SORL AUTO PARTS, INC. AND   SUBSIDIARIES    
|--------------------------------------------
|NOTES TO CONSOLIDATED   FINANCIAL STATEMENTS
|                                            

|NOTE 1 - | DESCRIPTION OF BUSINESS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | SORL Auto Parts, Inc.  is principally engaged in the manufacture   and distribution of automotive air brake valves and related components for   commercial vehicles weighing more than three tons, such as trucks, and buses,   through its 90% ownership of Ruili Group Ruian Auto Parts Company Limited   (Ruian, or the Company) in the Peoples Republic of China (PRC or China).  The Company distributes products both in   China and internationally under SORL trademarks.  The Companys product range includes 40 categories of brake   valves with over 800 different specifications.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|NOTE 2 - | REORGANIZATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | In March 2004, pursuant to a Joint Venture   Agreement between the Ruili Group Co., Ltd., a PRC corporation (Ruili   Group), and Fairford Holdings, Inc., a Hong Kong Company (Fairford), the   parties formed a sino-foreign joint venture (the Joint Venture) under the   name Ruili Group Ruian Auto Parts Co. Ltd., of which Fairford owned 90% and   the Ruili Group owned 10%.  The   shareholders and their respective equity interests in Fairford and the Ruili   Group were identical.  In connection   with its formation, the Joint Venture acquired the business segment of the   Ruili Group relating to the manufacture and sale of various kinds of valves   for automotive brake systems and related operations (the Transferred   Business).  This was accomplished by   the transfer from the Ruili Group to Fairford of the relevant assets and   liabilities of the Transferred Business including trade receivables,
inventories, plant and machinery, and the assumption of short and long term   borrowings for a purchase price of $6,390,000.  The consideration was based on a valuation provided by Ruian   Ruiyang Assets Valuation Co., Ltd., an independent PRC valuation firm.  Fairford then transferred these assets and   liabilities to the Joint Venture as consideration for its 90% ownership   interest of the Joint Venture.  The Ruili   Group transferred inventory as its capital contribution for its 10% interest   in the Joint Venture.  The assets and   liabilities transferred to the Joint Venture by Fairford and the Ruili Group   represented all the assets and liabilities of the Transferred Business.  Certain historical information of the   Transferred Business is based on the operation of the Transferred Business   when it was owned by the Ruili Group.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | In May 2004, pursuant to the terms of a   Share Exchange Agreement (the Exchange Agreement) dated as of April 4,   2004, among the Company, Keating Reverse Merger Fund, LLC, Xiao Ping Zhang,   Xiao Feng Zhang and Shuping Chi (collectively, the Sellers); and Fairford,   the Company acquired from the Sellers (the Acquisition) all of the issued and   outstanding equity interests of Fairford (the Fairford Shares).  As consideration for the Fairford Shares,   the Company issued 1,000,000 shares of its Series A Convertible Preferred   Stock, which were convertible into an aggregate of the 194,305,800 shares of   common stock.  The consideration for   the Acquisition was determined through arms length negotiations between the   management and the Fairford Sellers.    As a result of the Acquisition, the Fairford Sellers acquired   approximately 97.5% of the Companys common stock on an as converted
basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | A current report on Form 8-K was filed on   May 24, 2004 to present the financials of the predecessor company (Ruili   Group) for the years ended December 31, 2003 and 2002.  The historical financial statements filed   with the 8-K reflected the assets and liabilities of both the Transferred   Business and the non-transferred business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | Subsequent to the transfer and   reorganization that occurred in March, 2004, the Company began presenting its   financial statements as that of the successor company, being only those   assets, liabilities, results of operations, and cash flows relating to the   Transferred Business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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|         | Prior periods were restated to reflect   comparable prior period results of the Transferred Business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTE 3 - | BASIS OF PRESENTATION OF   THE FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | The financial statements for the year   ended December 31, 2005 and 2004 have been prepared to present the financial   position, results of operations and cash flows of the continuing business of   SORL Auto Parts, Inc (the successors financial statements).  The financial statements reflect the   accounts of the transferred business (as described in the preceding   paragraphs titled REORGANIZATION), from the Ruili Group to the Joint   Venture.                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | The financial statements for the year   ended December 31, 2003 have been restated to present the financial position,   results of operations and cash flows for the transferred business to provide   comparative financial information to that of fiscal 2005 and2004.  The financial statements have been   restated to remove the assets, liabilities and results of operations related   to non-transferred business as described in the preceding paragraphs titled   REORGANIZATION.  The assets,   liabilities and results of operations of the non-transferred business have   been presented as discontinued operations in the accompanying financial   statements. These transactions have been accounted for as a reverse spin-off   in according with EITF 02-11, Accounting for Reverse Spinoffs Followed by a   Recapitalization.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTE 4 - | SUMMARY OF SIGNIFICANT   ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | ACCOUNTING METHOD                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | The Company uses the accrual method of   accounting for financial statement and tax return purposes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | PRINCIPLES OF CONSOLIDATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | The consolidated financial statements   include the accounts of SORL Auto Parts, Inc.  and its majority owned subsidiaries.  All significant intercompany balances and transactions have   been eliminated in the consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | USE OF ESTIMATES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | The preparation of financial statements in   conformity with U.S. generally accepted accounting principles requires   management to make estimates and assumptions that affect the reported amounts   of assets and liabilities and disclosure of contingent assets and liabilities   at the date of the financial statements and the reported amounts of revenues   and expenses during the reporting period.    Management makes its best estimate of the outcome for these items   based on historical trends and other information available when the financial   statements are prepared.  Changes in   estimates are recognized in accordance with the accounting rules for the   estimate, which is typically in the period when new information becomes   available to management.  Actual   results could differ from those estimates.       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | FAIR VALUE OF FINANCIAL   INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | For certain of the Companys financial   instruments, including cash and cash equivalents, trade receivables and   payables, prepaid expenses, deposits and other current assets, short-term bank   borrowings, and other payables and accruals, the carrying amounts approximate   fair values due to their short maturities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | RELATED PARTY   TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | A related party is generally defined as   (i) any person that holds 10% or more of the Companys securities and their   immediate families, (ii) the Companys management, (iii) someone that   directly or indirectly controls, is controlled by or is under common control   with the Company, or (iv) anyone who can significantly influence the   financial and operating decisions of the Company.  A transaction is considered to be a related party transaction   when there is a transfer of resources or obligations between related   parties.  The Companys policy is that   all related party transactions must be in arms length.                                                                                                                                                                                                      

