**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-QSB**


**(Amendment
        No. 1)**





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




For
      the quarterly period ended March 31, 2006





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





For
      the transition period from ________ to ________


Commission
      file number  000-51006





**HARBIN
      ELECTRIC, INC.**


(Exact
      name of small business issuer as specified in its charter)





Nevada
            98-0403396(State
                or other jurisdiction of incorporation)
            (IRS
                Employer Identification No.)





No.
                9 Ha Ping Xi Lu, Ha Ping Lu Ji Zhong Qu
              Harbin
                Kai Fa Qu, Harbin, People’s Republic of China 150060(Address
                of principal executive offices)





(215)
      854-8104


(Issuer’s
      telephone number)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or 15(d) of the Securities Exchange Act of 1934, 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 whether the registrant is a shell company (as
      defined in Rule 12b-2 of the Exchange Act). Yes o No x




**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**


**PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS**




Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after
      the distribution of securities under a plan confirmed by a court. Yes o No o




**APPLICABLE
      ONLY TO CORPORATE ISSUERS**




State
        the
        number of shares outstanding of each of the issuer’s classes of common equity,
        as of July 13,
        2006: 16,600,451 shares of common stock, par value $0.00001 per
        share.




Transitional
      Small Business Disclosure Format (Check one): Yes o No x





**Table
      of Contents**




**Page**




**Part
                  I. Financial Information****Item
                  1. Financial Statements (Unaudited)**
              **1****Consolidated
                  Balance Sheet (Unaudited) as of March 31, 2006**
              **1****Consolidated
                  Statements of Operations (Unaudited)****For
                  the Three Months Ended March 31, 2006 and 2005**
              **2****Consolidated
                  Statements of Cash Flows****For
                  the Three Months Ended March 31, 2006 and 2005**
              **3****Consolidated
                  Statements of Stockholders’ Equity****For
                  the Three Months Ended March 31, 2006**
              **4****Notes
                  to the Consolidated Financial Statements**
              **6****Item
                  1A. Risk Factors**
              **17****Item
                  2. Management’s Discussion and Analysis or Plan of
                  Operation**
              **22****Item
                  3. Controls and Procedures**
              **26****Part
                  II. Other Information****Item
                  1. Legal Proceedings.**
              **26****Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds.**
              **26****Item
                  3. Defaults upon Senior Securities.**
              **26****Item
                  4. Submission of Matters to a Vote of Securities
                  Holders.**
              **26****Item
                  5. Other Information.**
              **26****Item
                  6. Exhibits.**
              **27****Signatures**
              **28****Index
                  to Exhibits**
              **29**










**PART
      I. FINANCIAL INFORMATION**




**Item
      1. Financial Statements**




**HARBIN
      ELECTRIC, INC. & SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET**


**(UNAUDITED)**




**ASSETS**
            
            **AS
                OF MARCH 31, 2006**CURRENT
                ASSETS:Cash
                & cash equivalents
            
            $
            9,042,762Accounts
                receivable, net of allowance for uncollectible accounts of
                $30,000
            
            
            7,944,125Inventory
            
            
            607,174Advances
                to suppliers
            
            
            3,209,657Other
                assets
            
            
            732Total
                current assets
            
            
            20,804,451PROPERTY
                AND EQUIPMENT, net
            
            
            7,778,662INTANGIBLE
                ASSETS, net
            
            
            321,281TOTAL
                ASSETS
            
            $
            28,904,394**LIABILITIES
                AND STOCKHOLDERS' EQUITY**CURRENT
                LIABILITIES:Accrued
                expenses
            
            $
            539,406STOCKHOLDERS'
                EQUITYCommon
                stock, $0.00001 par value; authorized shares 100,000,000;issued
                and outstanding 16,600,451 shares
            
            
            166Additional
                paid in capital
            
            
            11,610,676Statutory
                reserves
            
            
            2,415,898Accumulated
                other comprehensive income
            
            
            652,038Retained
                earnings
            
            
            13,686,210Total
                stockholders' equity
            
            
            28,364,988TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            28,904,394




The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements.


-1-




**HARBIN
      ELECTRIC, INC. & SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**





**For
                  The Three Months Ended****March
                  31, 2006**
              
              **March
                  31, 2005**Net
                  revenue
              
              $
              8,878,658
              
              $
              4,128,297Cost
                  of revenue
              
              
              4,604,923
              
              
              2,078,060Gross
                  profit
              
              
              4,273,736
              
              
              2,050,237Operating
                  expenses:Selling
                  expenses
              
              
              208,007
              
              
              106,588General
                  and administrative expenses
              
              
              908,758
              
              
              251,700Total
                  operating expenses
              
              
              1,116,765
              
              
              358,288Income
                  from operations
              
              
              3,156,971
              
              
              1,691,948Non-operating
                  IncomeRealized
                  gain on sale of marketable securities
              
              
              571,143
              
              
              -Other
                  income
              
              
              54,062
              
              
              -Interest
                  income
              
              
              12,321
              
              
              294Net
                  income
              
              
              3,794,497
              
              
              1,692,242Other
                  comprehensive item:Unrealized
                  gain on marketable securities
              
              
              -
              
              
              14,000Reclassification
                  adjustment for gains on sale of marketable securities
              
              
              (587,171
              )
              
              -Comprehensive
                  Income
              
              $
              3,207,326
              
              $
              1,706,242Basic
                  weighted average shares outstanding
              
              
              16,600,451
              
              
              15,000,450Basic
                  net earnings per share
              
              $
              0.23
              
              $
              0.11Diluted
                  weighted average shares outstanding
              
              
              16,700,451
              
              
              15,100,450Diluted
                  net earnings per share
              
              $
              0.23
              
              $
              0.11





The
      accompanying notes are an integral part of these consolidated financial
      statements.


-2-




**HARBIN
      ELECTRIC, INC. & SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**For
                  The Three Months Ended****MARCH
                  31, 2006**
              
              **MARCH
                  31, 2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              3,794,497
              
              $
              1,692,242Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Depreciation
              
              
              68,854
              
              
              29,471Stock
                  based compensation
              
              
              313,000
              
              
              -(Increase)
                  decrease in current assets:Accounts
                  receivable
              
              
              (2,054,991
              )
              
              (819,162
              )Inventory
              
              
              741,419
              
              
              189,373Advances
                  to suppliers
              
              
              (447,757
              )
              
              (545,086
              )Advances
                  to related parties
              
              
              -
              
              
              71,283Other
                  assets
              
              
              3,377
              
              
              (161,237
              )Increase
                  in current liabilities:Accrued
                  expenses
              
              
              344,487
              
              
              91,874Net
                  cash provided by operating activities
              
              
              2,762,887
              
              
              548,758CASH
                  FLOWS FROM INVESTING ACTIVITIESProceeds
                  from sale of marketable securities
              
              
              1,093,166
              
              
              -Acquisition
                  of intangible assets
              
              
              -
              
              
              (266,200
              )Acquisition
                  on property & equipment
              
              
              (65,203
              )
              
              (131,600
              )Net
                  cash provided by (used in) investing activities
              
              
              1,027,963
              
              
              (397,800
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Increase
                  in subscription Receivable
              
              
              -
              
              
              (125,859
              )Net
                  cash provided by (used in) financing activities
              
              
              -
              
              
              (125,859
              )EFFECT
                  OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS
              
              
              (487,107
              )
              
              -NET
                  INCREASE IN CASH & CASH EQUIVALENTS
              
              
              3,303,743
              
              
              25,099CASH
                  & CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              5,739,019
              
              
              2,210,803CASH
                  & CASH EQUIVALENTS, END OF PERIOD
              
              $
              9,042,762
              
              $
              2,235,902




The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements.


