U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





x
      QUARTERLY REPORT
      PURSUANT SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      quarterly period ended December 31, 2007





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: 000-31091







Equicap,
      Inc.


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




Nevada
            33-0652593(State
                or other jurisdiction of
            (I.R.S.
                employerincorporation
                or organization)
            identification
                number)





10510
                Hillsboro RoadSanta
                Ana, California
            92705(Address
                of principal executive offices)
            (Zip
                Code)





Issuer’s
      telephone number: (904) 507-4937





Not
      Applicable 
 (Former
      name, former address and former


fiscal
      year, if changed since last report)





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





Check
      whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange
      Act).  Yes
o No ý





APPLICABLE
      ONLY TO CORPORATE ISSUERS





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 28,169,013 shares of common stock, par value
      $.001 per share, outstanding as of February 4, 2008.





Transitional
      Small Business Disclosure Format (Check one):  YES
o  NO
x





**EQUICAP,
      INC.**




**-
      INDEX -**





Page


**PART
      I - FINANCIAL INFORMATION** :





Item
                1.
            Financial
                Statements
            1Consolidated
                Balance Sheet as of December 31, 2007 (unaudited)
            2Consolidated
                Statements of Operations for the Three and Six Months Ended December
                31,
                2007 and 2006 (unaudited)
            3Consolidated
                Statements of Cash Flows for the Six Months Ended December 31, 2007
                and
                2006 (unaudited)
            5Notes
                to Consolidated Financial Statements, December 31, 2007
                and
                  2006
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and
                Results
                  of Operations
            12Item
                3.
            Controls
                and Procedures
            19**PART
                II - OTHER INFORMATION**:Item
                1.
            Legal
                Proceedings
            19Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            19Item
                3.
            Defaults
                Upon Senior Securities
            19Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            19Item
                5.
            Other
                Information
            19Item
                6.
            Exhibits
            19Signatures
            20










**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements.**





Statements
      made in this Form 10-QSB (the “Quarterly Report”) that are not historical or
      current facts are “forward-looking statements” made pursuant to the safe harbor
      provisions of Section 27A of the Securities Act of 1933, as amended (the “Act”),
      and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). These statements often can be identified by the use of terms
      such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate”,
“approximate”, or “continue”, or the negative thereof. Equicap, Inc. (the
“Company”) intends that such forward-looking statements be subject to the safe
      harbors for such statements. The Company wishes to caution readers not to place
      undue reliance on any such forward-looking statements, which speak only as
      of
      the date made. Any forward-looking statements represent management’s best
      judgment as to what may occur in the future. However, forward-looking statements
      are subject to risks, uncertainties and important factors beyond the control
      of
      the Company that could cause actual results and events to differ materially
      from
      historical results of operations and events and those presently anticipated
      or
      projected. These factors include our current dependence on a limited number
      of
      sources of products and customers, demand for our products, pricing pressures
      on
      our products caused by demand and competition, delivery deadlines, customer
      satisfaction, our ability to generate sales and expand our customer base,
      warranty obligations and claims, operating a portion of our business in the
      Peoples Republic of China, currency controls and exchange rate exposure, and
      the
      other risk factors discussed in our reports filed with the Securities and
      Exchange Commission. The Company disclaims any obligation to revise any
      forward-looking statements to reflect events or circumstances after the date
      of
      such statement or to reflect the occurrence of anticipated or unanticipated
      events.


-1-




**EQUICAP,
      INC.**


**CONSOLIDATED
      BALANCE SHEET**


**DECEMBER
      31, 2007**


**(UNAUDITED)**





**ASSETS**


**CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            1,839,165Accounts
                receivable, net of allowance of $232,853
            
            
            341,431Inventory
            
            
            780,826Other
                receivables, net of allowance of $38,918
            
            
            652,959Advance
                payments
            
            
            4,532,027Prepaid
                expenses
            
            
            98,486Trade
                note receivable
            
            
            109,680**Total
                Current Assets**
            
            
            **8,354,574****PROPERTY
                AND EQUIPMENT, NET**
            
            
            **2,439,130****GOODWILL**
            
            
            **3,188,639****OTHER
                ASSETS**Deferred
                compensation
            
            
            226,790Other
                deferred assets
            
            
            1,426**Total
                Other Assets**
            
            
            **228,216****Total
                Assets**
            
            **$**
            **14,210,559****LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Accounts
                payable and accrued expenses
            
            $
            1,084,304Taxes
                payable
            
            
            37,568Other
                payables
            
            
            431,773**Total
                Current Liabilities**
            
            
            **1,553,645****MINORITY
                INTEREST**
            
            
            **2,648,612****STOCKHOLDERS’
                EQUITY**Preferred
                stock, $.001 par value, 10,000,000 sharesauthorized,
                -0- shares issued and outstanding
            
            
            -Common
                stock, $.001 par value, 500,000,000 sharesauthorized,
                28,169,013 shares issued and outstanding
            
            
            28,169Stock
                Subscription Receivable - IBC
            
            
            (1,780
            )Stock
                Subscription Receivable - Usunco
            
            
            (33,120
            )Additional
                paid-in capital
            
            
            15,092,331Accumulated
                deficit
            
            
            (5,738,157
            )Accumulated
                other comprehensive income
            
            
            660,859**Total
                Stockholders’ Equity**
            
            
            **10,008,302****Total
                Liabilities and Stockholders’ Equity**
            
            **$**
            **14,210,559**




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


-2-




**EQUICAP,
      INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**AND
      COMPREHENSIVE LOSS**


**(UNAUDITED)**


**For
                Three Months Ended****December
                31,****2007**
            
            **2006****REVENUE**
            
            **$**
            **741,978**
            
            **$**
            **336,468****COST
                OF SALES**
            
            
            **554,172**
            
            
            **278,872****GROSS
                PROFIT**
            
            
            **187,806**
            
            
            **57,596****OPERATING
                EXPENSES**Selling,
                general and administrative
            
            
            574,205
            
            
            60,767**LOSS
                FROM OPERATIONS**
            
            
            **(386,399**
            **)**
            
            **(3,171**
            **)****OTHER
                INCOME (EXPENSE)**Interest
                income
            
            
            46,640
            
            
            **-**Interest
                expense
            
            
            (741
            )
            
            -Other
                income (expense), net
            
            
            2,160
            
            
            -**Total
                other income (expense)**
            
            
            **48,059**
            
            
            **-****LOSS
                BEFORE PROVISION FOR INCOME TAX**
            
            
            **(338,340**
            **)**
            
            **(3,171**
            **)****PROVISION
                FOR INCOME TAX**
            
            
            **-**
            
            
            **-****NET
                LOSS BEFORE MINORITY INTEREST**
            
            
            **(338,340**
            **)**
            
            **(3,171**
            **)****MINORITY
                INTEREST**
            
            
            **18,434**
            
            
            **-****NET
                LOSS**
            
            
            **(356,774**
            **)**
            
            **(3,171**
            **)****OTHER
                COMPREHENSIVE INCOME**Foreign
                currency translation adjustment
            
            
            307,714
            
            
            -**COMPREHENSIVE
                LOSS**
            
            
            **($49,060**
            **)**
            **$**
            **(3,171**
            **)****LOSS
                PER COMMON SHARE**Basic
            
