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 March 31, 2008





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
              incorporation
                or organization)
            
            (I.R.S.
                employer
              identification
                number)





10510
                Hillsboro Road Santa 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 May 7, 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 March 31, 2008 (unaudited)
              2Consolidated
                  Statements of Operations for the Three and Nine Months Ended March
                  31,
                  2008 and 2007 (unaudited)
              3Consolidated
                  Statements of Cash Flows for the Nine Months Ended March 31, 2008
                  and 2007
                  (unaudited)
              5Notes
                  to Consolidated Financial Statements, March 31, 2008 and
                  2007
              6Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              13Item
                  3A(T).
              Controls
                  and Procedures
              20**PART
                  II – OTHER INFORMATION:**Item
                  1.
              Legal
                  Proceedings
              20Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              20Item
                  3.
              Defaults
                  Upon Senior Securities
              20Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              20Item
                  5.
              Other
                  Information
              20Item
                  6.
              Exhibits
              21Signatures
              22







**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
      products and customers, the shift in focus of our business, the 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**





**MARCH
      31, 2008**





**(UNAUDITED)**





**ASSETS****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            1,249,268Accounts
                receivable, net of allowance of $233,033
            
            
            627,141Inventory
            
            
            937,114Other
                receivables, net of allowance of $37,131
            
            
            1,411,392Advance
                payments
            
            
            3,546,748Prepaid
                expenses
            
            
            59,113Notes
                receivable
            
            
            270,106**Total
                Current Assets**
            
            
            **8,100,882****PROPERTY
                AND EQUIPMENT, NET**
            
            
            **2,514,792****GOODWILL**
            
            
            **3,321,208****OTHER
                ASSETS**Intangible
                assets
            
            
            2,793Deferred
                compensation
            
            
            199,592Other
                deferred assets
            
            
            1,299**Total
                Other Assets**
            
            
            **203,684****Total
                Assets**
            
            **$**
            **14,140,566****LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Accounts
                payable and accrued expenses
            
            $
            655,231Taxes
                payable
            
            
            40,034Other
                payables
            
            
            431,310**Total
                Current Liabilities**
            
            
            **1,126,575****MINORITY
                INTEREST**
            
            
            **2,668,512****COMITTMENTS
                AND CONTINGENCIES****STOCKHOLDERS’
                EQUITY**Preferred
                stock, $.001 par value, 10,000,000 shares authorized, -0- shares
                issued
                and outstanding
            
            
            -Common
                stock, $.001 par value, 100,000,000 shares authorized, 28,169,013
                shares
                issued and outstanding
            
            
            28,169Additional
                paid-in capital
            
            
            15,063,532Accumulated
                deficit
            
            
            (5,878,586
            )Accumulated
                other comprehensive income
            
            
            1,132,364**Total
                Stockholders’ Equity**
            
            
            **10,345,479****Total
                Liabilities and Stockholders’ Equity**
            
            **$**
            **14,140,566**





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


2


**EQUICAP,
      INC.**





**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





**AND
      COMPREHENSIVE INCOME (LOSS)**





**(UNAUDITED)**





**For Three Months Ended****March 31,****2008**
            
            **2007****REVENUE**
            
            **$**
            **968,914**
            
            **$**
            **491,981****COST
                OF SALES**
            
            
            **786,371**
            
            
            **436,637****GROSS
                PROFIT**
            
            
            **182,543**
            
            
            **55,344****OPERATING
                EXPENSES**Selling,
                general and administrative
            
            
            365,657
            
            
            990,236**LOSS
                FROM OPERATIONS**
            
            
            **(183,114**
            **)**
            
            **(934,892**
            **)****OTHER
                INCOME (EXPENSE)**Interest
                income (expense)
            
            
            7,154
            
            
            **-**Other
                income (expense), net
            
            
            55,432
            
            
            (1,073
            )**Total
                other income (expense)**
            
            
            **62,586**
            
            
            **(1,073**
            **)****LOSS
                BEFORE PROVISION FOR INCOME TAX**
            
            
            **(120,528**
            **)**
            
            **(935,965**
            **)****PROVISION
                FOR INCOME TAX**
            
            
            **-**
            
            
            **825****NET
                LOSS BEFORE MINORITY INTEREST**
            
            
            **(120,528**
            **)**
            
            **(936,790**
            **)****MINORITY
                INTEREST**
            
            
            **19,900**
            
            
            **-****NET
                LOSS**
            
            
            **(140,428**
            **)**
            
            **(936,790**
            **)****OTHER
                COMPREHENSIVE INCOME**Foreign
                currency translation adjustment
            
            
            471,505
            
            
            17,697**COMPREHENSIVE
                INCOME (LOSS)**
            
            **$**
            **331,077**
            
            **$**
            **(919,093**
            **)****LOSS
                PER COMMON SHARE**Basic
            
            **$**
            **(0.00**
            **)**
            **$**
            **(0.04**
            **)**Diluted
            
            **$**
            **(0.00**
            **)**
            **$**
            **(0.04**
            **)****WEIGHTED
                AVERAGE SHARES OF COMMON STOCK**Basic
            