-3-




**HARBIN
      ELECTRIC, INC. & SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


**FOR
      THE PERIOD ENDED MARCH 31, 2006**




**Common**
              **Stock****Number
                of shares**
            
            **Amount**
            
            **Additional**
              **paid
                in capital**
            
            **Subscription**
              **receivable**
            
            **Shares
                to be**
              **issued**
            
            **Statutory**
              **reserves**
            
            **Other**
              **Comprehensive**
              **income
                (loss)**
            
            **Retained**
              **earnings**
              **(deficit)**
            
            **Total**
              **stockholders’**
              **equity**Balance
                as of December 31, 2003
            
            
            1,357,466
            
            $
            14
            
            $
            725,986
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            (3,880
            )
            $
            722,120Issuance
                of subsidiary’s stock
            
            
            10,642,534
            
            
            106
            
            
            5,771,736
            
            
            (4,862,256
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            909,586Accrued
                interest on subscription receivable
            
            
            —
            
            
            —
            
            
            125,859
            
            
            (125,859
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Unrealized
                loss on investment
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (102,245
            )
            
            —
            
            
            (102,245
            )Net
                income for the year ended December 31, 2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            2,311,333
            
            
            2,311,333Allocation
                to statutory reserves
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            346,700
            
            
            —
            
            
            (346,700
            )
            
            —Balance
                as of December 31, 2004
            
            
            12,000,000
            
            
            120
            
            
            6,623,581
            
            
            (4,988,115
            )
            
            —
            
            
            346,700
            
            
            (102,245
            )
            
            1,960,753
            
            
            3,840,794Recapitalization
                on reverse acquisition
            
            
            3,000,451
            
            
            30
            
            
            (30
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Subscription
                receivable exchange for Property & equipment
            
            
            —
            
            
            —
            
            
            —
            
            
            4,862,256
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            4,862,256Accrued
                interest on subscription receivable
            
            
            —
            
            
            —
            
            
            (125,859
            )
            
            125,859
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Shares
                issued for cash
            
            
            1,600,000
            
            
            16
            
            
            4,799,984
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            4,800,000Allocation
                to statutory reserves
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,500,024
            
            
            —
            
            
            (1,500,024
            )
            
            —Items
                of other comprehensive income:Unrealized
                gain on investment
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            587,171
            
            
            —
            
            
            587,171Foreign
                currency translation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            512,540
            
            
            —
            
            
            512,540Net
                income for the year ended December 31, 2005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            10,000,158
            
            
            10,000,158Balance
                as of December 31, 2005
            
            
            16,600,451
            
            
            166
            
            
            11,297,676
            
            
            —
            
            
            —
            
            
            1,846,724
            
            
            997,466
            
            
            10,460,887
            
            
            24,602,919Allocation
                to statutory reserves
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            569,175
            
            
            —
            
            
            (569,175
            )
            
            —Stock
                option vested
            
            
            
            
            
            —
            
            
            313,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            313,000Unrealized
                gain on investment
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (587,171
            )
            
            —
            
            
            (587,171
            )Foreign
                currency translation
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            241,743
            
            
            —
            
            
            241,743Net
                income for the three-month period ended March 31, 2006
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            3,794,497
            
            
            3,794,497Balance
                as of March 31, 2006
            
            
            16,600,451
            
            $
            166
            
            $
            11,610,676
            
            $
            —
            
            $
            —
            
            $
            2,415,898
            
            $
            652,038
            
            $
            13,686,210
            
            $
            28,364,988





The
      accompanying notes are an integral part of these consolidated financial
      statements.


-4-


**HARBIN
          ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2006**
 (Unaudited)


**1.**
            **ORGANIZATION
                AND DESCRIPTION OF
                BUSINESS**





Harbin
      Tech Full Electric Co., Ltd. (“HTFE”) was incorporated and formerly known as
      Harbin Tech Full Technology Development Co., Ltd. (“HTFTD”). On July 12, 2004,
      the Board of Directors of HTFTD approved to change the name of HTFTD to Harbin
      Tech Full Electric Co., Ltd. HTFE is engaged in the business of manufacturing
      and marketing of Linear Motors and special electric motors. HTFE has domestic
      patents for commercial applications of linear motors.





Tech
      Full
      International, Inc. (“TFI”) was a Delaware corporation, incorporated on August
      24, 2004. TFI was a non-operative holding company of HTFE.





On
      August
      31, 2004, TFI entered into an agreement with all the shareholders of HTFE to
      exchange all of the outstanding stock of TFI for all the outstanding stock
      of
      HTFE. After the consummation of the agreement, the former shareholders of HTFE
      owned 1,500 shares of common stock of TFI, which represented 100% of TFI’s
      issued and outstanding shares. For U.S. Federal income tax purposes, the
      transaction is intended to be qualified as a tax-free transaction under section
      351 of the Internal Revenue Code of 1986, as amended.





The
      exchange of shares between TFI and the shareholders of HTFE has been accounted
      for as a reverse acquisition under the purchase method of accounting since
      the
      shareholders of HTFE obtained control of the consolidated entity. Accordingly,
      the merger of the two companies has been recorded as a recapitalization of
      HTFE,
      with HTFE being treated as the continuing entity.  The historical financial
      statements presented are those of HTFE. The continuing company has retained
      December 31 as its fiscal year end. The financial statements of the legal
      acquirer are not significant; therefore, no pro forma financial information
      is
      submitted.





On
      January 24, 2005, the TFI consummated a merger agreement with Torch Executive
      Services Ltd. (“Torch”), a Nevada corporation, under which Torch issued
      8,000,000 shares of Torch to the shareholders of TFI, and under which TFI merged
      into Torch Subsidiary, Inc., a Delaware corporation (“TSI”) and an acquisition
      subsidiary of Torch, with TSI being the surviving entity. As a part of the
      merger, Torch cancelled 5,000,000 shares of its issued and outstanding stock
      owned by its former president. The exchange of shares with Torch has been
      accounted for as a reverse acquisition under the purchase method of accounting
      since the shareholders of TFI obtained control of Torch. Accordingly, the merger
      of the two companies has been recorded as a recapitalization of TFI, with TFI
      being treated as the continuing entity. The financial statements of legal
      acquiree are not significant; therefore, no pro forma financial information
      is
      submitted.





Torch
      was
      incorporated in the State of Nevada on July 9, 2003. Torch was a development
      stage company in the business of providing luxury travel and concierge services
      on a personalized one-to-one basis as well as through the internet.





As
        a part
        of the merger, Torch was renamed to Harbin Electric, Inc. (the “Company”) and
        the Company declared a stock dividend of one-half share on each share of
        its
        common stock outstanding for all shareholders on record as of January 26,
        2005.
        All per share data including earnings per share has been retroactively restated
        to reflect the stock split.





In
      connection with the transactions described above, the Company changed its fiscal
      year end to December 31.


-5-


**HARBIN
          ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2006**
 (Unaudited)


**Joint
      Venture with Baldor Electric Company**





On
        January 12, 2005, HTFE entered into an agreement with Harbin Tech Full Industry
        Co., Ltd. ("HTFI"), pursuant to which HTFI agreed to transfer all of its
        interests in a joint venture with Baldor Electric Company (“Baldor”) to HTFE. In
        exchange for the transfer of the interests in the joint venture, HTFE agreed
        to
        cause its publicly traded holding company to issue 1,000,000 shares of Harbin
        Electric, Inc.'s common stock to HTFI as a payment for the transfer of the
        joint
        venture interests. On May 12, 2005, HTFE and the Company signed a written
        Consent amending the Share Transfer Agreement whereby HTFE and the Company
        agreed that the Company is to issue 786,885 shares of the Company’s common stock
        for the transfer of HTFE’s interest in the joint venture, as opposed to the
        1,000,000 shares as set forth in the original Share Transfer Agreement dated
        January 12, 2005.





In
      accordance with the Joint Venture Agreement, HTFI has a 65% equity ownership
      in
      the joint venture and Baldor has the remaining 35%. HTFI will receive 55% of
      the
      profits from the joint venture with the remainder of the profits going to
      Baldor. The Chief Executive Officer and Chairman of the Company and the
      Company’s majority shareholder is also the principal owner of HTFI.





Effective
      as of November 20, 2005, HTFI, HTFE and the Company signed a written consent
      to
      terminate the Share Transfer Agreement which was dated as of January 12, 2005,
      and amended and restated as of May 12, 2005. The initial transaction was
      recorded at the carrying value in the books of HTFE in accordance with FAS
      141
      as the transaction was between entities under common control. On termination,
      the joint venture was deconsolidated, the initial transaction was reversed
      and
      no gain or loss was recorded. The joint venture had no operations during the
      year. The shares contemplated in the transaction were never issued.





**2.**
            **BASIS
                OF PRESENTATION**





The
      accompanying unaudited financial statements of the Company have been prepared
      in
      accordance with generally accepted accounting principles for interim financial
      information. Accordingly, they do not include all of the information required
      by
      generally accepted accounting principles for complete financial statements.
      In
      the opinion of management, all adjustments (consisting of normal recurring
      adjustments) considered necessary for a fair presentation have been included.
      Operating results for the interim periods are not necessarily indicative of
      the
      results for any future period. These statements should be read in conjunction
      with the Company's audited financial statements and notes thereto for the fiscal
      year ended December 31, 2005.





**Accounts
      Receivable**





The
      Company’s policy is to maintain reserves for potential credit losses on accounts
      receivable. Management reviews the composition of accounts receivable and
      analyzes historical bad debts, customer concentrations, customer credit
      worthiness, current economic trends and changes in customer payment patterns
      to
      evaluate the adequacy of these reserves. The Company had accounts receivable
      of
      $7,944,125 as of March 31, 2006.





**Advances
      to suppliers**





The
        Company advances to certain vendors for purchase of its material. The advances
        to suppliers amounted to $3,209,657 at March 31, 2006.