            
            **($
                0.01**
            **)**
            $
            -Diluted
            
            
            **($
                0.01**
            **)**
            $
            -**WEIGHTED
                AVERAGE SHARES OF****COMMON
                STOCK**Basic
            
            
            **28,169,013**
            
            
            **18,323,944**Diluted
            
            
            **28,169,013**
            
            
            **18,323,944**




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


-3-





**EQUICAP,
      INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**AND
      COMPREHENSIVE LOSS\**


**(UNAUDITED)**


**For
                Six Months Ended****December
                31,****2007**
            
            **2006****REVENUE**
            
            **$**
            **1,474,586**
            
            **$**
            **714,096****COST
                OF SALES**
            
            
            **1,142,610**
            
            
            **664,078****GROSS
                PROFIT**
            
            
            **331,976**
            
            
            **50,018****OPERATING
                EXPENSES**Selling,
                general and administrative
            
            
            835,967
            
            
            118,352**LOSS
                FROM OPERATIONS**
            
            
            **(503,991**
            **)**
            
            **(68,334**
            **)****OTHER
                INCOME (EXPENSE)**Interest
                income
            
            
            78,776
            
            
            **-**Interest
                expense
            
            
            (741
            )
            
            -Other
                income (expense), net
            
            
            (28,992
            )
            
            -**Total
                other income (expense)**
            
            
            **49,043**
            
            
            **-****LOSS
                BEFORE PROVISION FOR INCOME TAX**
            
            
            **(454,948**
            **)**
            
            **(68,334**
            **)****PROVISION
                FOR INCOME TAX**
            
            
            **-**
            
            
            **-****NET
                LOSS BEFORE MINORITY INTEREST**
            
            
            **(454,948**
            **)**
            
            **(68,334**
            **)****MINORITY
                INTEREST**
            
            
            **39,567**
            
            
            **-****NET
                LOSS**
            
            
            **(494,515**
            **)**
            
            **(68,334**
            **)****OTHER
                COMPREHENSIVE INCOME**Foreign
                currency translation adjustment
            
            
            478,682
            
            
            -**COMPREHENSIVE
                LOSS**
            
            
            **($15,833**
            **)**
            **$**
            **(68,334**
            **)****LOSS
                PER COMMON SHARE**Basic
            
            
            **($
                0.02**
            **)**
            $
            -Diluted
            
            
            **($
                0.02**
            **)**
            $
            -**WEIGHTED
                AVERAGE SHARES OF****COMMON
                STOCK**Basic
            
            
            **28,169,013**
            
            
            **18,323,944**Diluted
            
            
            **28,169,013**
            
            
            **18,323,944**




The
      accompanying notes are an integral part of these consolidated financial
      statements.   -4-




**EQUICAP,
      INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**For
                Six Months Ended****December
                31,****2007**
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            
            ($
                494,515
            )
            
            ($
                68,334
            )Adjustments
                to reconcile net loss to net cashused
                by operating activities:Minority
                interest
            
            
            39,567
            
            
            -Depreciation
            
            
            32,987
            
            
            -Allowance
                for bad debts
            
            
            215,863
            
            
            -Stock
                based compensation
            
            
            54,394
            
            
            -Non-cash
                payments of rent
            
            
            2,500
            
            
            2,100Changes
                in assets and liabilities:Accounts
                receivable
            
            
            322,246
            
            
            109,257Inventory
            
            
            (378,340
            )
            
            57,217Other
                receivables
            
            
            3,543,016
            
            
            -Advance
                payments
            
            
            (3,757,688
            )
            
            (20,000
            )Prepaid
                expenses
            
            
            (68,257
            )
            
            -Trade
                note receivable
            
            
            (107,323
            )
            
            -Other
                deferred assets
            
            
            3,288
            
            
            -Accounts
                payable and accrued expenses
            
            
            244,100
            
            
            (177,289
            )Taxes
                payable
            
            
            (2,701
            )
            
            -Other
                payables
            
            
            (389,414
            )
            
            -Due
                to shareholders
            
            
            -
            
            
            27,130**Total
                Adjustments**
            
            
            **(245,762**
            **)**
            
            **(1,585**
            **)****Net
                Cash Provided (Used) By Operating Activities**
            
            
            **(740,277**
            **)**
            
            **(
                69,919**
            **)****CASH
                FLOWS FROM INVESTING ACTIVITIES**Additions
                to property, plant and equipment
            
            
            (1,532,663
            )
            
            -Additions
                to construction in progress
            
            
            (409,185
            )
            
            -Acquisition
                of Shengte, net of cash from Shengte
            
            
            (3,495,463
            )
            
            -**Net
                Cash Used By Investing Activities**
            
            
            **(5,437,311**
            **)**
            
            -**EFFECT
                OF FOREIGN CURRENCY CONVERSION ON CASH**
            
            
            **167,941**
            
            
            **-****NET
                DECREASE IN CASH AND CASH EQUIVALENTS**
            
            
            **(6,009,647**
            **)**
            
            **(69,919**
            **)****CASH
                AND CASH EQUIVALENTS AT BEGINNING OF YEAR**
            
            
            **7,848,812**
            
            
            **129,798****CASH
                AND CASH EQUIVALENTS AT END OF YEAR**
            
            **$**
            **1,839,165**
            
            **$**
            **59,879****SUPPLEMENTAL
                INFORMATION:****CASH
                PAID FOR INCOME TAXES**
            
            $
            -
            
            $
            -**CASH
                PAID FOR INTEREST**
            
            $
            741
            
            $
            -




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


-5-





**EQUICAP,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**


**(UNAUDITED)**





**NOTE
      1 - ORGANIZATION AND DESCRIPTION OF BUSINESS**





Equicap,
      Inc. (“the Company”), a Nevada corporation, is a developer and distributor of
      diesel engine products and automotive parts sourced from China and sold to
      customers primarily located in China and North America.





On
      March
      7, 2007, the Company and Usunco Automotive, Ltd. (“Usunco”) entered into a Share
      Exchange Agreement (“Exchange Agreement”) which was consummated on March 9,
      2007. Under the terms of the Exchange Agreement, the Company acquired all of
      the
      outstanding equity securities of Usunco in exchange for 18,323,944 shares of
      common stock of Equicap, Inc.





For
      accounting purposes, because the Company had been a public shell company prior
      to the share exchange, the share exchange was treated as a recapitalization
      of
      the Company. As such, the historical financial information prior to the share
      exchange is that of Usunco and its subsidiaries. Historical share amounts have
      been restated to reflect the effect of the share exchange.





On
      June
      18, 2006, Usunco acquired 100% of IBC Automotive Products Inc (“IBC”), a
      California Corporation as of May 14, 2004 (date of inception), through a Share
      Exchange Agreement of 28% of Usunco’s shares. IBC is considered a “predecessor”
business to Usunco as its operations constituted the business activities of
      Usunco formed to consummate the acquisition of IBC. The consolidated financial
      statements reflect all predecessor statements of income and cash flow activities
      from the inception of IBC in May 2004.