            
            **28,169,013**
            
            
            **20,839,906**Diluted
            
            
            **28,169,013**
            
            
            **20,839,906**





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


3





**EQUICAP,
      INC.**





**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





**AND
      COMPREHENSIVE INCOME (LOSS)**





**(UNAUDITED)**





**For Nine Months Ended****March 31,****2008**
            
            **2007****REVENUE**
            
            **$**
            **2,443,500**
            
            **$**
            **1,206,077****COST
                OF SALES**
            
            
            **1,928,981**
            
            
            **1,100,715****GROSS
                PROFIT**
            
            
            **514,519**
            
            
            **105,362****OPERATING
                EXPENSES**Selling,
                general and administrative
            
            
            1,201,624
            
            
            1,108,588**LOSS
                FROM OPERATIONS**
            
            
            **(687,105**
            **)**
            
            **(1,003,226**
            **)****OTHER
                INCOME (EXPENSE)**Interest
                income
            
            
            85,189
            
            
            **-**Other
                income (expense), net
            
            
            26,440
            
            
            (1,073
            )**Total
                other income (expense)**
            
            
            **111,629**
            
            
            **(1,073**
            **)****LOSS
                BEFORE PROVISION FOR INCOME TAX**
            
            
            **(575,476**
            **)**
            
            **(1,004,299**
            **)****PROVISION
                FOR INCOME TAX**
            
            
            **-**
            
            
            **825****NET
                LOSS BEFORE MINORITY INTEREST**
            
            
            **(575,476**
            **)**
            
            **(1,005,124**
            **)****MINORITY
                INTEREST**
            
            
            **59,467**
            
            
            **-****NET
                LOSS**
            
            
            **(634,943**
            **)**
            
            **(1,005,124**
            **)****OTHER
                COMPREHENSIVE INCOME**Foreign
                currency translation adjustment
            
            
            950,187
            
            
            17,697**COMPREHENSIVE
                INCOME (LOSS)**
            
            **$**
            **315,244**
            
            **$**
            **(987,427**
            **)****LOSS
                PER COMMON SHARE**Basic
            
            **$**
            **(0.02**
            **)**
            **$**
            **(0.05**
            **)**Diluted
            
            **$**
            **(0.02**
            **)**
            **$**
            **(0.05**
            **)****WEIGHTED
                AVERAGE SHARES OF COMMON STOCK**Basic
            
            
            **28,169,013**
            
            
            **19,568,101**Diluted
            
            
            **28,169,013**
            
            
            **19,568,101**




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


4


**EQUICAP,
      INC.**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**For Nine Months Ended****March 31,****2008**
              
              **2007****CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  loss
              
              $
              (
                  634,943
              )
              $
              (
                  1,005,124
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Non
                  cash note conversion cost
              
              
              
              
              
              897,131Share-based
                  compensation
              
              
              81,592
              
              
              17,987Minority
                  interest
              
              
              59,467
              
              
              -Depreciation
                  and amortization
              
              
              73,313
              
              
              -Allowance
                  for bad debts
              
              
              212,391
              
              
              (5,246
              )Non-cash
                  payments of rent
              
              
              3,750
              
              
              3150Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              54,140
              
              
              121,518Inventory
              
              
              (501,710
              )
              
              59,395Other
                  receivables
              
              
              2,957,982
              
              
              -Advance
                  payments
              
              
              (2,657,134
              )
              
              -Prepaid
                  expenses
              
              
              (27,625
              )
              
              -Trade
                  note receivable
              
              
              (256,563
              )
              
              -Other
                  deferred assets
              
              
              (1,234
              )
              
              -Accounts
                  payable and accrued expenses
              
              
              (201,770
              )
              
              143,431Taxes
                  payable
              
              
              (293
              )
              
              -Other
                  payables
              
              
              (406,868
              )
              
              7,346Due
                  to shareholders
              
              
              -
              
              
              8,466**Total
                  Adjustments**
              
              
              **(610,562**
              **)**
              
              **1,253,178****Net
                  Cash Used By Operating Activities**
              
              
              **(1,245,505**
              **)**
              
              **(248,054**
              **)****CASH
                  FLOWS FROM INVESTING ACTIVITIES**Additions
                  to property, plant and equipment
              
              
              (367,657
              )
              
              -Additions
                  to construction in progress
              
              
              (1,630,161
              )
              
              -Additions
                  to intangible
              
              
              (2,984
              )
              
              -Acquisition
                  of Shengte, net of cash from Shengte
              
              
              (3,584,960
              )
              
              -**Net
                  Cash Used By Investing Activities**
              
              
              **(5,585,762**
              **)**
              
              -**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Net
                  proceeds from private placement
              