-6-


**HARBIN
            ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
            31, 2006**
 (Unaudited)


**Investment
      in marketable securities**





Securities available
          for sale are
          carried at
          fair
          value withunrealized gains
          and
          losses reported
          as other comprehensive income in the stockholders’ equity section of the balance
          sheet. Realized gains and losses on securities available for sale are included
          in other income (expense) and, when applicable, are reported as a
          reclassification adjustment in other comprehensive income. Gains and losses
          on
          the sale of available for sale securities are determined using the specific
          identification method.




The
            total
            proceeds from the sale of marketable security was $1,093,165
            during the period and the realized gain was $571,143.The
            Company determines cost on specific identification method. The reclassification
            adjustment in the statement of operations and comprehensive income relates
            to
            the release of unrealized gain on marketable securities.on the
            marketable securities sold during the period.As
            of
            March 31, 2006, the Company did not have any marketable securities on
            hand.




**Inventory**





Inventory
        consists of raw material for manufacturing the electrical motor, work in
        process
        and finished goods. Inventory is valued at the lower of cost or market. The
        management compares the cost of inventory with the market value and allowance
        is
        made for writing down the inventory to its market value, if lower.





**Income
      Taxes**





The
        Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
        the
        recognition of deferred tax assets and liabilities for the expected future
        tax
        consequences of events that have been included in the financial statements
        or
        tax returns. Under this method, deferred income taxes are recognized for
        the tax
        consequences in future years of differences between the tax bases of assets
        and
        liabilities and their financial reporting amounts at each period end based
        on
        enacted tax laws and statutory tax rates applicable to the periods in which
        the
        differences are expected to affect taxable income. Valuation allowances are
        established, when necessary, to reduce deferred tax assets to the amount
        expected to be realized.




According
      to the Provisional Regulations of the People's Republic of China on Income
      Tax,
      the Document of Reductions and Exemptions of Income Tax for the Company has
      been
      approved by the local tax bureau and the Management Regulation of Harbin
      Economic and Technological Development Zone for the reporting period. The
      Company is exempted from income tax from July 1, 2004 through June 30,
      2006.





*(a)*
              *Fair
                  value of financial
                  instruments*





Statement
      of financial accounting standard No. 107, “Disclosures about Fair Value of
      Financial Instruments,” requires that the Company disclose estimated fair values
      of financial instruments. The carrying amounts reported in the statements of
      financial position for current assets and current liabilities qualifying as
      financial instruments are a reasonable estimate of fair value.





**Foreign
      currency transactions and comprehensive income (loss)**





Assets
      and liabilities in foreign currency are recorded at the balance sheet date
      at
      the rate prevailing on that date. Items of income statement are recorded at
      the
      average exchange rate. Gain or loss on foreign currency transactions are
      reflected on the income statement. Gain or loss on financial statement
      translation from foreign currency are recorded as a separate component in the
      equity section of the balance sheet, as component of comprehensive income.
      The
      functional currency of the Company is Chinese Renminbi.


-7-


**HARBIN
          ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2006**
 (Unaudited)




**Segment
      Reporting**





Statement
        of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About
        Segments of an Enterprise and Related Information" requires use of the
        "management approach" model for segment reporting. The management approach
        model
        is based on the way a company's management organizes segments within the
        Company
        for making operating decisions and assessing performance. Reportable segments
        are based on products and services, geography, legal structure, management
        structure, or any other manner in which management disaggregates a company.





SFAS
      131
      has no effect on the Company's financial statements as substantially all of
      the
      Company's operations are conducted in one industry segment. The Company consists
      of one reportable business segment. All of the Company's assets are located
      in
      People's Republic of China.





**Recent
      Pronouncements**





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006. The Company has not evaluated the impact of this
      pronouncement its financial statements.




In
          March
          2006 FASB issued SFAS 156 ‘Accounting for Servicing of Financial Assets’ this
          Statement amends FASB Statement No. 140, *Accounting
          for Transfers and Servicing of Financial Assets and Extinguishments of
          Liabilities,* with
          respect to the accounting for separately recognized servicing assets and
          servicing liabilities. This Statement:


1.
            Requires
                an entity to recognize a servicing asset or servicing liability each
                time
                it undertakes an obligation to service a financial asset by entering
                into
                a servicing contract.


2.
            Requires
                all separately recognized servicing assets and servicing liabilities
                to be
                initially measured at fair value, if practicable.


3.
            Permits
                an entity to choose ‘Amortization method’ or  Fair value measurement
                method’ for each class of separately recognized servicing assets and
                servicing liabilities:


4.
                At
                    its initial adoption, permits a one-time reclassification of
                    available-for-sale securities to trading securities by entities
                    with
                    recognized servicing rights, without calling into question the
                    treatment
                    of other available-for-sale securities under Statement 115, provided
                    that
                    the available-for-sale securities are identified in some manner
                    as
                    offsetting the entity’s exposure to changes in fair value of servicing
                    assets or servicing liabilities that a service elects to subsequently
                    measure at fair value.


-8-


**HARBIN
          ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2006**
 (Unaudited)


5.
            Requires
                separate presentation of servicing assets and servicing liabilities
                subsequently measured at fair value in the statement of financial
                position
                and additional disclosures for all separately recognized servicing
                assets
                and servicing liabilities.




This
      Statement is effective as of the beginning of the Company’s first fiscal year
      that begins after September 15, 2006. Management believes that this statement
      will not have a significant impact on the consolidated financial
      statements.




**3.**
            **PRINCIPLES
                OF CONSOLIDATION**





The
      accompanying consolidated financial statements include the accounts of the
      Company and its wholly owned subsidiary, HTFE. All significant inter-company
      accounts and transactions have been eliminated in consolidation.





**4.**
            **MAJOR
                CUSTOMERS AND VENDORS**





Three
      major customers accounted for 80% of the net revenue for the three-month period
      ended March 31, 2006. One major customer accounted for 74% of the net revenue
      for the three-month period ended March 31, 2005. As of March 31, 2006, the
      total
      receivable balance due from these three customers was $7,419,460.




Three
        vendors provided 76% of the Company’s purchase of raw materials for the
        three-month period ended March 31, 2006. Three vendors provided 79% of the
        Company's raw materials for the three-month period ended March 31, 2005.
        The
        Company's accounts payable to these vendors was $1,815 as of March 31, 2005.
        The
        Company’s accounts payable to these vendors was $0 as of March 31,
        2006.





The
      Company extends credit to its customers based upon its assessment of their
      credit worthiness and generally does not require collateral. Credit losses
      have
      not been significant.





In
        addition, the Company enters into non-cancelable purchase commitments with
        its
        vendors. As of December 31, 2004, December 31, 2005, and March 31, 2006,
        the
        Company was obligated under the non cancelable commitments to purchase materials
        amounting to $223,000, $793,000, $428,000, respectively.





**5.**
            **INTANGIBLE
                ASSETS**





Intangible
      assets consist of Patents. The Company is amortizing the intangible assets
      over
      3 year period. The Company evaluates intangible assets for impairment, at least
      on an annual basis and whenever events or changes in circumstances indicate
      that
      the carrying value may not be recoverable from its estimated future cash flows.
      Recoverability of intangible assets, other long-lived assets and, goodwill
      is
      measured by comparing their net book value to the related projected undiscounted
      cash flows from these assets, considering a number of factors including past
      operating results, budgets, economic projections, market trends and product
      development cycles. If the net book value of the asset exceeds the related
      undiscounted cash flows, the asset is considered impaired, and a second test
      is
      performed to measure the amount of impairment loss. As of March 31, 2006, no
      impairment of intangible assets has been recorded.









-9-
 
 **HARBIN
              ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
              TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
              31, 2006**
 (Unaudited)


Patents
            
            $
            398,044Less
                Accumulated amortization
            
            
            (76,763
            )$
            321,281





Amortization
        expense for the three-month periods ended March 31, 2005 and March 31, 2006
        amounted to $ 1,412 and $13,781, respectively.





Amortization
      expense for the Company’s current amortizable intangible assets over the next
      five twelve month periods is estimated to be: 2007 -$60,145; 2008 -$60,145;
      2009
      -$60,145; 2010 -$60,145; 2011 -$10,024.





**6.**
            **SHAREHOLDER’S
                EQUITY**





Harbin
      Tech Full Electric Co. Ltd. (“HTFE”) was founded in the People’s Republic of
      China on April 10, 2003. Upon its inception, HTFE issued 6,000,000 shares of
      its
      common stock for $726,000 to four shareholders. On July 12, 2004, HTFE issued
      47,000,000 shares of its common stock for subscription receivable of $5,771,842
      from a related party. Immediately after the issuance, HTFE had 53,000,000 shares
      of stock issued and outstanding. Through December 31, 2004, HTFE had
      subscription receivable $4,862,256 from its shareholders. The Company accrued
      interest at 5.86% on the subscription receivable amounting to $125,859 through
      December 31, 2004. The Company completed the process of acquiring the plant
      facility in exchange of the subscription receivable in the beginning of year
      2005. This transaction was with a company owned by the majority shareholder
      of
      the Company. Because the transfer of assets was between entities under common
      control, the assets were recorded at cost which was the carryover basis in
      the
      books of HTFE.