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| | FINANCIAL RISK FACTORS   AND FINANCIAL RISK MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company is exposed to the following   risk factors:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | CASH AND CASH EQUIVALENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The Company considers all highly liquid   instruments purchased with an original maturity of three months or less to be   cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | INVENTORIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Inventories are stated at the lower of   cost or net realizable value, with cost computed on a weighted-average   basis.  Cost includes all costs of   purchase, cost of conversion and other costs incurred in bringing the   inventories to their present location and condition.  Net realizable value is the estimated   selling price in the ordinary course of business less the estimated costs of   completion and the estimated costs necessary to make the sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | PROPERTY, PLANT AND   EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Property, plant and equipment are stated   at cost less accumulated depreciation and impairment losses.  The initial cost of the asset comprises   its purchase price and any directly attributable costs of bringing the asset   to its working condition and location for its intended use.  Depreciation is provided using the   straight-line method over the assets estimated useful life for periods   ranging from five to ten years.    Significant improvements and better7ments are capitalized where it is   probable that the expenditure resulted in an increase in the future economic   benefits expected to be obtained from the use of the asset beyond its   originally assessed standard of performance.    Routine repairs and maintenance are expensed when incurred.  Gains and losses on disposal of fixed   assets are recognized in the income statement based on the net disposal   proceeds less the carrying amount of the assets.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | IMPAIRMENT OF LONG-LIVED   ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Long-lived assets, such as property, plant   and equipment and other non-current assets, including intangible assets, are   reviewed for impairment whenever events or changes in circumstances indicate   that the carrying value of an asset may not be recoverable.  An impairment loss is recognized when the   estimated undiscounted cash flows associated with the asset or group of   assets is less than their carrying value.    If impairment exists, an adjustment is made to write the asset down to   its fair value, and a loss is recorded as the difference between the carrying   value and fair value.  Fair values are   determined based on quoted market values, discounted cash flows or internal   and external appraisals, as applicable.    Assets to be disposed of are carried at the lower of carrying value or   estimated net realizable value.                                                                                