On
      July
      6, 2007, the Board of Directors of Zhejiang Zhongchai Machinery Co., Ltd.
      (“Zhongchai”), the China based and 75% owned subsidiary of Equicap, Inc.,
      approved and finalized a Share Purchase Agreement (“Share Purchase Agreement”)
      with Xinchang Keyi Machinery Co., Ltd., a corporation incorporated in the
      People’s Republic of China (“Keyi”). Pursuant to the Share Purchase Agreement,
      Zhongchai purchased all the outstanding equity of Shengte from Keyi, the sole
      owner of Shengte for approximately $3.7 million.





**NOTE
      2 - INTERIM FINANCIAL STATEMENTS**





These
      interim financial statements should be read in conjunction with the Company’s
      audited financial statements for the year ended June 30, 2007, as not all
      disclosures required by generally accepted accounting principles for annual
      financial statements are presented. The interim financial statements follow
      the
      same accounting policies and methods of computations as the audited financial
      statements for the year ended June 30, 2007.





**NOTE
      3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





The
      accompanying unaudited financial statements have been prepared in accordance
      with generally accepted accounting principals (GAAP) applicable to interim
      financial information and with the requirements of Form 10-QSB and Item 310
      of
      Regulation S-B of the Securities and Exchange Commission. Accordingly, they
      do
      not include all of the information and footnotes required by accounting
      principles generally accepted in the United States of America for complete
      financial statements. Interim results are not necessarily indicative of results
      for a full year. In the opinion of management, all adjustments considered
      necessary for a fair presentation of the financial position and the results
      of
      operations and cash flows for the interim periods have been
      included.





**GOODWILL
      AND OTHER INTANGIBLE ASSETS**





Goodwill
      represents costs in excess of fair values assigned to the underlying net assets
      of acquired businesses. Goodwill and intangible assets deemed to have indefinite
      lives are not amortized. All other intangible assets are amortized over their
      estimated useful lives. Goodwill and indefinite-lived intangible assets are
      subject to annual impairment testing using the guidance and criteria described
      in Statement of Financial Accounting Standard No. 142, “Goodwill and Other
      Intangible Assets”. This testing compares carrying values to fair values and,
      when appropriate, the carrying value of these assets is reduced to fair value.
      As of December 31, 2007, the Company concluded that there were no impairments
      on
      goodwill or indefinite-lived intangibles.


-6-




**EQUICAP,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**


**(UNAUDITED)**





**NOTE
      3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (continued)





**EARNINGS
      (LOSS) PER SHARE**





The
      Company presents earnings (loss) per share on a basic and diluted basis. Basic
      earnings (loss) per share have been computed by dividing net earnings by the
      weighted average number of shares outstanding. Diluted earnings (loss) per
      share
      has been computed by dividing net earnings by the weighted average number of
      shares outstanding including the dilutive effect of equity securities. All
      share
      and per share data have been adjusted to reflect the recapitalization of the
      Company after the share exchange agreement with Usunco.





**Three
                Months Ended December 31, 2007**
            
            **Six
                Months Ended December 31, 2007****Net
                Income (Loss)**
            
            **Shares**
            
            **Per
                Share**
            
            **Net
                Income (Loss)**
            
            **Shares**
            
            **Per
                Share**Basic
                EPS
            
            
            ($356,774
            )
            
            28,169,013
            
            
            ($0.01
            )
            
            ($494,515
            )
            
            28,169,013
            
            
            ($0.02
            )Effect
                of dilutive securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Diluted
                EPS
            
            
            ($356,774
            )
            
            28,169,013
            
            
            ($0.01
            )
            
            ($494,515
            )
            
            28,169,013
            
            
            ($0.02
            )




**Three
                Months Ended December 31, 2006**
            
            **Six
                Months Ended December 31, 2006****Net
                Income (Loss)**
            
            **Shares**
            
            **Per
                Share**
            
            **Net
                Income (Loss)**
            
            **Shares**
            
            **Per
                Share**Basic
                EPS
            
            
            ($3,171
            )
            
            18,323,944
            
            $
            -
            
            
            ($68,334
            )
            
            18,323,944
            
            $
            -Effect
                of dilutive securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Diluted
                EPS
            
            
            ($3,171
            )
            
            18,323,944
            
            $
            -
            
            
            ($68,334
            )
            
            18,323,944
            
            $
            -




**NOTE
      4 - INVENTORY**





Inventory
      at December 31, 2007 consisted of the following:




Starters
                & Alternators
            
            $
            25,863Gears
                products
            
            
            754,963Total
            
            $
            780,826





**NOTE
      5 - ADVANCE PAYMENTS**





Advance
      payments amounted to approximately $4.53 million as of December 31, 2007, which
      represent a deposit that Zhongchai placed with Zhejiang Xinchai Holdings Co.,
      Ltd. ("Xinchai Holdings"), a corporation in China, to secure Zhongchai's
      exclusive right to acquire 100% interest of a project from Xinchai
      Holdings within twelve months starting Oct. 15, 2007. The project is located
      in
      Hangzhou, Zhejiang Province, China, for assembly of advanced diesel
      engines, engine components and related products. The project is currently in
      the
      process of obtaining land, approval, and final registration. Zhongchai will
      be
      entitled to a refund of the full deposit amount in case the project is not
      completed or Zhongchai decides not to pursue the transaction within the twelve
      month period. The Company expects to enter into a definitive agreement after
      completion of due diligence and final establishment of the
      operations.





**NOTE
      6 - RENTAL EXPENSE**





The
      Company's U.S. office site is located in the state of California. Rental expense
      for the three months ended December 31, 2007 and 2006 was $1,250 and $1,050,
      respectively. Rental expense for the six months ended December 31, 2007 and
      2006
      was $2,500 and $2,100 respectively. The Company’s Chinese operations are located
      in Hangzhou, China, and the rental expense for three months ended December
      31,
      2007 and 2006 was $11,323 and $2,606, respectively. The rental expense for
      six
      months ended December 31, 2007 and 2006 was $21,235 and $5,178,
      respectively.


-7-




**EQUICAP,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**


**(UNAUDITED)**





**NOTE
      7- RISK FACTORS**





For
      the
      auto parts segment, one major customer, JNS TSUSHO Corporation, accounted for
      100% of the net revenue of auto parts in North America for the three months
      ended December 31, 2007. For the diesel power segment, two customers, Zhejiang
      Xinchai Stock Co., Ltd. and Zhejiang Xinchai Power Co., Ltd., accounted for
      67%
      and 33%, respectively, of the net revenue in China, for the three months ended
      December 31, 2007. These three customers accounted for 26%, 49% and 25%,
      respectively, of the Company’s consolidated revenue for the three months ended
      December 31, 2007. For the six months ended December 31, 2007, two major
      customers, Ltd/Visteon and JNS TSUSHO Corporation, accounted for approximately
      50% and 46% of the net revenue of auto parts in North America; and two
      customers, Zhejiang Xinchai Stock Co., Ltd. and Zhejiang Xinchai Power


Co.,
      Ltd., accounted for 67% and 33%, respectively, of the net revenue in China.
      These four customers accounted for 14%, 13%, 47% and 24%, respectively, of
      the
      Company’s consolidated revenue for the six months ended December 31,
      2007.