On
      August
      31, 2004 all shareholders of HTFE entered into an agreement with Tech Full
      International, Inc. (TFI) to exchange all of their outstanding shares of HTFE
      for 1,500 shares of common stock of TFI which constituted 100% of TFI’s issued
      and outstanding shares. After the consummation of the agreement, the former
      shareholders of HTFE owned all outstanding and issued shares of TFI.





On
      January 12, 2005, TFI and its shareholders entered into a merger agreement
      (“Merger Agreement”) with Torch Executive Services, Inc. (Torch) and a wholly
      owned subsidiary of Torch, Torch Subsidiary, Inc. (“TSI”). At the closing which
      occurred on January 24, 2005, TFI was merged with and into TSI and the separate
      existence of TFI ceased. On the date of the merger, there were 7,000,300 shares
      of common stock of Torch outstanding. As a part of the merger, 8,000,000
      restricted shares of Torch were issued to the shareholders of TFI and the former
      president, sole director and majority shareholder of Torch returned 5,000,000
      shares of Torch to the treasury which was subsequently cancelled. After the
      merger, there were 10,000,300 shares of stock of Torch outstanding.





On
        January 24, 2005 the Company declared a stock dividend of one-half share
        for
        each share of its stock outstanding to all stockholders of record as of January
        26, 2005, after the Merger Agreement. The stock dividend was payable on January
        27, 2005. The Company has a total of 16,600,451 shares of common stock
        outstanding as of December 31, 2005.




-10-


**HARBIN
            ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
            31, 2006**
 (Unaudited)


On
        January 12, 2005 HTFE entered into an agreement with related party Harbin
        Tech
        Full Industry Co., Ltd. (“HTFI”), pursuant to which HTFI agreed to transfer all
        of its interests in joint venture with Baldor Electric Company to HTFE in
        exchange for the Company to issue 1,000,000 shares of its common stock to
        HTFI.
        On May 12, 2005, HTFE and the Company signed a written Consent amending the
        Share Transfer Agreement whereby HTFE and the Company agreed that the Company
        is
        to issue 786,885 shares of the Company’s common stock for the transfer of HTFE’s
        interest in the joint venture, as opposed to the 1,000,000 shares as set
        forth
        in the original Share Transfer Agreement dated January 12, 2005. The Company
        allocated 786,885 shares of its common stock for issuance in connection with
        the
        transfer of the joint venture interest. The shares have not been issued as
        of
        December 31, 2005. As the transaction was between entities under common control,
        the transaction was recorded at the historical cost basis The Company issued
        shares at fair value equal to the recorded cost. On November 20 2005, HTFI,
        HTFE
        and the Company signed a written consent to terminate the Share Transfer
        Agreement (see note 1).





On
        August
        31, 2005, Harbin Electric, Inc. entered into Securities Purchase Agreements
        with
        institutional investors and other accredited investors to sell an aggregate
        of
        1,600,000 shares of the Company’s common stock, par value $0.00001 at a price of
        $3.00 per share together with options to purchase an aggregate of 480,000
        shares
        of common stock at $3.50 per share (the "Private Placement"). The Private
        Placement is being entered into pursuant to Regulation D of the Securities
        Act
        of 1933. The options have registration rights, however, there is no penalty
        or
        liquidated damages clause if the Company fails to register the shares upon
        exercise of the options. The Company is not obligated to buy back the options.
        Accordingly, in accordance with EITF 00-19, the options are classified as
        equity. The fair value of the options was calculated using the Black-Scholes
        options pricing model using the following assumptions: Volatality 66%; risk
        free
        interest rate 4.13% and expected term of 5 years.





On
      September 18, 2005, the Company received $4,800,000 from the Private Placement.
      HTFE’s total registered capital as of March 31, 2006 has been increased to
      $11,200,000.





**7.**
            **STOCK-BASED
                COMPENSATION PLAN******





In
        May
        2005, the Board of Directors of the Company adopted and approved the 2005
        Stock Option Plan (the “Plan”) which authorized the issuance of up
        to 1,500,000 shares under the Plan.





On
          January 31, 2005, the Company granted a total of 150,000 stock options
          to
          purchase shares of its common stock to three directors of the Company under
          the
          Company's 2005 Stock Option Plan, pursuant to a written agreement (the
          "Agreement"). The option terminates five (5) years from the date of grant.
          Per
          the Agreement, option shall become exercisable during the term that Optionee
          serves as a Director of the Company as follows: (i) 50% of the shares of
          Stock
          subject to this Option became exercisable immediately as of the date of
          this
          Agreement; and (ii) the balance of the shares of Stock subject to this
          Option
          shall become exercisable in eight (8) equal quarterly installments of three
          thousand one hundred twenty five (3,125) shares of Stock subject to this
          Option,
          the first installment to be exercisable as of the last day of the first
          quarter
          of calendar year 2005, with an additional 3,125 of such Shares becoming
          exercisable as of the last day of each subsequent quarter. The Company
          granted
          to Optionee the right to purchase the number of shares of Stock set forth
          in the
          Agreement, for cash (or other consideration as is authorized under the
          Plan and
          acceptable to the Board of Directors of the Company, in their sole and
          absolute
          discretion) at $3.10 per share (the "Exercise Price"), such price being
          not less
          than eighty-five percent (85%) of the fair market value per share of the
          Shares
          covered by this Option as of the date of the Agreement.




On
        September 26, 2005, the Company granted options (the “Options”) to purchase
        250,000 shares of the Company's common stock (the “Common Stock”) at an exercise
        price $3.93 per share, the closing price on September 23, 2005. One-fifth
        (1/5)
        of the Options (50,000 shares) have been vested immediately. The remaining
        Options shall vest over a 3-year period, with 13.33 % (33,333 shares) vesting
        on
        the 180th day of the Effective Date and the balance vesting thereafter on
        a
        semi-annual basis, proportionately over the course of the following three
        (3)
        years. The options were valued using the Black-Scholes option pricing model
        using the following assumptions: Volatility 66%; risk free interest rate
        4.13%
        and expected term of 3 years.




-11-


**HARBIN
            ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
            31, 2006**
 (Unaudited)


During
      the three months ended March 31, 2006, the Company issued 480,000 options to
      employees and 20,000 options to two directors. The options vest over a period
      of
      three years and have a life of 5 years. The Company recorded $198,000 of
      compensation based on the fair value method under FAS 123R using the following
      assumptions: Volatility of 66%, risk free interest rate of 4.13% , dividend
      yield of 0% and expected life of 5 years. No estimate of forfeitures was made
      as
      the Company has a short history of granting options.




The
          Company adopted SFAS No. 123-R effective January 1, 2006 using the
          modified prospective method. Under this transition method, stock compensation
          expense recognized in the first quarter of 2006 includes compensation expense
          for all stock-based compensation awards granted on or after January 1,2006,
          based on the grant-date fair value estimated in accordance with the provisions
          of SFAS No. 123-R. and the fair value of options granted before
          January 1, 2006 that have vested during the quarter.


Prior
      to January 1, 2006, the Company measured stock compensation expense using
      the intrinsic value method of accounting in accordance with Accounting
      Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
      Employees,” and related interpretations (APB No. 25). Thus, expense was
      generally not recognized for the Company’s employee stock option and purchase
      plans.





**Impact
      of adoption of SFAS No. 123-R in Q1 2006**





Stock
      compensation expense measured in accordance with SFAS No. 123-R totaled
      approximately $313,000 or $ 0.02 per basic and diluted share in the first
      quarter of 2006. The adoption of SFAS No. 123-R resulted in increased
      expense of approximately $313,000 as compared to the stock compensation
      expense that would have been recorded pursuant to APB No. 25. In the first
      quarter of 2005, no expense was recorded as the Company did not have any stock
      options awarded during that period that had intrinsic value.  Had the fair
      value method been adopted during the first quarter of 2005, pro forma net income
      and earnings per share would have been as follows: ($
      in
      thousands, except per share amounts):





**Three-month
                period ended March 31, 2005**Net
                Income - as reported
            $1,692Stock-Based
                employee compensation expense included in reported net income, net
                of
                taxTotal
                stock-based employee compensation under fair-value-based method for
                all
                rewards, net of tax
            (97)Pro
                forma net income
            $1,595





-12-


**HARBIN
            ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
            31, 2006**
 (Unaudited)


**Earnings
                  per share:**
              **Three-month
                  period ended March 31, 2005**Basic,
                  as reported
              $0.11Diluted,
                  as reported
              $0.11Basic,
                  pro forma
              $0.11Diluted,
                  pro forma
              $0.11





**Methods
      of estimating fair value**





Under
      both SFAS No. 123-R and under the fair value method of accounting under
      SFAS No. 123 (i.e., SFAS No. 123 Pro Forma), the fair value of
      restricted stock is determined based on the number of shares granted and the
      quoted price of the Company’s common stock on the date of grant. The fair value
      of stock options is determined using the Black-Scholes model.