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| | INTANGIBLE ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Intangible assets represent mainly the   patent of technology, plus the computer software.  Intangible assets are measured initially at cost.  Intangible assets are recognized if it is   probable that the future economic benefits that are attributable to the asset   will flow to the enterprise and the cost of the asset can be measured   reliably.  After initial recognition,   intangible assets are measured at cost less any impairment losses.  Intangible assets with definite useful   lives are amortized on a straight-line basis over their useful lives.                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ACCOUNTS RECEIVABLES AND   ALLOWANCE FOR BAD DEBTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | The Company presents accounts receivables,   net of allowances for doubtful accounts and returns, to ensure accounts   receivable are not overstated due to uncollectibility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | During fiscal years ended December 31,   2003 and 2004 the Companys general policy regarding the extension of credit   terms was that invoices were due within 45 - 60 days of shipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Beginning in 2005, in response to changing   economic conditions in China, the Company has modified its collection   policies.  Certain individual   customers or certain classes of customers may have custom payment arrangements   based upon criteria set by management.                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Accounts receivables generated from credit   sales in 2005 have general credit terms of 90 days for domestic aftermarket   customers.  However, the Company has   extended credit terms to certain customers for a period of 1 year or   more.  As of December 31, 2005 and   2004 no customers had balances that are due in more than 1 year and   accordingly all accounts receivable have been classified as current in the   accompanying statements.                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The allowances are calculated based on   detailed review of certain individual customer accounts, historical rates and   an estimation of the overall economic conditions affecting the Companys   customer base.  The Company reviews a   customers credit history before extending credit.  If the financial condition of its customers were to   deteriorate, resulting in an impairment of their ability to make payments,   additional allowances may be required.                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company will write off the   uncollectible receivables once the customers are bankrupt or there is a   remote possibility that the Company will collect the outstanding   balance.  The write-off must be   reported to the local tax authorities and get the official approval from   them.  To date, the Company has not   written off any account receivable.                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | NOTES RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Notes receivable are issued by some   customers to pay certain outstanding receivable balances to the Company with   specific payment terms and definitive due dates.  Notes receivable do not bear interest.                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | REVENUE RECOGNITION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Revenue from the sale of goods is   recognized when the risks and rewards of ownership of the goods have   transferred to the buyer.  Revenue   consists of the invoice value for the sale of goods and services net of   value-added tax (VAT), rebates and discounts and returns.  The Company is subject to the Education   Surtax (levied at 4% of net VAT payable) until August 31, 2005, which is   recorded as deductions from gross sales.    The Company nets sales return in gross revenue, i.e., the revenue   shown in the income statement is the net sales.  Goods are generally only returnable if the product is   defective.

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| | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company accounts for income taxes   under the provision of Statement of Financial Accounting Standards (SFAS   No. 109), Accounting for Income Taxes, whereby deferred income tax assets   and liabilities are computed for differences between the financial statements   and tax bases of assets and liabilities that will result in taxable or   deductible amounts in the future, based on enacted tax laws and rates applicable   to the periods in which the differences are expected to affect  taxable income.  Valuation allowances are established when necessary; to reduce   deferred income tax assets to the amount expected to be realized.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | FOREIGN CURRENCY   TRANSLATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | The Company maintains its books and   accounting records in Renminbi (RMB), the currency of the PRC, The   Companys functional currency is also RMB.    The Company has adopted SFAS 52 in translating financial statement   amounts from RMB to the Companys reporting currency, United States dollars   (US$).  All assets and liabilities   are translated at the current rate.    The shareholders equity accounts are translated at appropriate historical   rate.  Revenue and expenses are   translated at the weighted average rates in effect on the transaction dates.                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Foreign currency gains and losses, if any,   are included in the Consolidated Statements of Income as a component of other   comprehensive income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| | STOCK-BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In December 2004, the Financial Accounting   Standards Board (FASB) issued SFAS No. 123R, Share-Based Payment (SFAS   123R).  SFAS 123R revises FASB   Statement No.  123 Accounting for   Stock-Based Compensation and supersedes APB Opinion No. 25 Accounting for   Stock Issued to Employees.  SFAS 123R   requires all public and non-public companies to measure and recognize   compensation expense for all stock-based payments for services received at   the grant-date fair value, with the cost recognized over the vesting period   (or the requisite service period).    The Company has adopted SFAS 123R as of January 1, 2006.                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The Company expects the adoption of this   standard to have a material effect on its final financial statements, as   discussed in Note 18, the Company has adopted a stock compensation plan which   authorizes the Company to issue up to 1,700,000 shares of common stock over a   10-year period.  The issuance of stock   or granting of options, warrants or other common stock equivalents will   result in a change to income based upon grant date fair value which will be   recognized over the vesting period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | RESEARCH AND DEVELOPMENT   EXPENSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Research and development costs are   classified as general and administrative expenses and are expensed as   incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | SHIPPING AND HANDLING   COSTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Shipping and handling cost are classified   as selling expenses and are expensed as incurred.  Shipping and handling costs amounted to approximately   $1,150,000, $638,000, and $470,000 for the years ended December 31, 2005,   2004 and 2003, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ADVERTISING COSTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Advertising costs are classified as   selling expenses and are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | WARRANTY CLAIMS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The Company offers product warranties for   certain products.  Warranty claims are   classified as selling expenses and are expensed as incurred.  The Company accrues the costs of unsettled   product warranty claims based on the historical claims made in previous   years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | PURCHASE DISCOUNTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Purchase discounts, if applicable, are   netted in the cost of goods sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | LEASE COMMITMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company has adopted SFAS No. 13,   Accounting for Leases.  If the lease   terms meet one or all of the following four criteria, it will be classified   as a capital lease, otherwise, it is an operating lease: (1) The lease   transfers the title to the lessee at the end of the term; (2) the lease   contains a bargain purchase option; (3) the lease term is equal to 75% of the   estimated economic life of the leased property or more; (4) the present value   of the minimum lease payment in the term equals or exceeds 90% of the fair   value of the leased property.  The   current lease agreement with Ruili Group Co.    Ltd.  does not meet any of the   above criteria, so it is classified and recorded as an operating lease.                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | RECENTLY ISSUED   ACCOUNTING STANDARDS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | In January 2003, and subsequently revised   in December 2003, the FASB issued Interpretation No. 46 Consolidation of   Variable Interest Entities, an Interpretation of ARB No.  51 (FIN 46).  FIN 46 requires certain variable interest entities to be   consolidated by the primary beneficiary of the entity if the equity investors   in the entity do not have the characteristics of a controlling financial   interest or do not have sufficient equity at risk for the entity to finance   its activities without additional subordinated financial support from other   parties.  FIN 46 is effective for all   new variable interest entities created or acquired after January 31,   2003.  For variable interest entities   created or acquired prior to February 1, 2003, the provisions of FIN 46 must   be applied for the first interim or annual period beginning after June 15,   2003.  FIN 46 does not have any impact   on the financial position or
results of operations of the Company.

