**Harbin      Electric Announces Earnings for the First Quarter of Fiscal Year      2006**

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**HARBIN      ELECTRIC, INC. & SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF OPERATIONS **

**(UNAUDITED)**

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

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**HARBIN      ELECTRIC, INC. & SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEET**

**(UNAUDITED)**

|                                                                                                      |   |                                    |       |
|-----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|
|  **ASSETS**                                                                                          |   | **AS                OF MARCH 31, 2006** |       |
|                                                                                                      |   |                                    |       |
| CURRENT                ASSETS:                                                                            |   |                                    |       |
| Cash                & cash equivalents                                                                |   | $                                       | 9,042,762  |   |
| Accounts                receivable, net of allowance for uncollectible accounts of                $30,000 |   |                                    | 7,944,125  |   |
| Inventory                                                                                                 |   |                                    | 607,174    |   |
| Advances                to suppliers                                                                      |   |                                    | 3,209,657  |   |
| Other                assets                                                                               |   |                                    | 732        |   |
|                                                                                                      |   |                                    |       |   |
| Total                current assets                                                                       |   |                                    | 20,804,451 |   |
|                                                                                                      |   |                                    |       |   |
| PROPERTY                AND EQUIPMENT, net                                                                |   |                                    | 7,778,662  |   |
|                                                                                                      |   |                                    |       |   |
| INTANGIBLE                ASSETS, net                                                                     |   |                                    | 321,281    |   |
|                                                                                                      |   |                                    |       |   |
|                                                                                                      |   |                                    |       |   |
| TOTAL                ASSETS                                                                               |   | $                                       | 28,904,394 |   |
|                                                                                                      |   |                                    |       |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                   |   |                                    |       |   |
|                                                                                                      |   |                                    |       |   |
| CURRENT                LIABILITIES:                                                                       |   |                                    |       |   |
| Accrued                expenses                                                                           |   | $                                       | 539,406    |   |
|                                                                                                      |   |                                    |       |   |
| STOCKHOLDERS'                EQUITY                                                                       |   |                                    |       |   |
| Common                stock, .00001 par value; authorized shares 100,000,000;                             |   |                                    |       |   |
| issued                and outstanding 16,600,451 shares                                                   |   |                                    | 166        |   |
| Additional                paid in capital                                                                 |   |                                    | 11,610,676 |   |
| Statutory                reserves                                                                         |   |                                    | 2,415,898  |   |
| Accumulated                other comprehensive income                                                     |   |                                    | 652,038    |   |
| Retained                earnings                                                                          |   |                                    | 13,686,210 |   |
|                                                                                                      |   |                                    |       |   |
| Total                stockholders' equity                                                                 |   |                                         | 28,364,988 |   |
|                                                                                                      |   |                                    |       |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY                                                 |   | $                                       | 28,904,394 |   |
|                                                                                                      |   |                                    |       |   |

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**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 |   | $ | 1,692,242 |   |
| Adjustments                to reconcile net income to net cash provided by operating                activities: |   |   |   |   |   |  |   |
| Depreciation                                                                                                    |   |   | 68,854 |   |   | 29,471 |   |
| Stock                based compensation                                                                         |   |   | 313,000 |   |   | - |   |
| (Increase)                decrease in current assets:                                                           |   |   |   |   |   |  |   |
| Accounts                receivable                                                                              |   |   | (2,054,991 | ) |   | (819,162 | ) |
| Inventory                                                                                                       |   |   | 741,419 |   |   | 189,373 |   |
| Advances                to suppliers                                                                            |   |   | (447,757 | ) |   | (545,086 | ) |
| Advances                to related parties                                                                      |   |   | - |   |   | 71,283 |   |
| Other                assets                                                                                     |   |   | 3,377 |   |   | (161,237 | ) |
| Increase                in current liabilities:                                                                 |   |   |   |   |   |  |   |
| Accrued                expenses                                                                                 |   |   | 344,487 |   |   | 91,874 |   |
|                                                                                                            |   |   |   |   |   |  |   |
| Net                cash provided by operating activities                                                        |   |   | 2,762,887 |   |   | 548,758 |   |
|                                                                                                            |   |   |   |   |   |  |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                                             |   |   |   |   |   |  |   |
| Acquisition                of intangible assets                                                                 |   |   | - |   |   | (266,200 | ) |
| Acquisition                on property & equipment                                                          |   |   | (65,203 | ) |   | (131,600 | ) |
|                                                                                                            |   |   |   |   |   |  |   |
| Net                cash used in investing activities                                                            |   |   | (65,203 | ) |   | (397,800 | ) |
|                                                                                                            |   |   |   |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES:                                                            |   |   |   |   |   |  |   |
| Proceeds                from sale of marketable securities                                                      |   |   | 1,093,166 |   |   | - |   |
| Increase                in subscription Receivable                                                              |   |   | - |   |   | (125,859 | ) |
|                                                                                                            |   |   |   |   |   |  |   |
| Net                cash provided by (used in) financing activities                                              |   |   | 1,093,166 |   |   | (125,859 | ) |
|  EFFECT                OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS                              |   |   | (487,107 | ) |   | - |   |
|                                                                                                            |   |   |   |   |   |   |   |
| NET                INCREASE IN CASH & CASH EQUIVALENTS                                                      |   |   | 3,790,850 |   |   | 25,099 |   |
|                                                                                                            |   |   |   |   |   |  |   |
| CASH                & CASH EQUIVALENTS, BEGINNING OF PERIOD                                                 |   |   | 5,739,019 |   |   | 2,210,803 |   |
|                                                                                                            |   |   |   |   |
| CASH                & CASH EQUIVALENTS, END OF PERIOD                                                       |   | $ | 9,042,762 |   | $ | 2,235,902 |   |