**Significant
      assumptions used to estimate fair value**





Under
        SFAS No 123-R, the Company’s expected volatility assumption is based on the
        historical volatility of Company’s stock. The expected life assumption is
        primarily based on historical exercise patterns and employee post-vesting
        termination behavior. The risk-free interest rate for the expected term of
        the
        option is based on the U.S. treasury yield curve in effect at the time of
        grant.





Stock
      compensation expense recognized in the first quarter of 2006 is based on awards
      expected to vest, and there were no estimated forfeitures as the Company has
      a
      short history of issuing options. SFAS No. 123-R requires forfeitures to be
      estimated at the time of grant and revised in subsequent periods, if necessary,
      if actual forfeitures differ from those estimates.





**8.**
            **SUPPLEMENTAL
                DISCLOSURE OF CASH FLOWS**





The
      Company prepares its statements of cash flows using the indirect method as
      defined under the Financial Accounting Standard No. 95.





The
      Company paid $0 for interest and income tax during the three-month periods
      ended
      March 31, 2006 and 2005.





**9.**
            **STATUTORY
                COMMON WELFARE FUND**





As
      stipulated by the Company Law of the People’s Republic of China (PRC), net
      income after taxation can only be distributed as dividends after appropriation
      has been made for the following:





(i)
            Making
                up cumulative prior years’ losses, if
                any;





(ii)
            Allocations
                to the “Statutory surplus reserve” of at least 10% of income after tax, as
                determined under PRC accounting rules and regulations, until the
                fund
                amounts to 50% of the Company's registered capital;




-13-


**HARBIN
              ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
              TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
              31, 2006**
 (Unaudited)


(iii)
            Allocations
                of 5-10% of income after tax, as determined under PRC accounting
                rules and
                regulations, to the Company's “Statutory common welfare fund”, which is
                established for the purpose of providing employee facilities and
                other
                collective benefits to the Company's employees; and





(iv)
            Allocations
                to the discretionary surplus reserve, if approved in the shareholders’
                general meeting.





The
      Company established a reserve for the annual contribution of 5% of net income
      to
      the welfare fund. The amount included in the statutory reserve for the
      three-month periods ended March 31, 2006 and 2005 amounted to $174,115 and
      $0,
      respectively.





**10.**
            **STATUTORY
                RESERVE**





In
      accordance with the Chinese Company Law (note 9), the Company has allocated
      10%
      of its annual net income, amounting to $ 348,230 and $0, as statutory surplus
      reserve for the three-month periods ended March 31, 2006 and 2005, respectively.
      The Statutory Surplus Reserve and Statutory common welfare fund are aggregated
      on the balance sheet as Statutory Reserve.





**11.**
            **EMPLOYEE
                PENSION**





The
      employee pension in Harbin generally includes two parts: The first part to
      be
      paid by the Company is
      20% of
      the employees’ actual salary in the prior year. If the average salary falls
      below $1,165 for each individual, $1,165 will be used as the basis. The other
      part paid by the employees is 8% of actual salary with the same minimum
      requirement. The Company made no contributions of employment benefits, including
      pension in the three-month period ended March 31, 2005. The Company made $
      5,065
      in contributions of employment benefits, including pension in the three-month
      period ended March 31, 2006.





**12.**
            **EARNINGS
                PER SHARE**





Earnings
      per share for three-month periods ended March 31, 2006 and March 31, 2005 were
      determined by dividing net income for the periods by the weighted average number
      of both basic and diluted shares of common stock and common stock equivalents
      outstanding.





The
      following is an analysis of the differences between basic and diluted earnings
      per common share in accordance with Statement of Financial Accounting Standards
      No. 128, “Earnings Per Share”.





**For
                the three-month**
              **periods
                ended March 31**2006
            2005Weighted
                average common shares outstanding
            16,600,451
            15,000,450Effect
                of dilutive securities:
              Stock
                options
            100,000
            100,000Weighted
                average common shares
              outstanding
                and common share equivalents
            16,700,451
            15,100,450


-14-
 
 **HARBIN
              ELECTRIC, INC. AND SUBSIDIARIES**
 **NOTES
              TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
              31, 2006**
 (Unaudited)


**13.**
            **CURRENT
                VULNERABILITY DUE TO CERTAIN CONCENTRATIONS**




The
      Company's operations are carried out in the PRC. Accordingly, the Company's
      business, financial condition and results of operations may be influenced by
      the
      political, economic and legal environments in the PRC, and by the general state
      of the PRC's economy.




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




**14.**
            **RECLASSIFICATIONS**





Certain
      prior period amounts have been reclassified to conform to the three-month period
      ended March 31, 2006 presentation.








-15-


**Item
      1A. Risk Factors**





You
      should carefully consider these risk factors as each of these risks could
      adversely affect our business, operating results and financial condition.
      Additional risks and uncertainties not presently foreseeable to us may also
      impair our business operations. If any of the following risks actually occurs,
      our business, financial condition or operating results could be materially
      and
      adversely affected. In such case, the trading price of our common stock could
      decline, and you may lose all or part of your investment.




**GENERAL
        RISKS RELATING TO OUR BUSINESS**




**Our
      management owns a significant amount of our common stock, giving them influence
      or control in corporate transactions and other matters, and their interests
      could differ from those of other stockholders.**




As
        of
        July 17, 2006, our principal executive officers, Tianfu Yang, Tianli Yang,
        Suofei Xu, and Zedong Xu, beneficially owned approximately 68.7% of our
        outstanding common stock. As a result, they are in a position to significantly
        influence or control the outcome of matters requiring stockholders’ vote,
        including the election of directors, the adoption of any amendment to our
        certificate of incorporation or bylaws, and the approval of significant
        corporate transactions. Their control may delay or prevent a change of control
        on terms favorable to our other stockholders and may adversely affect the
        voting
        and other rights of our other stockholders.




**We
      need to manage growth in operations to maximize our potential growth and
      achieve our expected revenues.**




In
      order to maximize potential growth in our current and potential markets, we
      believe that we must expand our manufacturing and marketing operations. We
      experience growth in our revenues of over three hundred eighty-seven percent
      (387%) over the last year (when comparing our revenues in 2005 to those in
      2004); however, there can be no assurance that we will be able to maintain
      such
      growth or any growth of our business. To fund our anticipated expansion, we
      need
      an increased amount of working capital. This expansion will place a significant
      strain on our management and our operational, accounting, and information
      systems. We expect that we will need to continue to improve our financial
      controls, operating procedures, and management information systems. We will
      also
      need to effectively train, motivate, and manage our employees. Our failure
      to
      manage our growth could disrupt our operations and ultimately prevent us from
      generating the revenues we expect.





**We
      may require additional financing in the future and a failure to obtain such
      required financing will inhibit our ability to grow.**




The
      continued growth of our business may require additional funding from time to
      time. Funding would be used for general corporate purposes. General corporate
      purposes may include acquisitions, investments, repayment of debt, capital
      expenditures, repurchase of our capital stock and any other purposes that we
      may
      specify in any prospectus supplement. Obtaining additional funding would be
      subject to a number of factors including market conditions, operational
      performance and investor sentiment, many of which are outside of our control.
      These factors may make the timing, amount, terms and conditions of additional
      funding unattractive, or unavailable, to us.




**We
      may not be able to adequately protect and maintain our intellectual property.**




Our
        success will depend on our ability to continue to develop and market linear
        motors and other motor products. While we have been granted three patents
        in
        China relating to linear motor applications, we currently have not applied
        for
        patents for our technical processes and designs, as we believe an application
        for such patents would result in public knowledge of our proprietary technology
        and designs.




-16-




**Because
      of our dependence on a few key customers, the loss of any key customer could
      cause a significant decline in our revenues.**




Three
      major customers accounted for 80% of the net revenue for the three-month period
      ended March 31, 2006. The loss of any of our major customers, or a significant
      reduction in sales to any such customers, would adversely affect our
      revenues.





**We
      depend on the supply of raw materials, and any adverse changes in such supply
      or
      the costs of raw materials may adversely affect our
      operations.**




Three
      vendors provided 76% of our purchase of raw materials for the three-month period
      ended March 31, 2006. We currently obtain most of our raw materials from Acheng
      Relay Company Limited, Jiangnan Aluminum Material Factory and Linear Motor
      Institute of the Zhejiang University and Rui’an Fangzhuang Motor Fittings
      Factory. Any material change in the spot and forward rates could have a material
      adverse effect on the cost of our raw materials and on our operations.  In
      addition, if we need alternative sources for key component parts for any reason,
      these component parts may not be immediately available to us. If alternative
      suppliers are not immediately available, we will have to identify and qualify
      alternative suppliers, and production of these components may be delayed. We
      may
      not be able to find an adequate alternative supplier in a reasonable time
      period, or on commercially acceptable terms, if at all. Shipments of affected
      products have been limited or delayed as a result of such problems in the past,
      and similar problems could occur in the future. Our inability to obtain our
      key
      source supplies for the manufacture of our products may require us to delay
      shipments of products, harm customer relationships or force us to curtail or
      cease operations.