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| | In April 2003, the FASB issued SFAS No.   149, Accounting for Amendment of statement 133 on Derivative Instruments and   Hedging Activities, which amends and clarifies financial accounting and   reporting for derivative instruments, including  certain derivative instruments embedded in other contracts and for   hedging  activities under FASB   Statement No. 133, Accounting for Derivative Instruments and Hedging   Activities.  This Statement is   generally effective for contracts entered into or modified after June 30,   2003, and all provisions should be applied prospectively.  This statement does not affect the   Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In May 2003, the FASB issued SFAS No. 150,   Accounting for Certain Financial Instruments with Characteristics of both   Liabilities and Equity, which establishes standards for how an issuer classifies   and measures certain financial instruments with characteristics of both   liabilities and equity.  It requires   that an issuer classify a financial instrument that is within its scope as a   liability (or an asset in some circumstances).  This Statement is effective for financial instruments entered   into or modified after May 31, 2003, and otherwise is effective at the   beginning of the first interim period beginning after June 15,   2003.  It is to be implemented by   reporting the cumulative effect of a change in an accounting principle for   financial instruments created before the issuance date of the Statement and   still existing at the beginning of the interim period of adoption.  Restatement is not
permitted.  This statement does not affect the   Company.                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In November 2004, the FASB issued SFAS No.   151 Inventory Costs - an amendment of ARB No. 43, Chapter 4 (SFAS   151).  This statement amends the   guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the   accounting for abnormal amounts of idle facility expense, freight, handling   costs, and wasted material (spoilage).    SFAS 151 requires that those items be recognized as current-period   charges.  In addition, this Statement   requires that allocation of fixed production overheads to costs of conversion   be based upon the normal capacity of the production facilities.  The provisions of SFAS 151 are effective   for fiscal years beginning after June 15, 2005.  As such, the Company is required to adopt these provisions at   the beginning of the fiscal year ended December 31, 2006.  The Company is currently evaluating the   impact of SFAS 151 on its consolidated financial
statements.                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In December 2004, the FASB issued SFAS No.   152 Accounting for Real Estate Time-Sharing Transactions - an amendment of   FASB Statements No. 66 and 67 (SFAS 152).    This statement amends FASB Statement No. 66 Accounting for Sales of   Real Estate to reference the financial accounting and reporting guidance for   real estate time-sharing transactions that is provided in AICPA Statement of   Position 04-2 Accounting for Real Estate Time-Sharing Transactions (SOP   04-2).  SFAS 152 also amends FASB   Statement No.  67 Accounting for   Costs and Initial Rental operations of Real Estate Projects to state that   the guidance for incidental operations and costs incurred to sell real estate   projects does not apply to real estate time-sharing transactions, with the   accounting for those operations and costs being subject to the guidance in   SOP 04-2.  The provisions of SFAS
152   are effective in fiscal years beginning after June 15, 2005.  As such, the Company is required to adopt   these provisions at the beginning of the fiscal year ended December 31,   2006.  The Company is currently   evaluating the impact of SFAS 152 on its consolidated financial statements.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In December 2004, the FASB issued SFAS No.   153, Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29   (SFAS 153).  SFAS 153 replaces the   exception from fair value measurement in APB Opinion No. 29 for nonmonetary   exchanges of similar productive assets with a general exception from fair   value measurement for exchanges of nonmonetary assets that do not have   commercial substance.  A nonmonetary   exchange has commercial substance if the future cash flows of the entity are   expected to change significantly as a result of the exchange.  SFAS 153 is effective for all interim   periods beginning after June 15, 2005.    As such, the Company is required to adopt these provisions at the   beginning of the fiscal quarter ended September 30, 2005.  This statement has had no effect on the   Company.                                                                                                                                                                                                                                                                                                                                                                          