For
      the
      auto parts segment, one major supplier, Fittswell (Hong Kong) Industries Co.,
      Ltd provided 100% of the Company's purchases of the auto parts in North America
      for the three months ended December 31, 2007. For the diesel power segment,
      three major suppliers, Zhejiang Yuyang Machinery Co., Ltd., Changzhou No. 2
      Gears Co., Ltd., and Xinchang ZhiSheng Machinery Co., Ltd. accounted for
      approximately 39%, 15% and 7%, of the total purchases in China for the three
      months ended December 31, 2007. These four suppliers accounted for 18%, 32%,
      12%
      and 6%, respectively, of the Company’s consolidated purchases for the three
      months ended December 31, 2007. For the six months ended December 31, 2007,
      three major suppliers, Fittswell (Hong Kong) Industries Co., Ltd, Zhejiang
      Yongkang Boyu and Wuxi Susun provided approximately 43%, 40% and 17%,
      respectively of the Company's purchases of the auto parts in North America;
      and
      three major suppliers, Zhejiang Yuyang Machinery Co., Ltd., Changzhou No. 2
      Gears Co., Ltd., and Xinchang Zhaofeng Machinery Co., Ltd., accounted for
      approximately 40%, 16% and 7%, of the total purchases in China. These six
      suppliers accounted for 10%, 9%, 4%, 31%, 13% and 6%, respectively, of the
      Company’s consolidated purchases for the six months ended December 31,
      2007.





**NOTE
      8- DEFERRED COMPENSATION**





As
      described in Note 11 (“Stock-based compensation”), the Company granted options
      to employees and warrants to the private placement agent. Following SFAS No.
      123R, the Company recognizes expenses on the fair value of the options and
      warrants. Deferred compensation represents stock-based compensation that will
      be
      expensed in future periods based on the vesting time of such options and
      warrants.





**NOTE
      9 - SEGMENT REPORTING**





The
      Company’s reporting segments have been determined based on the geographic
      location of their operations and the nature of the products offered to
      customers. The North America/Auto Parts Segment, represented by the 100% owned
      subsidiary, IBC Automotive Products, Inc. headquartered in California, USA,
      focuses on sourcing automotive parts and products from China and distributing
      them in North America and other regions. The China/Diesel Power Segment,
      represented by the 75% owned subsidiary Zhejiang ZhongChai Machinery Co., Ltd.
      in Hangzhou, China, currently focuses on distribution of mid-sized diesel
      engines and engine related products, such as gears, for the industrial and
      agricultural equipment markets in China.





The
      accounting policies of the segments are the same as those described in Note
      3
      Summary of Significant Accounting Policies. Segment operating results evaluate
      earnings before corporate and unallocated shared expenses, amortization of
      intangible assets, gain or loss on sale of assets, net interest income, income
      tax benefits and minority interests. Intersegment and intergeographic sales,
      if
      any, are accounted for on an arm’s length pricing basis. There were no
      Intersegment sales for the three and six months ended December 31, 2007 and
      2006.


-8-




**EQUICAP,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**


**(UNAUDITED)**





**NOTE
      9 - SEGMENT REPORTING** (continued)








**Three
                months ended December 31,**
            
            **Six
                months ended December 31,****Segment
                revenues**
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**North
                America/Auto Parts
            
            $
            192,584
            
            $
            336,468
            
            $
            419,427
            
            $
            714,096China/Diesel
                Power
            
            $
            549,394
            
            $
            -
            
            $
            1,055,159
            
            $
            -Corporate
                and Elimination
            
            $
            -
            
            $
            -
            
            
            
            
            $
            -Consolidated
            
            $
            741,978
            
            $
            336,468
            
            $
            1,474,586
            
            $
            714,096





**Three
                months ended December 31,**
            
            **Six
                months ended December 31,****Segment
                operating earnings (loss)**
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**North
                America/Auto Parts
            
            
            ($225,
                247
            )
            
            ($3,171
            )
            
            ($247,064
            )
            
            ($68,334
            )China/Diesel
                Power
            
            $
            34,812
            
            $
            -
            
            $
            104,382
            
            $
            -Corporate
                and Elimination
            
            
            ($195,964
            )
            $
            -
            
            
            ($361,309
            )
            $
            -Consolidated
            
            
            ($386,399
            )
            
            ($3,171
            )
            
            ($503,991
            )
            
            ($68,334
            )





**Three
                months ended December 31,**
            
            **Six
                months ended December 31,****Depreciation
                expense**
            
            **2007**
            
            **2006**
            
            **2007**
            
            
            
            **2006**North
                America/Auto Parts
            
            $
            -
            
            $
            -
            
            $
            -
            
            
            
            
            $
            -China/Diesel
                Power
            
            $
            14,164
            
            $
            -
            
            $
            32,987
            
            
            
            
            $
            -Corporate
                and Elimination
            
            $
            -
            
            $
            -
            
            $
            -
            
            
            
            
            $
            -Consolidated
            
            $
            14,164
            
            $
            -
            
            $
            32,987
            
            
            
            
            $
            -**As
                of December 31,****Segment
                identifiable assets**
            
            
            **2007**
            
            
            **2006**North
                America/Auto Parts
            
            $
            94,315
            
            $
            397,730China/Diesel
                Power
            
            $
            12,825,974
            
            $
            -Corporate
                and Elimination
            
            $
            1,290,270
            
            $
            -Consolidated
            
            $
            14,210,559
            
            $
            397,730




-9-


**EQUICAP,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**


**(UNAUDITED)**





**NOTE
      10 - STOCK AUTHORIZATION AND ISSUANCE**





On
      March
      9, 2007, the Company completed the sale of an aggregate of 8,450,704 shares
      of
      its common stock to a limited number of institutional investors in a private
      placement transaction pursuant to offering exemptions under the Securities
      Act
      of 1933. The shares, which represent approximately 30% of our outstanding common
      stock on an after-issued basis, were sold at a price of $1.42 per share, for
      net
      proceeds of approximately $10 million. The net proceeds from this transaction
      will be used for general working capital purposes.





The
      Company has a registration payment arrangement with regard to the common stock
      issued in the private offering. The Company was required to file a registration
      statement within 45 days of closing and cause the registration statement to
      become effective on or prior to 150 days after the closing date. In the event
      the Company does not satisfy the registration obligations of the registration
      rights agreement, (“Registration Default”), the Company shall pay the investors
      an amount in cash equal to 1% of the aggregate investment amount for each 30-day
      period of a Registration Default. The maximum penalty that the Company may
      incur
      under this registration payment arrangement is 10% of the aggregate investment
      amount, or $1,200,000. Any payments made are to be prorated for any portion
      of a
      30-day period of a Registration Default. In addition, the Company is required
      to
      use reasonable commercial efforts to maintain the registration statement’s
      effectiveness and file additional registration statements in the future, to
      continue to provide to the stockholders the opportunity to sell the shares
      of
      restricted stock that they hold. The Company paid $32,000 in respect of the
      penalty, to date, because the registration statement was not timely declared
      effective.





Although
      the Company has the obligation to register shares of common stock for other
      persons under the above described registration rights agreement, the Company
      is
      not obligated to pay liquidated damages in the event that their shares are
      not
      registered or the registration statement is not available for their
      sale.