**Our
      success depends on our management team and other key personnel, the loss of
      any
      of whom could disrupt our business operations.**




Our
        future success will depend in substantial part on the continued service of
        our
        senior management, including Mr. Tianfu Yang, our Chairman and Chief Executive
        Officer, Mr. Xu Suofei, our Vice President and Board Member, Mr. Tianli Yang,
        our Vice President, and Mr. Zedong Xu, our Chief Financial Officer. The loss
        of
        the services of one or more of our key personnel could impede implementation
        of
        our business plan and result in reduced profitability. We do not carry key
        person life insurance on any of our officers or employees. Our future success
        will also depend on the continued ability to attract, retain and motivate
        highly
        qualified technical sales and marketing customer support.




Because
      of the rapid growth of the economy in China, competition for qualified personnel
      is intense. We cannot assure you that we will be able to retain our key
      personnel or that we will be able to attract, assimilate or retain qualified
      personnel in the future.




**Our
      directors and officers control a majority of our common stock and, as a result,
      they may exercise voting control.**




Our
        directors and executive officers, directly or through entities that they
        control, currently beneficially own, as a group, approximately 68.9% of our
        issued and outstanding common stock as of July 17, 2006. This significant
        concentration of share ownership may adversely affect the trading price of
        our
        common stock because investors often perceive a disadvantage in owning shares
        in
        a company with just one or several controlling stockholders. Furthermore,
        our
        directors and officers, as a group, has the ability to control the outcome
        of
        all matters requiring stockholder approval, including the election of directors
        and approval of significant corporate transactions, such as mergers,
        consolidations or the sale of substantially all of our assets. This
        concentration of ownership may have the effect of delaying or preventing
        a
        change of control, including a merger, consolidation or other business
        combination involving us, or discouraging a potential acquirer from making
        a
        tender offer or otherwise attempting to obtain control.


-17-







**RISKS
        RELATING TO DOING BUSINESS IN THE PEOPLE’S REPUBLIC OF
        CHINA**




**China’s
      economic policies could adversely affect our business.**




Substantially
      all of our assets are located in China and substantially all of our revenue
      is
      derived from our operations in China. Accordingly, our results of operations
      and
      prospects are subject, to a significant extent, to the economic, political
      and
      legal developments in China.




While
      China’s economy has experienced a significant growth in the past twenty years,
      growth has been uneven, both geographically and among various sectors of the
      economy. The Chinese government has implemented various measures to encourage
      economic growth and guide the allocation of resources. Some of these measures
      benefit the overall economy of China, but may also have a negative effect on
      us.
      For example, our operating results and financial condition may be adversely
      affected by the government control over capital investments or changes in tax
      regulations.




The
      economy of China has been transitioning from a planned economy to a more
      market-oriented economy. In recent years the Chinese government has implemented
      measures emphasizing the utilization of market forces for economic reform and
      the reduction of state ownership of productive assets and the establishment
      of
      corporate governance in business enterprises; however, a substantial portion
      of
      productive assets in China are still owned by the Chinese government. In
      addition, the Chinese government continues to play a significant role in
      regulating industry development by imposing industrial policies. It also
      exercises significant control over China’s economic growth through the
      allocation of resources, controlling payment of foreign currency-denominated
      obligations, setting monetary policy and providing preferential treatment to
      particular industries or companies.




**Capital
        outflow policies in the People’s Republic of China may hamper our ability to
        remit income to the United States.**




The
        PRC
        has adopted currency and capital transfer regulations. These regulations
        may
        require that we comply with complex regulations for the movement of capital.
        Although we believe that we are currently in compliance with these regulations,
        should these regulations or the interpretation of them by courts or regulatory
        agencies change we may not be able to remit all income earned and proceeds
        received in connection with our operations or from the sale of our operating
        subsidiary to the United States or to our stockholders.




**If
      preferential tax concessions granted by the PRC government are changed or
      expire, our financial results and results of operations would be materially
      and
      adversely.**




Our
      results of operation may be adversely affected by changes to or expiration
      of
      preferential tax concessions that our subsidiary in the PRC currently enjoys.
      The statutory tax rate generally applicable to domestic Chinese companies is
      33%. A reduced income tax rate of 15% may be possible for productive foreign
      investment enterprises in the Economic and Technological Development Zones
      and
      for enterprises engaged in production or business operations in the Special
      Economic Zones. As a result of preferential tax rate incentives, our operations
      have been subject to relatively low tax liabilities. Tax that would otherwise
      have been payable without preferential tax treatment amounted to approximately
      $0.34 million and $1.5 million in 2004 and 2005, respectively.




Tax
      laws
      in China are subject to interpretations by relevant tax authorities. The
      preferential tax treatment may not remain in effect or may change, in which
      case
      we may be required to pay the higher income tax rate generally applicable to
      Chinese companies, or such other rate as is required by the laws of
      China.


-18-




**Fluctuations
      in the value of the RMB could materially affect our financial condition and
      results of operations.**




The
      value
      of the RMB against the U.S. dollar and other currencies may fluctuate and is
      affected by, among other things, changes in the PRC's political and economic
      conditions. As the majority of our net revenue is denominated in RMB, any
      significant revaluation of the RMB may materially and adversely affect our
      cash
      flows, revenues and financial condition. For example, to the extent that we
      need
      to convert U.S. dollars we receive from an offering of our securities into
      RMB
      for our operations, appreciation of the RMB against the U.S. dollar could have
      a
      material adverse effect on our business, financial condition and results of
      operations. Conversely, if we decide to convert our RMB into U.S. dollars for
      the purpose of making payments for business purposes and the U.S. dollar
      appreciates against the RMB, the U.S. dollar equivalent of the RMB we convert
      would be reduced. In addition, the depreciation of significant U.S. dollar
      denominated assets could result in a charge to our income statement and a
      reduction in the value of these assets.




On
      July 21, 2005, the PRC government changed its policy of tying the value of
      the
      RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate
      within a narrow and managed band against a basket of certain foreign currencies.
      This change in policy has resulted in an approximately 2.0% appreciation of
      the
      RMB against the U.S. dollar. While the international reaction to the RMB
      revaluation generally has been positive, there remains significant international
      pressure on the PRC government to adopt an even more flexible currency policy,
      which could result in a further and more significant appreciation of the RMB
      against the U.S. dollar.





**We
      may experience currency fluctuation and longer exchange rate payment
      cycles.**




The
      local currencies in the countries in which we sell our products may fluctuate
      in
      value in relation to other currencies. Such fluctuations may affect the costs
      of
      our products sold and the value of our local currency profits. While we are
      not
      conducting any meaningful operations in countries other than China at the
      present time, we may expand to other countries and may then have an increased
      risk of exposure of our business to currency fluctuation.




**We
      may face obstacles from the Communist system in the PRC.**




Foreign
      companies conducting operations in the PRC face significant political, economic
      and legal risks. The Communist regime in the PRC, including a stifling
      bureaucracy, may hinder Western investment.




**We
      may have difficulty establishing adequate management, legal and financial
      controls in the PRC.**




The
      PRC historically has been deficient in Western style management and financial
      reporting concepts and practices, as well as in modern banking, computer and
      other control systems. We may have difficulty in hiring and retaining a
      sufficient number of qualified employees to work in the PRC. As a result of
      these factors, we may experience difficulty in establishing management, legal
      and financial controls, collecting financial data and preparing financial
      statements, books of account and corporate records and instituting business
      practices that meet Western standards.




**It
      will be extremely difficult to acquire jurisdiction and enforce liabilities
      against our officers, directors and assets based in the
      PRC.**




Because
        our executive officers and several of our directors, including our chairman
        of
        the Board of Directors, are Chinese citizens, it may be difficult, if not
        impossible, to acquire jurisdiction over these persons in the event a lawsuit
        is
        initiated against us and/or our officers and directors by a stockholder or
        group
        of stockholders in the United States. Also, because the majority of our assets
        are located in the PRC, it would also be extremely difficult to access those
        assets to satisfy an award entered against us in U.S. court.




-19-




**The
      legal system in China has inherent uncertainties that may limit the legal
      protections available in the event of any claims or disputes with third
      parties.**




The
      legal system in China is based on written statutes. Prior court decisions may
      be
      cited for reference but have limited precedential value. Since 1979, the central
      government has promulgated laws and regulations dealing with economic matters
      such as foreign investment, corporate organization and governance, commerce,
      taxation and trade. As China’s foreign investment laws and regulations are
      relatively new and the legal system is still evolving, the interpretation of
      many laws, regulations and rules is not always uniform and enforcement of these
      laws, regulations and rules involve uncertainties, which may limit the remedies
      available in the event of any claims or disputes with third parties. In
      addition, any litigation in China may be protracted and result in substantial
      costs and diversion of resources and management attention.