- 15 -

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|         | In March 2005, the FASB issued   Interpretation No. 47, Accounting for Conditional Asset Retirement   Obligations - an interpretation of FASB Statement No. 143 (FIN 47).  FIN 47 clarifies that the term conditional   asset retirement obligation refers to a legal obligation to perform and asset   retirement activity in which the timing and (or) method of settlement are   conditional on a future event that may or may not be within the control of   the entity.  Accordingly, an entity is   required to recognize a liability for the fair value of a conditional asset   retirement obligation if the fair value of the liability can be reasonably   estimated.  FIN 47 is effective for   fiscal years that end after December 15, 2005.  As such, the Company is required to adopt these provisions for   the fiscal year ended December 31, 2005.    This statement has had no effect on the Company.
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | In May 2005, the FASB issued SFAS No. 154,   Accounting Changes and Error Corrections - a replacement of APB Opinion No.   20 and FASB Statement No. 3 (SFAS 154).    SFAS 154 changes the requirements for the accounting for and reporting   of a change in accounting principle.    These requirements apply to all voluntary changes and changes required   by an accounting pronouncement in the unusual instance that the pronouncement   does not include specific transition provisions.  SFAS 154 is effective for fiscal years beginning after December   15, 2005.  As such, the Company is   required to adopt these provisions at the beginning of the fiscal year ended   December 31, 2006.  The Company is   currently evaluating the impact of SFAS 154 on its consolidated financial   statements.                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | In February 2006, the FASB issued SFAS No.   155, Accounting for Certain Hybrid Financial Instruments - an amendment of   FASB Statement No. 133 and 140 (SFAS 155).  SFAS 155 resolves issues addressed in Statement 133   Implementation Issue No. D1, Application of Statement 133 to Beneficial   Interests in Securitized Financial Assets.    SFAS 155 is effective for all financial instruments acquired or issued   after the beginning of the first fiscal year that begins after   September 15, 2006.  As such, the   Company is required to adopt these provisions at the beginning of the fiscal   year ended December 31, 2007.  The   Company is currently evaluating the impact of SFAS 155 on its consolidated   financial statements.                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|NOTE 5 - | RELATED PARTY   TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | The Company continued to purchase   non-valve automotive components, raw materials and packaging materials from   the Ruili Group Co., Ltd., which is the minority shareholder of the JV, and   also has the common controlling party, i.e.    the Zhang family; as well as some non-valve parts from Ruian Ruili   Haizhiguan Auto Part Co., Ltd., a subsidiary of Ruili Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | The following related party transactions   occurred for the fiscal year ended December 31, 2005, 2004 and 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                           |  | December 31, |           
|------------------------------------------ |  | ------------ | ----------
|                                           |  |              |           
|                                           |  | 2005         |           
|                                           |  |              |           
|PURCHASES FROM:                            |  |              |           
|Ruili Group Co., Ltd.                      |  | $            | 16,780,670
|Ruian Ruili Haizhiguan Auto Part Co., Ltd. |  |              | 283,024   
|Total Purchases                            |  | $            | 17,063,694
|                                           |  |              |           
|SALES TO:                                  |  |              |           
|Ruili Group Co., Ltd.                      |  | $            | 4,471,022 
|Total Sales                                |  | $            | 4,471,022 
|                                           |  |              |           

- 16 -

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| | The total purchases from Ruili Group in   2005 consisted of $15.2 million finished products of non-valve auto parts,   $0.3 million raw materials, and $1.2 million packaging materials.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ACCOUNTS PAYABLE AND OTHER   PAYABLES                |  |   |           |  |   |           |  |  |   | 
|---------------------------------------------------- |  | - | --------- |  | - | --------- |  |  | - | 
|                                                     |  |   |           |  |   |           |  |  |   | 
|Ruili Group Co., Ltd.                                |  | $ | 1,060,193 |  | $ | 2,239,054 |  |  |  | 
|Ruian Ruili Haizhiguan Auto Part Co., Ltd.           |  |   |          |  |   | 11,862    |  |  |  | 
|Xiaofeng Zhang, Board Director                       |  |   |          |  |   | 265,701   |  |  |  | 
|Shuping Chi                                          |  |   | 273,559   |  |   |          |  |  |  | 
|Total Related Parties included in Accounts   Payable |  |   | 1,333,752 |  |   | 2,516,617 |  |  |  | 
|                                                     |  |   |           |  |   |           |  |  |   | 

|         | There were no related party transactions   for the fiscal year ended December 31, 2003.                      
|-------- | -------------------------------------------------------------------------------------------------------------
|         |                                                                                                              
|NOTE 6 - | ACCOUNTS RECEIVABLE                                                                                          
|         |                                                                                                              
|         | The changes in the allowance for doubtful   accounts at December 31, 2005 and 2004 are summarized as follows:

|                           |  | 2005 |         | 2004 |  
|-------------------------- |  | ---- | ------- | ---- | -
|                           |  |      |         |      |  
|Beginning balance          |  | $    | 68,384  |      | $
|Add: Increase to allowance |  |      | 846,337 |      |  
|Less: Accounts written off |  |      |        |      |  
|                           |  |      |         |      |  
|Ending balance             |  | $    | 914,721 |      | $
|                           |  |      |         |      |  

| | The companys receivables are summarized   as follows:
| | ------------------------------------------------------