**NOTE
      11 - STOCK-BASED COMPENSATION**





As
      of
      December 31, 2007, there are outstanding 366,550 options to employees (“Employee
      Options”) and 422,535 warrants (“Agent Warrants”) to the private placement
      agent. Both the Employee Options and Agent Warrants vest over three years and
      have a life of five years. For the three and six months ended December 31,
      2007,
      the Company recorded approximately $27,197 and $54,394, respectively, of
      stock-based compensation based on the fair value method of SFAS. N0. 123R using
      the following assumptions: Volatility of 34.94%, risk free interest rate of
      4.63%, 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
      fair
      value of the options and warrants was 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-based compensation was determined using the
      Black-Scholes model.





**NOTE
      12 - MAKE GOOD ESCROW AGREEMENT**





In
      connection with the Offering, for the benefit of the investors, eight of the
      former shareholders of Usunco, some of whom are the officers and directors
      of
      Equicap, have agreed to place into escrow an aggregate of 10,140,846 shares
      of
      common stock issued in the Share Exchange. The placing of shares by the former
      shareholders of Usunco into escrow was tantamount to a reverse stock split
      followed by the grant of a restricted stock award. If the consolidated financial
      statements of Equicap for the fiscal year ending June 30, 2007, prepared in
      accordance with United States generally accepted accounting principles,
      consistently applied, reflect either (i) less than $2,320,000 of after-tax
      net
      income or (ii) earnings before income tax provision and before minority interest
      of less than $3,200,000, then 3,042,254 shares of common stock in escrow will
      be
      distributed to the investors on a pro rata basis for no additional
      consideration. The Company did not satisfy the condition and these shares have
      been distributed. According to the Registration Rights Agreement, the Company
      filed a registration statement for such 3,042,254 shares distributed to the
      investors, and the registration statement was declared effective on December
      21,
      2007.


-10-




**EQUICAP,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**


**(UNAUDITED)**





**NOTE
      12 - MAKE GOOD ESCROW AGREEMENT** (continued)





If
      either
      (i) the earnings per share reported in the Annual Report on Form 10-KSB of
      Equicap for the fiscal year ending June 30, 2008 is less than $0.343 on a fully
      diluted basis (as equitably adjusted for any stock splits, stock combinations,
      stock dividends or similar transactions), (ii) the earnings per share before
      income tax provision and before minority interest reported in the Annual
      Report on Form 10-KSB of the company for the fiscal year ending June 30,
      2008, is less than $0.446 on a fully diluted basis (as equitably adjusted for
      any stock splits, stock combinations, stock dividends or similar transactions),
      (iii) the after tax net income reported in the Annual Report on Form 10-KSB
      of
      the company for the fiscal year ending June 30, 2008, is less than $10,000,000,
      or (iv) the earnings before income tax provision and before minority interest
      reported in the Annual Report on Form 10-KSB of the company for the fiscal
      year
      ending June 30, 2008, is less than $13,020,000, then 7,098,592 shares of common
      stock in escrow will be distributed to the investors on a pro rata basis for
      no
      additional consideration. Any shares not distributed to the investors will
      be
      released to the persons who placed them in escrow. Any make good shares issued
      to the investors will be subject to the registration rights under the
      Registration Rights Agreement.





According
      to SAB 79, *Accounting
      for Expenses or Liabilities by Principal Stockholder(s),* if the
      performance criteria are not met these shares will be released to the investors
      and treated as an expense for the amount of the market value of the shares
      as of
      the date of release. Per SFAS No. 123R, *Accounting
      for Stock-Based Compensation* ,
      if the
      performance criteria are met, the shares will be released back to the former
      shareholders of Usunco and treated as an expense for the amount of the market
      value of the shares as of the date of release. Based upon the market price
      of
      $1.00 per share of common stock as of June 30, 2007, the total expense
      recognized for the fiscal year of 2007 was $3,954,930. Based upon the current
      market price of $0.20 per share, the potential impact of the release of shares
      upon the financial statements is estimated to be approximately $1.4 million
      for
      the fiscal year of 2008. Such expense is treated as an unusual item since it
      is
      deemed to be unusual in nature but may not be infrequent in occurrence. This
      recognition of expense will not occur if the shares are forfeited or cancelled
      and are not released to either the investors or the former shareholders of
      Usunco.





**NOTE
      13 - SUBSEQUENT EVENTS**





None.


-11-


**Item
      2.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of Operations or
      Plan
      of Operations.**




Equicap,
      Inc. (“Equicap”) does business through its subsidiary, Usunco Automotive Limited
      (“Usunco”) which in turn operates through IBC Automotive Products, Inc. (“IBC”),
      its wholly-owned subsidiary established under the laws of the State of
      California (the “North America/Auto Parts Segment”), and through Zhejiang
      ZhongChai Machinery Co., Ltd. (the “ZhongChai JV”), a 75%-owned joint venture
      established under the laws of the People’s Republic of China (the “PRC” or
“China”) and Zhejiang Shengte Transmission Co., Ltd.(“Shengte”) a company
      established under the laws of the PRC and wholly owned by ZhongChai JV (the
      “China/Diesel Power Segment”). Through its operating subsidiaries, the company
      is engaged in the development and distribution of automotive parts, diesel
      engines, gears and related products in industrial and agricultural sectors,
      sourced from China and sold to customers located primarily in China and North
      America.




**Company
      Background**




Equicap
      was a public “shell” company with nominal assets until March 9, 2007, when it
      conducted a share exchange with the equity owners of Usunco (“Share Exchange”)
      and sold common stock in a private placement to eleven accredited and
      institutional investors for gross proceeds of $12,000,000. Prior to the Share
      Exchange, its sole business had been to identify, evaluate and investigate
      various companies with the intent that, if such investigation warranted, a
      reverse merger transaction be negotiated and completed pursuant to which Equicap
      would acquire a target company with an operating business with the intent of
      continuing the acquired company’s business as a publicly held
      entity.




*Share
      Exchange*




Equicap
      and Usunco entered a Share Exchange Agreement on March 7, 2007 which was
      consummated on March 9, 2007. Under the terms of the Exchange Agreement, Equicap
      acquired all the outstanding equity securities of Usunco in exchange for
      18,323,944 shares of common stock of Equicap, and thereby Equicap acquired
      Usunco as a wholly-owned subsidiary.




Upon
      execution of the Exchange Agreement, Mr. Peter Wang was appointed a director
      and
      the president of Equicap. Mr. Thomas W. Colligan, the sole officer and director
      of Equicap before the Share Exchange, submitted his resignation letter resigning
      from all executive offices, effective on March 9, 2007, and with respect to
      his
      position as a director, effective on March 29, 2007. On March 29, 2007,
      additional persons were appointed to the board of directors and as management
      persons.




In
      connection with the Share Exchange, Equicap engaged Fountainhead Capital
      Partners Limited, to act as a financial advisor. At the closing of the Share
      Exchange, Fountainhead was paid an advisory fee of $450,000 by Equicap.




In
      connection with the Share Exchange, vFinance Investments, Inc., for advice
      in
      connection with the transaction, was issued 161,633 shares of common stock
      as
      compensation. The shares were issued as restricted stock. These shares have
      registration rights.




Since
      the
      former shareholders of Usunco own approximately 65% of the shares of common
      stock of Equicap, the former shareholders of Usunco have control over Equicap.
      As a result, Usunco is deemed to have been the acquiring company in the Share
      Exchange for accounting purposes, and the Share Exchange transaction is treated
      as a reverse acquisition with Usunco as the acquirer and Equicap as the acquired
      party. Equicap changed its fiscal year to end June 30.