**We
      may face political and/or judicial corruption in the PRC.**




Another
      obstacle to foreign investment is corruption. There is no assurance that we
      will
      be able to obtain recourse, if desired, through the PRC’s poorly developed and
      often corrupt judicial systems.





Most
      of
      our assets are located in China, any dividends of proceeds from liquidation
      is
      subject to the approval of the relevant Chinese government
      agencies.











-20-


**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation**





**INFORMATION
      REGARDING FORWARD LOOKING STATEMENTS**





The
      following discussion should be read in conjunction with the unaudited condensed
      consolidated financial statements and notes thereto set forth in Item 1 of
      this
      Quarterly Report. In addition to historical information, this discussion and
      analysis contains forward-looking statements that relate to future events and
      expectations and, as such, constitute forward-looking statements.
      Forward-looking statements include those containing such words as” anticipates,”
“believes,” “estimates,” “expects,” “hopes,” “targets,” “should,” will,” “will
      likely result,” “forecast,” “outlook,” “projects” or similar expressions. Such
      forward-looking statements involve known and unknown risks, uncertainties and
      other factors that may cause actual results, performance or achievements of
      the
      Company to be materially different from those expressed or implied in the
      forward-looking statements.





**OVERVIEW**




We
        were incorporated under the laws of the state of Nevada and, along with our
        wholly-owned subsidiaries, are headquartered in Harbin, China. We manufacture,
        design, supply and service linear motors and special motors for domestic
        China
        and other international markets. Our products are purchased by a broad range
        of
        customers, including those involved in oil services, factory automation,
        packaging and mass transportation systems.





Our
        expenses have consisted primarily of those incurred with sales and marketing
        of
        our products, general and administrative costs associated with our operations
        and costs of maintaining our facilities, salaries and research and development.
        To date, we have funded our operations primarily through the sale of equity
        securities and retained earnings.




We
        are subject to risks common to companies operating in China, including risks
        inherent in our distribution and commercialization efforts, uncertainty of
        foreign regulatory and marketing approvals and laws, reliance on key customers,
        enforcement of patent and proprietary rights, the need for future capital
        and
        retention of key employees. We cannot provide assurance that we will generate
        revenues or achieve and sustain profitability in the future.





**ACCOUNTING
        POLICIES AND ESTIMATES**




We
        believe that the application of the following accounting policies, which
        are
        important to our financial position and results of operations, requires
        significant judgments and estimates on the part of management. For a summary
        of
        our significant accounting policies, see Note 2 of the consolidated
        financial statements appearing elsewhere in this Quarterly Report.




***Accounts
        Receivable***




We
        maintain reserves for potential credit losses on accounts receivable. Management
        reviews the composition of accounts receivable and analyze historical bad
        debts,
        customer concentrations, customer credit worthiness, current economic trends
        and
        changes in customer payment patterns to evaluate the adequacy of these reserves.





We
        use
        estimates in determining our allowance for bad debts that are based on our
        historical collection experience, current trends, credit policy and a percentage
        of our accounts receivable by aging category. In determining these percentages,
        we review historical write-offs in our receivables. In determining the
        appropriate reserve percentages, we also review current trends in the credit
        quality of our customers, as well as changes in our internal credit policies.
        We
        maintain reserves for potential credit losses on accounts receivable. Management
        reviews the composition of accounts receivable and analyzes historical bad
        debts, customer concentrations, customer credit worthiness, current economic
        trends and changes in customer payment patterns to evaluate the adequacy
        of
        these reserves. Reserves are recorded primarily on a specific identification
        basis. Additional allowances for doubtful accounts may be required if there
        is
        deterioration in past due balances, if economic conditions are less favorable
        than anticipated, or for customer-specific circumstances, such as financial
        difficulty.


-21-





Reserves
        are recorded primarily on a specific identification basis. Reserve for potential
        credit losses were $0, $29,249 and $29,249 for the years ended December 31,
        2004
        and 2005 and for the three months ended March 31, 2006, respectively. No
        amounts
        were written off during the periods indicated. If our estimate of our allowance
        is understated in future periods, operating income would be
        reduced.





***Inventories***




Inventory
        levels are based on projections of future demand and market conditions.
        Inventories are stated at cost, which is not in excess of market using the
        weighted average cost method. Any sudden decline in demand and/or rapid product
        improvements and technological changes can result in excess and/or obsolete
        inventories. Because most of our products are customized and unique to a
        particular customer, there is a risk that we will forecast inventory needs
        incorrectly and purchase or produce excess inventory. As a result, actual
        demand
        may differ from forecasts, and such differences, if not managed, may have
        a
        material adverse effect on future results of operations due to required
        write-offs of excess or obsolete inventory. To mitigate against such exposure,
        we require a binding purchase order or a signed agreement by our customer
        agreeing to pay for and take possession of finished goods inventory parts
        for
        the duration of the agreement.





On
        an
        ongoing basis, inventories are reviewed for potential write down for estimated
        obsolescence or unmarketable inventories equal to the difference between
        the
        costs of inventories and the estimated net realizable value based upon forecasts
        for future demand and market conditions. We have experienced no inventory
        write
        downs since our inception. Accordingly, we have not created any reserve for
        obsolete inventory consistent with our historical experience. To the extent
        we
        increase our reserves for future periods, operating income will be
        reduced.




***Revenue
        Recognition***




Our
        revenue recognition policies are structured to comply with Staff Accounting
        Bulletin (SAB) 104 and SFAS 48. SAB 104 requires that revenue can only be
        recognized when it is realized or realizable and earned. Revenue generally
        is
        realized or realizable and earned when all four of the following criteria
        have
        been met: (1) persuasive evidence of an arrangement exists; (2) delivery
        has
        occurred or services rendered; (3) the price is fixed and determinable; and
        (4)
        collectability is reasonably assured.





Determination
        of criterion (4) is based on our judgments regarding the collectability of
        those
        amounts. Historically, we have not encountered any significant problems with
        collectability and thus have determined that it is not necessary to defer
        revenue recognition on that basis. Should changes in conditions cause us
        to
        determine this criterion is not met for certain future transactions, revenues
        for any reporting period could be adversely affected by delaying recognition
        of
        such revenues.





In
        addition, our revenue recognition could be negatively impacted by returns.
        However, we make custom products which are customer specific, and no returns
        are
        allowed. We warrant our product for repair only in the event of defects for
        two
        years from the date of shipment. Historically, we have not experienced
        significant defects, and replacements for defects have not been material.
        We
        charge such costs to cost of goods sold. For the years ended December 31,
        2004
        and 2005 and for the three months ended March 31, 2006, such returns and
        allowances were $0, $0 and $0, respectively. Should returns increase in the
        future it would be necessary to adjust our estimates, in which case recognition
        of revenues could be delayed.




-22-




***Stock-Based
        Compensation***





Prior
        to
        January 1, 2006, we accounted for share-based employee compensation plans
        using the intrinsic value method of accounting in accordance with APB 25.
        Under
        the provisions of APB 25, no compensation expense is recognized when stock
        options are granted with exercise prices equal to or greater than market
        value
        on the date of grant.





Effective
        January 1, 2006, the Company accounts for stock-based compensation in accordance
        with the fair value recognition provisions of SFAS 123R. The Company uses
        the
        Black-Scholes-Merton option-pricing model which requires the input of highly
        subjective assumptions. These assumptions include estimating the length of
        time
        employees will retain their stock options before exercising them (“expected
        term”), the estimated volatility of the Company’s common stock price over the
        expected term and the number of options that will ultimately not complete
        their
        vesting requirements (“forfeitures”). Changes in the subjective assumptions can
        materially affect the estimate of fair value of stock-based compensation
        and
        consequently, the related amount recognized on the consolidated statements
        of
        earnings.





**RESULTS
        OF OPERATIONS**





**Three
      Months Ended March 31, 2006 Compared To Three Months Ended March 31,
      2005**





**Revenue**





For
      the
      three-month period ended March 31, 2006, we generated net revenues of
      $8,878,658. During the three-month period ended March 31, 2005 **,** we
      produced net revenues of $4,128,297. Sales of linear motor and special motor
      products drove the growth in the period. Industrial electric linear motors
      and
      other special motors continued to comprise significantly all of our total
      product sales in both comparable periods. The increase for the three-month
      period ended March 31, 2006 was due to the Company’s success in recruiting new
      customers and increased sales to our existing customers.





**Gross
      Profit**





The
      Company achieved a gross profit of $4,273,736 for the three months ended March
      31, 2006 compared to $2,050,237 for the three months ended March 31, 2005.
      The
      increase is directly related to our increases in sales. Gross margin, as a
      percentage of revenues, was 48.1% for the three months ended March 31, 2006
      compared to 49.7% for the three months ended March 31, 2005. The change in
      gross
      margin is normal as it reflects the different mix of products shipped in their
      corresponding periods.