|                                      |  | 2005 |            | 2004 |  
|------------------------------------- |  | ---- | ---------- | ---- | -
|                                      |  |      |            |      |  
|Balance before allowance              |  | $    | 26,254,495 |      | $
|Less: Allowance for doubtful accounts |  |      | (914,721   | )    |  
|                                      |  |      |            |      |  
|Account receivable balance, net       |  | $    | 25,339,774 |      | $
|                                      |  |      |            |      |  

|NOTE 7 - | INVENTORIES                                                           
|-------- | ----------------------------------------------------------------------
|         |                                                                       
|         | On December 31, 2005 and 2004, inventories   consist of the following:

|                |  | 2005 |           | 2004 |  
|--------------- |  | ---- | --------- | ---- | -
|                |  |      |           |      |  
|Raw Material    |  | $    | 747,858   |      | $
|Work in process |  |      | 1,057,740 |      |  
|Finished Goods  |  |      | 706,985   |      |  
|                |  |      |           |      |  
|Total Inventory |  | $    | 2,512,583 |      | $
|                |  |      |           |      |  

- 17 -

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|NOTE 8 - | PROPERTY, PLANT AND   EQUIPMENT                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|         |                                                                                                 
|         | Property, plant and equipment consisted of   the following, on December 31, 2005, 2004 and 2003:

|                                  |  | 2005 |            | 2004 |   | 2003       |  
|--------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                  |  |      |            |      |   |            |  
|Machinery                         |  | $    | 8,706,639  |      | $ | 6,361,447  |  
|Molds                             |  |      | 1,080,291  |      |   | 1,015,016  |  
|Office equipment                  |  |      | 185,088    |      |   | 42,755     |  
|Vehicle                           |  |      | 169,529    |      |   | 98,578     |  
|                                  |  |      |            |      |   |            |  
|Sub-Total                         |  |      | 10,140,947 |      |   | 7,517,796  |  
|Less:    Accumulated depreciation |  |      | (3,024,281 | )    |   | (2,165,142 | )
|                                  |  |      |            |      |   |            |  
|Fixed Assets, net                 |  | $    | 7,116,666  |      | $ | 5,352,654  |  
|                                  |  |      |            |      |   |            |  

|         | Depreciation expense charged to operations   was $859,139, $535,620, and $1,798,000 (rounded) for the years ended December   31, 2005, 2004, and 2003, respectively.                                                                                                                                                                                                                                                                                    
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|NOTE 9 - | INTANGIBLE ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | Gross intangible assets were $44,297, less   accumulated amortization of $11,873 for net intangible assets of $32,424 as   of December 31, 2005.  Gross   intangible assets were $43,174, less accumulated amortization of $4,454 for   net intangible assets of $38,720 as of December 31, 2004 and $0 as of   December 31, 2003.  Amortization   expenses were $7,419 and $4,454 for the fiscal years ended December 31, 2005   and 2004 respectively.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | Future estimated amortization expense is   as follows:                                                                                                                                                                                                                                                                                                                                                                                                  

|  | 2006  |  |   | 2007  |  |   | 2008  |  |   | 2009  |  |   | 2010  |  |   | Thereafter | 
|- | ----- |  | - | ----- |  | - | ----- |  | - | ----- |  | - | ----- |  | - | ---------- | 
|  |       |  |   |       |  |   |       |  |   |       |  |   |       |  |   |            | 
|$ | 5,076 |  | $ | 3,617 |  | $ | 3,617 |  | $ | 3,617 |  | $ | 3,617 |  | $ | 12,880     | 

|NOTE 10 - | PREPAYMENT                                                               
|--------- | -------------------------------------------------------------------------
|          |                                                                          
|          | Prepayment consisted of the following as   of December 31, 2005 and 2004:

|                       |  | 2005 |           | 2004 |  
|---------------------- |  | ---- | --------- | ---- | -
|                       |  |      |           |      |  
|Raw material suppliers |  | $    | 1,584,193 |      | $
|Equipment purchase     |  |      | 217,637   |      |  
|Total prepayment       |  | $    | 1,801,829 |      | $
|                       |  |      |           |      |  

|NOTE 11 - | ACCRUED EXPENSES                                                               
|--------- | -------------------------------------------------------------------------------
|          |                                                                                
|          | Accrued expenses consisted of the   following as of December 31, 2005 and 2004:

|                         |  | 2005 |         | 2004 |  
|------------------------ |  | ---- | ------- | ---- | -
|                         |  |      |         |      |  
|Accrued payroll          |  | $    | 297,928 |      | $
|Accrued rent             |  |      |        |      |  
|Accrued legal            |  |      |        |      |  
|Other accrued expenses   |  |      | 185,054 |      |  
|                         |  |      |         |      |  
|Total accrued   expenses |  | $    | 482,982 |      | $
|                         |  |      |         |      |  

|NOTE 12 - | BANK BORROWINGS                                             
|--------- | ------------------------------------------------------------
|          |                                                             
|          | Bank borrowings represent the following as   of December 31:

- 18 -

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|                      |  | 2005 |            | 2004 | 
|--------------------- |  | ---- | ---------- | ---- | 
|                      |  |      |            |      | 
|Secured               |  |      | 16,026,717 |      | 
|                      |  |      |            |      | 
|Less: Current portion |  |      | 16,026,717 |      | 
|                      |  |      |            |      | 
|Non-current portion   |  |      |           |      | 
|                      |  |      |            |      | 

|          | These loans were from two banks, Bank of   China and CITIC Bank, to finance the general working capital as well as   urgent new equipment acquisition. Corporate or personal guarantees are provided   for those bank loans as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|          | $10.25M                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|          | $2.43M                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          | $3.35M                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|          | The Company does not provide any sort of   guarantee to any other parties. Interest rates for the loans ranged between   4.964% and 6.003% per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NOTE 13 - | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|          | The Company is registered in the PRC, and   is therefore subject to provincial and local income taxes within the PRC at   the applicable tax rate on the taxable income as reported in the PRC   statutory financial statements in accordance with relevant income tax laws.  According to applicable tax laws regarding   Sino-Foreign Joint Venture Manufacturers, the Company is exempted from income   taxes in the PRC for the fiscal years ended December 31, 2005 and 2004.  Thereafter, the Company is entitled to a   tax concession of 50% of the applicable income tax rate of 26.4%, for the   following three years ended December 31, 2006, 2007, and 2008.
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|          | Had the Company not been entitled to the   tax holiday, income tax expense computed for the years ended December 31,   2005 and 2004 would have been approximately $1,395,000 and $1,269,000   respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|          | Provision for income taxes consists of the   following for the year ended December 31, 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|(In Thousands)     |  |   |     | 
|------------------ |  | - | --- | 
|                   |  |   |     | 
|Income tax expense |  |   |     | 
|Current year       |  | $ | 444 | 
|Prior year         |  |   | 102 | 
|                   |  |   |     | 
|Total              |  | $ | 546 | 
|                   |  |   |     | 

| | The reconciliation of the applicable tax   rate to the effective tax rate is as follows:
| | ----------------------------------------------------------------------------------------

|(In Thousands)                                                    |  |   |      |  
|----------------------------------------------------------------- |  | - | ---- | -
|                                                                  |  |   |      |  
|Expected PRC income tax charge at   Statutory tax rate of 33% (i) |  |   | 619  |  
|Non-taxable income (ii)                                           |  |   | (201 | )
|Non-deductible expenses                                           |  |   | 26   |  
|                                                                  |  |   |      |  
|Current year income tax expense                                   |  | $ | 444  |  
|                                                                  |  |   |      |  

- 19 -

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| |     
| | ----
| | (i) 
| |     
| | (ii)

|          | No provision for deferred tax liabilities   has been made, since the Company had no material temporary differences   between the tax bases of assets and liabilities and their carrying amounts.                                                                                                                           
|--------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                            
|NOTE 14 - | LEASES                                                                                                                                                                                                                                                                                                                     
|          |                                                                                                                                                                                                                                                                                                                            
|          | The Company has a lease agreement with   Ruili Group Co., Ltd., a related party, for the rental of a manufacturing   plant.  The lease is for a ten year   term ending in February 2014.  Rent   expense for the fiscal years ended December 31, 2005, 2004, and 2003 was   $439,009, $439,009, and $365,840, respectively.
|          |                                                                                                                                                                                                                                                                                                                            
|          | Future minimum rental payments for the   years ended December 31 are as follows:                                                                                                                                                                                                                                           

|  | 2006    |  |   | 2007    |  |   | 2008    |  |   | 2009    |  |   | 2010    |  |   | Thereafter |  |   | Total     | 
|- | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ---------- |  | - | --------- | 
|  |         |  |   |         |  |   |         |  |   |         |  |   |         |  |   |            |  |   |           | 
|$ | 439,540 |  | $ | 439,540 |  | $ | 439,540 |  | $ | 439,540 |  | $ | 439,540 |  | $ | 1,321,620  |  | $ | 3,519,320 | 

|NOTE 15 - | ADVERTISING COSTS                                                                                                                                                                                                        
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                          
|          | Advertising costs are expensed as incurred   and are classified as selling expenses.    Advertising costs were $19,622, $1,661, and $8,069, for the fiscal   years ended December 31, 2005, 2004, and 2003, respectively.
|          |                                                                                                                                                                                                                          
|NOTE 16 - | RESEARCH AND DEVELOPMENT   EXPENSES                                                                                                                                                                                      
|          |                                                                                                                                                                                                                          
|          | Research and development costs are   expensed as incurred and were $361,503, $79,962, and $55,784, for the fiscal   years ended December 31, 2005, 2004, and 2003, respectively.                                         
|          |                                                                                                                                                                                                                          
|NOTE 17 - | WARRANTY CLAIMS                                                                                                                                                                                                          
|          |                                                                                                                                                                                                                          
|          | Warranty claims were $778,763, $205,314   and $112,063 for the fiscal years ended on December 31, 2005, 2004 and 2003   respectively. The movement of accrued warranty expenses for fiscal year 2005   is as follows:    