*Conversion
      of Convertible Note of Equicap*




Equicap
      and Fountainhead Capital Partners Limited entered into a convertible note on
      December 31, 2006, the principal of which was for working capital and discharge
      of accrued payables of Equicap. As part of the Share Exchange, Fountainhead
      agreed to convert the outstanding principal and accrued interest of
      approximately $100,000 into 702,132 shares of common stock, contingent on the
      closing of the Share Exchange. Upon the conversion, the note was cancelled.
      The
      shares were issued as restricted stock. Equicap has agreed to register the
      shares issued in the conversion.




-12-




*Private
      Placement Offering*




As
      a
      condition to the Share Exchange, Equicap and Usunco conducted a private
      placement offering of its common stock to accredited, institutional investors
      in
      which Equicap raised gross proceeds of $12 million (“Offering”) from 11
      investors under an exemption from registration under Section 4(2) of the
      Securities Act. After commissions and expenses related to the Offering and
      the
      $450,000 advisory fee payable to Fountainhead, Equicap received net proceeds
      of
      approximately $10,000,000 in the Offering. The investors were issued an
      aggregate of 8,450,704 shares of common stock, representing approximately 30%
      of
      the issued and outstanding common stock of Equicap. The price per share of
      common stock was $1.42.




vFinance
      Investment, Inc. was the exclusive placement agent for the Offering. For their
      services as placement agent, Equicap paid vFinance a fee equal to approximately
      $983,000. Equicap also reimbursed vFinance its expenses of approximately
      $120,000. In addition, Equicap issued to vFinance a five-year warrant to
      purchase an aggregate of 422,535 shares of common stock at an exercise price
      of
      $2.13 per share (“Agent Warrant”). The warrant vests over a three-year period
      and terminates March 6, 2012.




In
      connection with the Offering, Equicap granted registration rights to the
      investors and the holders of the Agent Warrant, and provided for registration
      rights for certain former principal shareholders of Equicap through piggy-back
      rights for their respective shares of common stock. Equicap entered into one
      registration rights agreement with the aforementioned persons. Equicap agreed
      to
      register the sale of the 8,450,704 shares of common stock issued to investors
      in
      the Offering, the 161,633 shares of common stock issued to vFinance, the 422,535
      shares of common stock underlying the Agent Warrant and the 1,161,632 shares
      held by the former principal shareholders of Equicap. In addition, if certain
      make good shares are distributed to the investors, Equicap will be obligated
      to
      register these shares in addition. If any of the above shares are not eligible
      for registration because of the rules and regulations of the Securities and
      Exchange Commission, when they are eligible for registration, Equicap will
      be
      obligated to take such action to have them registered for sale by the holder
      by
      filing successive registration statements. The initial registration statement
      for sale of the common shares was filed within the time limit of the
      registration rights agreement. Equicap had to have the registration statement
      effective within 150 days of the closing date of the Offering. If these actions
      are not achieved by those dates then Equicap must pay each of, and only, the
      investors 1% of the share purchase price paid by such investor for each month
      thereafter that the investors cannot publicly sell the shares of common stock
      covered by that registration statement. The same penalties for the failure
      to
      file or have declared effective a registration statement within the stated
      time
      periods and maintain its effectiveness also apply to the subsequent required
      registration statements. The maximum penalties under the liquidated damages
      provision payable to the investors is 10% of the share purchase price paid
      by
      the investors in the Offering. The above timing and number of shares are subject
      to various conditions, and the registration statements are subject to the rules
      and regulations of the SEC and the staff interpretations thereof. The
      registration statements required for the investors and vFinance under the
      registration rights agreement must be kept effective until all the shares of
      these parties are sold or may be sold without limitation under Rule 144k.
      Equicap did not meet the effectiveness deadline for the initial registration
      statement and paid $32,000 to the investors under the liquidated damages
      provision.




The
      former principal shareholders of Equicap who have piggy-back rights also have
      a
      demand registration right after all the shares of the investors and vFinance
      have either been sold or may be sold without limitation under Rule 144k. The
      company is obliged to keep this registration statement effective until all
      the
      shares have been sold or are eligible for sale under Rule 144k.




Equicap
      completed the capitalization of its PRC joint venture shortly after the above
      described private placement. Pursuant to PRC law, foreign joint ventures have
      to
      be capitalized pursuant to the terms of their approval. Equicap, through Usunco
      contributed $8,000,000 and its joint venture partner contributed $2,600,000,
      all
      of which will be used as working capital and other corporate purposes. Future
      capital contributions between the parties are to be on a 75% - 25% basis, with
      Usunco being the majority party.


-13-




**Results
      of Operations**




***Three
      Months Ended*** **December
      31, 2007 Compared to Three Months Ended December 31, 2006**




*Revenue*




Revenue
      increased by $405,510 or 121% to $741,978 for the three months ended December
      31, 2007 compared with $336,468 for the three months ended December 31, 2006.
      Revenue for the three months ended December 31, 2007, consists of sales of
      automotive parts in North America and sales of gears and transmissions in China,
      for $192,584 and $549,394, respectively. All sales revenue for the three months
      ended December 31, 2006 were generated by its IBC subsidiary, incepted on May
      14, 2004, from distribution of starters and alternators.




*Cost
      of Sales and Gross Margin*




Cost
      of
      sales was $554,172 for the three months ended December 31, 2007, increasing
      by
      $275,300 or 99%, from $278,872 for the three months ended December 31, 2006.
      The
      gross margin was approximately 25% for the three months ended December 31,
      2007,
      compared to approximately 17% for the three months ended December 31, 2006.
      The
      low gross margin for the quarter ended December 31, 2006 for IBC subsidiary
      was
      due to its inability to raise prices on its customers and had to absorb by
      itself the price increases from suppliers during the quarter.




*Selling,
      General and Administrative Expenses*




Selling,
      general and administrative (“SG&A”) expenses consisted primarily of labor
      cost and related overhead costs for sales, marketing, finance, legal, human
      resources and general management. Such costs also include the expenses
      recognized for stock-based compensation pursuant to FAS 123(R).




SG&A
      expenses increased by $513,438 to $574,205 in the three months ended December
      31, 2007, from $60,767 in three months ended December 31, 2006. Increase in
      SG&A was mainly attributed to the increase in costs related to being a
      public company including professional services related to auditing, legal and
      other services, costs associated with the new recruitments and operating
      expenses in China, a special provision of bad debt allowance for amount of
      $215,103 owing to management’s expectation of non-collection of amounts due from
      one particular customer of IBC, and non-cash expenses amounting to $27,197
      recognized for stock based compensation related to stock options and warrants
      granted in the period pursuant to SFAS 123(R).




*Net
      Loss*




Net
      loss
      reached $356,774 in three months ended December 31, 2007, compared with net
      loss
      of $3,171 in the three months ended December 31, 2006. The net loss was mainly
      attributed to the increase in general and administrative expenses, comprised
      of
      costs related to being a public company including professional services related
      to auditing, legal and other services, costs associated with the new
      recruitments and operating expenses in China, a special bad
      debt
      allowance provision, and
      non-cash expenses recognized for stock based compensation related to stock
      options and warrants granted in the period pursuant to SFAS 123(R).