**Operating
      Expenses**





Our
        total
        operating expenses consist of costs associated with sales and marketing,
        research and development expenditures, general administrative costs, and
        amounts
        to account for stock based compensation. The Company incurred total operating
        expenses of $1,116,765, or 12.6% of sales, for the three months ended March
        31,
        2006. This represents an increase of $758,477 compared to $358,288, or 8.7%
        of
        sales for the three months ended March 31, 2005. Aggregated selling expenses
        of
        $208,007, or 2.3% of sales, account for expenses associated with sales and
        marketing of the Company’s products. Selling expenses for the corresponding
        period last year were $106,588 or 2.6% of sales. The increase is due to our
        increased revenues and sales activity. General and administrative expenses
        include the costs of maintaining the Company ’s
        facilities, salaries, research and development, and amounts allocated to
        stock
        based compensation through options grants. General and administrative expenses
        for the three months ended March 31, 2006 were $908,758, or 10.2% of sales
        compared to $251,700 or 6.1% of sales in March 31, 2005. The increases were
        due
        to the inclusion of stock based compensation expense and the opening of our
        new
        offices in the U.S. Excluding the stock based compensation, our General and
        administrative expenses for the three months ended March 31, 2006 were $595,758
        or 6.7% of sales versus $251,700 or 6.1% of sales in March 31,
        2005.




-23-





Stock
        compensation expense measured in accordance with SFAS No. 123-R totaled
        approximately $313,000 or $ 0.02 per basic and diluted share in the first
        quarter of 2006. The adoption of SFAS No. 123-R resulted in increased
        expense of approximately $313,000 or 3.5% of sales, as compared to the
        stock compensation expense that would have been recorded pursuant to APB
        No. 25. In the first quarter of 2005, no expense was recorded as the Company did
        not
        have any stock options awarded during that period that had intrinsic
        value.





**Net
      Income**





The
      Company's net income was $3,794,497 or 42.7% of sales for the three months
      ended
      March 31, 2006, compared to $1,692,242 or 41.0% of sales for the three months
      ended March 31, 2005. The increase is attributed to the continued increase
      in
      sales levels and the contribution from the sale of our marketable securities.
      The Company sold its marketable securities in the three-month period ended
      March
      31, 2006 at a realized gain of $571,143. Excluding the realized gain from the
      sale of marketable securities our net income was $3,223,354 or 36.3% of
      sales.





**Liquidity
      and Capital Resources**





As
        of
        March 31, 2006, the Company had $9,042,762 cash and cash equivalents. The
        Company had net cash flows provided by operations of $2,762,887 for the
        three-month period ended March 31, 2006, as compared to net cash provided
        by
        operations of $548,758 in the corresponding period last year. The change
        in net
        cash flows from operations in the current period as compared to the
        corresponding period last year was mainly due to net income and increases
        in
        collections of accounts receivables. Cash flows from investing
        activities contributed 1,027,963 in the current period compared with a net
        usage of $397,800 in the corresponding period last year. The
        usage in the current period was mainly due to investments in plant and
        equipment. The Company had a net increase in cash and cash equivalent of
        $3,303,743 in the current period as compared to a net increase of $25,099
        in the
        corresponding period last year. This was a result of the sale of our marketable
        securities which were held as available for sale securities. Our net increase
        in
        cash & cash equivalents of $3,303,743 was due the increased cash flow from
        operations and the sale of marketable securities.





The
      majority of the Company's revenues and expenses were denominated primarily
      in
      Renminbi (“RMB”), the currency of the People's Republic of China. There is no
      assurance that exchange rates between the RMB and the U.S. dollar will remain
      stable. A revaluation of the RMB relative to the U.S. dollar could adversely
      affect our business, financial condition and results of operations. We do not
      engage in currency hedging, therefore inflation has not had a material impact
      on
      our business.


-24-





**Item
      3. Controls and Procedures**




(a) **Evaluation
      of Disclosure Controls and Procedures** .




The
      Company’s Chief Executive Officer and Chief Financial Officer conducted an
      evaluation of the effectiveness of the design and operation of the Company’s
      disclosure controls and procedures as defined in Securities Exchange Act of 1934
      Rule 13a-15(e), as of the end of the period covered by this report. Based on
      that evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that the Company’s disclosure controls and procedures were effective
      as of the end of the period covered by this report.





(b) **Changes
      in Internal Control over Financial Reporting** .




There
      were no changes in internal controls over financial reporting that occurred
      during the first quarter of 2006 that
      have materially affected, or are reasonably likely to materially affect, the
      Company’s internal control over financial reporting.







**PART
      II. OTHER INFORMATION**




**Item
                1.**
            **Legal
                Proceedings**




We
        may
        from time to time become a party to various legal proceedings arising in
        the
        ordinary course of business. As of July 17, 2006, the Company was not involved
        in any material legal proceedings.




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




None.




**Item
                3.**
            **Defaults
                upon Senior Securities**




None.





**Item
                4.**
            **Submission
                of Matters to a Vote of Securities
                Holders**




The
      Company has held no regularly scheduled, called or special meetings of
      shareholders during the reporting period.





**Item
                5.**
            **Other
                Information**




The
        deadline for submitting a stockholder proposal for inclusion in our proxy
        statement and form of proxy for our 2006 Annual Meeting is June 15, 2006.
        Submissions must be received by us at our offices at 2 Penn Center,  Suite
        1306, Philadelphia, PA 19102 in writing and by that date. Any submissions
        not received in the manner described above will not be
        considered.


-25-


**Item
      6.**  **Exhibits.**




**Exhibit**
                **Number**
              **Description**
              **Method
                  of Filing**3.1
              Articles
                  of Incorporation of the Company
              Filed
                  as Exhibit 3.1 to the registration statement on Form SB-2 filed
                  with the
                  Commission on October 10, 2003 and incorporated herein by
                  reference.3.2
              Amended
                  and Restated Bylaws of the Company
              Filed
                  as Exhibit 10.1 to the current report on Form 8-K filed with the
                  Commission on July 6, 2005 and incorporated herein by
                  reference.21.1
              List
                  of subsidiaries
              Previously
                  filed.31.1
              Certification
                  by the Chief Executive Officer pursuant to Rule 13a-14(a) or
                  15d-14(a)
              Filed
                  herewith as Exhibit 31.1.31.2
              Certification
                  by the Chief Financial Officer pursuant to Rule 13a-14(a) or
                  15d-14(a)
              Filed
                  herewith as Exhibit 31.2.32.1
              Certification
                  of the Chief Executive Officer and the Chief Financial Officer
                  pursuant 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
              Filed
                  herewith as Exhibit 32.1.99.1
              Press
                  release dated May 15, 2006
              Previously
                  filed.











-26-





**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.




**Harbin
                Electric, Inc.**Date:
                July 17, 2006
              By:
              /s/ Tianfu
                YangTianfu
                YangChief
                Executive Officer,
                Directorand
                Chairman of the Board(Principal
                Executive Officer)  Date:
                July 17, 2006
              By:
              /s/ Zedong
                XuZedong
                XuChief
                Financial Officer
                (Principal
                  Accounting Officer)



















-27-


**EXHIBIT
      INDEX**


(a)
            Exhibits:




**Exhibit**
                **Number**
              **Description**
              **Method
                  of Filing**3.1
              Articles
                  of Incorporation of the Company
              Filed
                  as Exhibit 3.1 to the registration statement on Form SB-2 filed
                  with the
                  Commission on October 10, 2003 and incorporated herein by
                  reference.3.2
              Amended
                  and Restated Bylaws of the Company
              Filed
                  as Exhibit 10.1 to the current report on Form 8-K filed with the
                  Commission on July 6, 2005 and incorporated herein by
                  reference.21.1
              List
                  of subsidiaries
              Previously
                  filed.31.1
              Certification
                  by the Chief Executive Officer pursuant to Rule 13a-14(a) or
                  15d-14(a)
              Filed
                  herewith as Exhibit 31.1.31.2
              Certification
                  by the Chief Financial Officer pursuant to Rule 13a-14(a) or
                  15d-14(a)
              Filed
                  herewith as Exhibit 31.2.32.1
              Certification
                  of the Chief Executive Officer and the Chief Financial Officer
                  pursuant 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
              Filed
                  herewith as Exhibit 32.1.99.1
              Press
                  release dated May 15, 2006
              Previously
                  filed.







(b)
            Reports
                on Form 8-K during the quarter ended March 31,
                2006:




(i)
            Form
                8-K filed on April 3, 2006 disclosing the Company’s financial results for
                the year ended December 31, 2005 and certain other
                information.




(ii)
            Form
                8-K filed on February 8, 2006 disclosing the Company’s preliminary
                financial results for the year ended December 31, 2005.