| | Accrued in 2005:           | $   778,763 |   | 
| | -------------------------- | ----------- | - | 
| | Less: Actual Paid in 2005: | $  (598,831 | ) | 
| | Ending balance at 2005:    | $   179,932 |   | 

|NOTE 18 - | STOCK COMPENSATION PLAN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|          | The Company established a stock   compensation plan in October 2005 for the purpose of enhancing its ability to   attract, retain and provide incentives to directors, officers, employees and   independent contractors who are crucial to the future growth and success of   the Company.  The plan outlined that   over the next ten years the Company will issue approximately 1,700,000 common   shares to qualified directors, officers, employees and independent   contractors.  During 2005 the Company   issued 49,500 shares of common stock to employees valued at $6 per share   resulting in a change to income of $297,000.    The value of the stock issued was determined by using the approximate   quoted market price of the stock at the date of issuance.  The above issuance did not result in any   cash outflows to the Company.

- 20 -

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|          | Additionally, the Company issued 10,000   shares of common stock to consultants valued at $6.50 per share resulting in   a change to income of $65,000.  During   2005, the value of the stock issued was determined by using the approximated   quoted market price at the date of issuance.    The above issuance did not result in any cash outflows to the Company.                                                                                                                                                                 
|--------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|          | No stock options, warrants or similar   stock equivalent instruments were issued during 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|NOTE 19 - | SUBSEQUENT EVENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|          | On January 5, 2006, the Company signed the   Financial Advisory Agreement with Maxim Group LLC (Maxim) and Chardan   Capital Markets, LLC (Chardan) to provide general financial advisory and   investment banking services to the Company on an exclusive basis for a period   of twelve months.                                                                                                                                                                                                                                   
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|          | Effective February 2006, the Company shall   pay to Maxim and Chardan (i) a monthly retainer of $5,000 at the beginning of   each month for the term of this Agreement and (ii) issue to Maxim and Chardan   a warrant (Warrant) to purchase 100,000 shares of the Companys common   stock.  The Warrant shall be   exercisable at any time during the four-year period commencing on the date   thereof at an exercise price of $6.25 per share.                                                                                    
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|          | On March 1, 2006, the Company resolved to   issue 60,000 options with an exercise price of $4.79 per share and three-year   validity to the four independent directors under the 2005 Stock Compensation   Plan.  These options will be vested 3   years after date of grant.                                                                                                                                                                                                                                                           
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|NOTE 20 - | RESTATEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|          | The accompanying financial statements for   the years ended December 31, 2005 and 2004 have been restated to present   changes in cash flows from notes receivable arising from trade customers as a   component of operating cash flows rather than investing cash flows as   previously reported.  The restatement   affected the statements of cash flows only for 2005 and 2004.  The restatement had no impact on income   from continuing operations, net income, earnings per share (basic or diluted)   or stockholders equity.

- 21 -

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ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

|EXHIBIT NO. |  | DOCUMENT DESCRIPTION                                                                                                                                                
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                     
|3.1         |  | Articles of Incorporation (1)                                                                                                                                       
|            |  |                                                                                                                                                                     
|3.2         |  | Bylaws (1)                                                                                                                                                          
|            |  |                                                                                                                                                                     
|10.1        |  | Share Exchange Agreement and Plan of Reorganization (2)                                                                                                             
|            |  |                                                                                                                                                                     
|10.2        |  | Joint Venture Agreement (3)                                                                                                                                         
|            |  |                                                                                                                                                                     
|10.3        |  | 2005 Stock Compensation Plan (3)                                                                                                                                    
|            |  |                                                                                                                                                                     
|23.1        |  | Consent of Rotenberg & Co., llp                                                                                                                                     
|            |  |                                                                                                                                                                     
|23.2        |  | Consent of Clancy and Co., PLLC                                                                                                                                     
|            |  |                                                                                                                                                                     
|31.1        |  | Certification of Principal Executive Officer pursuant to Rule 13a-14   and Rule 15d-14(a), promulgated under the Securities and Exchange Act of   1934, as amended. 
|            |  |                                                                                                                                                                     
|31.2        |  | Certification of Principal Financial Officer pursuant to Rule 13a-14   and Rule 15d-14(a),  promulgated under   the Securities and Exchange Act of 1934, as amended.
|            |  |                                                                                                                                                                     
|32.1        |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted   pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief   Executive Officer).               
|            |  |                                                                                                                                                                     
|32.2        |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted   pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 (Chief Financial Officer).                

|   
|---
|(1)
|   
|(2)
|   
|(3)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Amendment to report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 15th day of August 2006.

| | SORL AUTO PARTS, INC.
| | ---------------------
| |                      
| |                      
| | By:                  
| |                      
| |                      
| |                      

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