-14-




***Six
      Months Ended December 31, 2007 Compared to Six Months Ended December 31,
      2006***




*Revenue*




Revenue
      increased by $760,490 or 106% to $1,474,586 for the six months ended December
      31, 2007 compared with $714,096 for the six months ended December 31, 2006.
      Revenue for the six months ended December 31, 2007, consists of sales of
      automotive parts in North America and sales of gears and transmissions in China,
      for $419,427 and $1,055,159, respectively. All sales revenue for the six months
      ended December 31, 2006 were generated by its IBC subsidiary, incepted on May
      14, 2004, from distribution of starters and alternators.




*Cost
      of Sales and Gross Margin*




Cost
      of
      sales was $1,142,610 for the six months ended December 31, 2007, increasing
      by
      $478,532 or 72%, from $664,078 for the six months ended December 31, 2006.
      The
      gross margin was approximately 23% for the six months ended December 31, 2007,
      compared to approximately 7% for the six months ended December 31, 2006. The
      low
      gross margin for the six months ended December 31, 2006 for IBC subsidiary
      was
      due to its to its inability to raise prices on its customers and had to absorb
      by itself the price increases from suppliers during the period.




*Selling,
      General and Administrative Expenses*




Selling,
      general and administrative (“SG&A”) expenses consisted primarily of labor
      cost and related overhead costs for sales, marketing, finance, legal, human
      resources and general management. Such costs also include the expenses
      recognized for stock-based compensation pursuant to FAS 123(R).




SG&A
      expenses increased by $717,615 to $835,967 in the six months ended December
      31,
      2007, from $118,352 in six months ended December 31, 2006. Increase in SG&A
      was mainly attributed to the increase in costs related to being a public company
      including professional services related to auditing, legal and other services,
      costs associated with the new recruitments and operating expenses in China,
      a
      special provision of bad debt allowance for amount of $215,103 owing to
      management’s expectation of non-collection of amounts due from one particular
      customer of IBC, and non-cash expenses amounting to $54,394 recognized for
      stock
      based compensation related to stock options and warrants granted in the period
      pursuant to SFAS 123(R).




*Net
      Loss*




Net
      loss
      reached $494,515 in six months ended December 31, 2007, compared with net loss
      of $68,334 in the six months ended December 31, 2006. The net loss was mainly
      attributed to the increase in general and administrative expenses, comprised
      of
      costs related to being a public company including professional services related
      to auditing, legal and other services, costs associated with the new
      recruitments and operating expenses in China, a special bad
      debt
      allowance provision, and
      non-cash expenses recognized for stock based compensation related to stock
      options and warrants granted in the period pursuant to SFAS 123(R).




*Potential
      Impact on Future Results from Make Good Arrangement*




As
      elaborated in the section “Share Exchange and Private Placement”, in connection
      with the Offering, for the benefit of the investors, eight of the former
      shareholders of Usunco, some of whom are the officers and directors of Equicap,
      agreed to place into escrow an aggregate of 10,140,846 shares of common stock
      issued in the Share Exchange. If the consolidated financial statements of
      Equicap for the fiscal year ending June 30, 2008, prepared in accordance with
      United States generally accepted accounting principles, consistently applied,
      do
      not meet certain performance criteria, then 7,098,592 shares of common stock
      in
      escrow will be distributed to the investors on a pro rata basis for no
      additional consideration. Any shares not distributed to the investors will
      be
      released to the persons who placed them in escrow.




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According
      to SAB 79, Accounting for Expenses or Liabilities by Principal Stockholder(s),
      if the performance criteria are not met these shares will be released to the
      investors and treated as an expense for the amount of the market value of the
      shares as of the date of release. Per SFAS No. 123R, Accounting for Stock-Based
      Compensation, if the performance criteria are met, the shares will be released
      back to the former shareholders of Usunco and treated as an expense for the
      amount of the market value of the shares as of the date of release. Therefore,
      whether or not such performance criteria are met, based upon the current market
      value of $0.20, the potential impact of the release of shares (either to the
      investors or back to the former Usunco shareholders) upon the financial
      statements is estimated to be approximately $1.4 million for fiscal year 2008.
      This recognition of expense will not occur if the shares are forfeited or
      cancelled and are not released to either the investors or the former
      shareholders of Usunco.




**Liquidity
      and Capital Resources**




As
      of
      December 31, 2007, Equicap had current assets equal to $8,354,574 which
      primarily were comprised of cash and cash equivalents of $ 1,839,165, inventory
      of $780,826 and net receivables and other receivables of $5,518,690. Equicap’s
      current liabilities as of December 31, 2007 were $1,553,645, which primarily
      were comprised of trade accounts payable, accrued expenses, taxes payable and
      other payables. At December 31, 2007, Equicap had working capital of $6,800,929.
      Equicap believes that it has sufficient operating capital for its current
      operations.




Equicap
      has funded its operations from income generated by its IBC subsidiary and by
      its
      PRC subsidiaries. The principal equity funding for the company was a private
      placement in March 2007, in which Equicap sold 8,450,704 shares at an aggregate
      offering price of $12,000,000. After related expenses, Equicap had net proceeds
      of approximately $10,000,000. The net proceeds of the private placement are
      being used by Equicap and its various subsidiaries principally for market
      expansion, product development, product acquisition and working capital and
      general corporate purposes.




Equicap
      used $8,000,000 of the proceeds from the March 2007 offering to fund the capital
      of ZhongChai JV. These funds are available as working capital of the joint
      venture. The joint venture partner contributed $2,600,000 of working capital
      simultaneously with the contribution by Equicap.




Subsequent
      to the fiscal year end of June 30, 2007, Equicap used approximately $3,700,000
      of its cash assets to acquire Shengte as a wholly-owned subsidiary of ZhongChai
      JV. The cash assets used for this acquisition were those forming a part of
      the
      working capital contributed to ZhongChai JV. Shengte is a manufacturer and
      distributor of gears and transmissions systems mainly used with diesel engines
      for industrial and agricultural machinery. We expect that future cash flows
      generated from the operation of gears business will be sufficient to cover
      Shengte’s working capital requirements.




Also
      subsequent to the fiscal year end of the June 30, 2007 quarter, Equicap did
      not
      have the registration statement declared effective within the time period
      specified in the registration rights agreement for the March 2007 offering.
      As a
      result Equicap was obligated to pay the liquidated damage amount provided in
      the
      agreement to the investors which was an aggregate of $32,000. The maximum amount
      of liquidated damages is 10% of the amount paid for the common stock purchased
      by the investors.





In
      October, 2007, the Zhongchai JV placed a deposit equivalent to approximately
      $4.52 million with Zhejiang Xinchai Holdings Co., Ltd. ("Xinchai Holdings"),
      a
      corporation in China, to secure Zhongchai JV's exclusive right to acquire
      100% interest of a project from Xinchai Holdings within twelve months
      starting October 15, 2007. The project is located in Hangzhou, Zhejiang
      Province, China, for assembly of advanced diesel engines, engine components
      and related products. The project is currently in the process of obtaining
      land,
      approval, and final registration. Zhongchai will be entitled to a refund of
      the
      full deposit amount in case the project is not completed or Zhongchai decides
      not to pursue the transaction within the twelve month period. The Company
      expects to enter into a definitive agreement after completion of due diligence
      and final establishment of the operations.


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As
      Equicap expands its operations and considers additional acquisitions of private
      companies, divisions or product lines, it may require additional capital for
      its
      business development and operations. Equicap does not have any specific sources
      of capital at this time, however, it believes that it will be able to find
      additional funding for its capitalization needs. Such capital may be in the
      form
      of either debt or equity or a combination. To the extent that financing is
      in
      the form of debt, it is anticipated that the terms will include various
      restrictive covenants, affirmative covenants and credit enhancements such as
      guarantees or security interests. The terms of any proposed financing may not
      be
      acceptable to Equicap. There is no assurance that funding will be identified
      or
      accepted by Equicap or, that if offered, it will be concluded.





**Off-Balance
      Sheet Arrangements**




The
      company does not have off-balance sheet arrangements, financings, or other
      relationships with unconsolidated entities or other persons, also known as
      “special purpose entities” (SPEs).




**Critical
      Accounting Policies and Estimates**




*Principles
      of Consolidation*




The
      consolidated financial statements include the accounts of the parent company
      and
      the subsidiaries. Inter-company accounts and transactions have been eliminated
      in consolidation.




*Cash
      and Cash Equivalents*




In
      accordance with Statement of Financial Accounting Standards No. 95, “Statement
      of Cash Flows,” the Company considers all highly liquid instruments with
      original maturities of three months or less to be cash and cash
      equivalents.




*Accounts
      Receivable*




Trade
      accounts receivable are stated at the amount management expects to collect
      from
      balances outstanding at the end of the period.  Based on its assessment of
      the credit history with customers having outstanding balances and current
      relationships with them, management makes conclusions whether any realization
      of
      losses on balances outstanding at the end of the period will be deemed
      uncollectible based on the age of the receivables. For the North America/Auto
      Parts segment, the Company reserves 5% of accounts receivable balances that
      have
      been outstanding for greater than 90 days. For the China/Diesel Power segment,
      the Company reserves 0.5% of accounts receivable balances that have been
      outstanding below three months, 5% of accounts receivable balances that have
      been outstanding between three months and six months, 20% of receivable balances
      that have been outstanding within one year, 50% of receivable balances that
      have
      been outstanding for between one year and two years, and 100% of receivable
      balances that have been outstanding more than two years.




*Inventory*




Inventories
      are stated at the lower of cost or net realizable value. Cost is calculated
      on
      the weighted-average basis and includes all costs to acquire and other costs
      incurred in bringing the inventories to their present location and condition.
      We
      evaluate the net realizable value of our inventories on a regular basis and
      record a provision for loss to reduce the computed weighted-average cost if
      it
      exceeds the net realizable value.




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*Revenue
      Recognition*




In
      accordance with the provisions of Staff Accounting Bulletin No. 103, revenue
      is
      recognized when merchandise is shipped, title and risk of loss pass to the
      customer and collectibility is reasonably assured. Revenue is recorded as the
      sales price of goods and services, net of rebates and discounts and is reported
      on a gross basis. The gross basis is used mainly due to the fact that the
      Company acts as principal in each transaction and is responsible for fulfillment
      and acceptability of the products purchased, the Company takes title to its
      products before the products are ordered by its customers, the Company has
      risk
      of inventory loss as title of the products is transferred to the Company, the
      Company is responsible for collection of sales and delivery of products and
      the
      Company does not act as an agent or broker and is not compensated on a
      commission or fee basis.




*Sales
      Return and Warranties*




Generally
      the company does not accept return of products once sold to customers. Instead,
      the company provides a one-year limited warranty covering manufacturing defects
      and/or product functional failures. After evaluation and confirmation of
      customer complaints, the company either replaces the defective products or
      accepts returns by crediting the customer's account. Such replacements or
      returns as well as handling costs therefrom are passed through to the suppliers.




*Advertising
      Costs*




The
      company expenses the cost of advertising as incurred. Advertising costs for
      the
      three and six months ended December 31, 2006 and 2007 were
      insignificant.




*Income
      Taxes*




Deferred
      income taxes are computed using the asset and liability method, such that
      deferred tax assets and liabilities are recognized for the expected future
      tax
      consequences of temporary differences between financial reporting amounts and
      the tax basis of existing assets and liabilities based on currently enacted
      tax
      laws and tax rates in effect in the United States of America for the periods
      in
      which the differences are expected to reverse. Income tax expense is the tax
      payable for the period plus the change during the period in deferred income
      taxes. A valuation allowance is provided when it is more likely than not that
      some portion or all of the deferred tax assets will not be realized. No
      differences were noted between the book and tax bases of the Company’s assets
      and liabilities, respectively. Therefore, there are no deferred tax assets
      or
      liabilities for the three and six months ended December 31, 2007. For the
      China/Diesel Power segment, the Zhongchai JV is located in the PRC, and is
      therefore subject to central government and provincial and local income taxes
      within the PRC at the applicable tax rate on the taxable income as reported
      in
      the PRC statutory financial statements in accordance with relevant income tax
      laws. The normal tax rate is 33%.




*Fair
      Value of Financial Instruments*




The
      Company considers the carrying amounts reported in the consolidated balance
      sheet for current assets and current liabilities qualifying as financial
      instruments and approximating fair value.




*Use
      of Estimates*




The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenues, expenses, and related disclosures at the date of the
      financial statements and during the reporting period. Actual results could
      differ from those estimates.


-18-




**Item
      3.**  **Controls
      and Procedures.**




As
      of the
      end of the period covered by this report, the Company conducted an evaluation,
      under the supervision and with the participation of the Chief Executive Officer
      and Chief Financial Officer, of the Company’s disclosure controls and procedures
      (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based
      on
      this evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that the Company’s disclosure controls and procedures are effective to
      ensure that information required to be disclosed by the Company in reports
      that
      it files or submits under the Exchange Act is recorded, processed, summarized
      and reported within the time periods specified in Securities and Exchange
      Commission rules and forms. There was no change in the Company’s internal
      control over financial reporting during the Company’s most recently completed
      fiscal quarter that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.




**PART
      II — OTHER INFORMATION**




**Item
                1.**
            **Legal
                Proceedings.******None**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 Security Holders.******None.**Item
                5.**
            **Other
                Information.**None.**Item
                6.**
            **Exhibits.**




**Exhibit**
            **Description**31.1
            Certification
                of the Company’s Principal Executive Officer pursuant to Section 302 of
                the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly
                Report on Form 10-QSB for the quarter ended December 31,
                2007.31.2
            Certification
                of the Company’s Principal Financial Officer pursuant to Section 302 of
                the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly
                Report on Form 10-QSB for the quarter ended December 31,
                2007.32.1
            Certification
                of the Company’s Principal Executive Officer and Principal Financial
                Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                to
                Section 906 of the Sarbanes Oxley Act of
                2002.


-19-


**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, the
      Registrant has duly caused this Report to be signed on its behalf by the
      undersigned thereunto duly authorized.




Date: February 5, 2008
            EQUICAP,
                INC.





By:
            /s/
                Jason LuName:
                Jason LuTitle:Chief
                Executive OfficerBy:
            /s/
                David Ming HeName:
                David Ming HeTitle:Chief
                Financial Officer




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