              
              **-**
              
              
              **9,876,306**Proceeds
                  from minority investment
              
              
              **-**
              
              
              **2,600,000****Net
                  Cash Provided By Financing Activities**
              
              
              **-**
              
              
              **12,476,306****EFFECT
                  OF FOREIGN CURRENCY CONVERSION ON CASH**
              
              
              **231,723**
              
              
              **17,697****NET
                    INCREASE (DECREASE) IN CASH AND CASH
                    EQUIVALENTS**
              
              
              **(6,599,544**
              **)**
              
              **12,742,057****CASH
                  AND CASH EQUIVALENTS**-******BEGINNING**
              
              
              **7,848,812**
              
              
              **129,798****CASH
                  AND CASH EQUIVALENTS**-******ENDING**
              
              **$**
              **1,249,268**
              
              **$**
              **12,871,855****SUPPLEMENTAL
                  INFORMATION:****CASH
                  PAID FOR INCOME TAXES**
              
              $
              -
              
              $
              -**CASH
                  PAID FOR INTEREST**
              
              $
              747
              
              $
              -




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


5





**EQUICAP,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**MARCH
      31, 2008 AND 2007**





**(UNAUDITED)**





**NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




**ORGANIZATION
      AND DESCRIPTION OF BUSINESS**





Equicap,
      Inc. (“the Company”), a Nevada corporation, is a manufacturer and distributor of
      industrial equipment and automotive parts and components, such as gears,
      transmissions, starters, alternators, and emission control devices, which are
      marketed and sold to customers primarily located in China and North
      America.





**BASIS
      OF PRESENTATION**





The
      Company’s Consolidated Financial Statements include the accounts of its direct
      wholly-owned subsidiaries and its indirect proportionate share of subsidiaries
      owned by the wholly-owned subsidiaries. All intercompany balances and
      transactions are eliminated in consolidation. The accompanying unaudited
      financial statements have been prepared in accordance with 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.





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.





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.





**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 March 31, 2008, the Company concluded that there were no impairments
      on
      goodwill or indefinite-lived intangibles.


6


**EQUICAP,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**MARCH
      31, 2008 AND 2007**





**(UNAUDITED)**





**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 – 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. The weighted average
      number of shares calculated for Diluted EPS excludes the potential common stock
      that would be exercised under the options granted to employees and warrants
      granted to agents because the inclusion of the potential shares from these
      options and warrants would cause an antidilutive effect by reducing the net
      loss
      per share. (See Note 11).


**Three Months Ended March 31, 2008**
                
                **Nine Months Ended March 31, 2008****Net Income**
                  **(Loss)**
                
                **Shares**
                
                **Per
                    Share**
                
                **Net Income**
                  **(Loss)**
                
                **Shares**
                
                **Per Share**Loss
                    from operations
                
                $
                (183,114
                )
                
                28,169,013
                
                $
                (0.01
                )
                $
                (687,105
                )
                
                28,169,013
                
                $
                (0.02
                )Basic
                    EPS
                
                $
                (140,428
                )
                
                28,169,013
                
                $
                (
                    -
                )
                $
                (634,943
                )
                
                28,169,013
                
                $
                (0.02
                )Effect
                    of dilutive securities
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Diluted
                    EPS
                
                $
                (140,428
                )
                
                28,169,013
                
                $
                (
                    -
                )
                $
                (634,943
                )
                
                28,169,013
                
                $
                (0.02
                )
  **Three Months Ended March 31, 2007**
                  
                  **Nine Months Ended March 31, 2007****Net Income**
                    **(Loss)**
                  
                  **Shares**
                  
                  **Per Share**
                  
                  **Net Income**
                    **(Loss)**
                  
                  **Shares**
                  
                  **Per
                      Share**Loss
                      from operations
                  
                  $
                  (934,892
                  )
                  
                  20,839,906
                  
                  $
                  (0.05
                  )
                  $
                  (1,003,226
                  )
                  
                  19,568,101
                  
                  $
                  (0.05
                  )Basic
                      EPS
                  
                  $
                  (936,790
                  )
                  
                  20,839,906
                  
                  $
                  (0.04
                  )
                  $
                  (1,005,124
                  )
                  
                  19,568,101
                  
                  $
                  (0.05
                  )Effect
                      of dilutive securities
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Diluted
                      EPS
                  
                  $
                  (936,790
                  )
                  
                  20,839,906
                  
                  $
                  (0.04
                  )
                  $
                  (1,005,124
                  )
                  
                  19,568,101
                  
                  $
                  (0.05
                  )





**NOTE
      4 – INVENTORY**





Inventory
      at March 31, 2008 consisted of the following:





Gears
                products
            
            $
            506,990Transmission
                products
            
            
            429,964Others
            
            
            160Total
            
            $
            937,114




7


**EQUICAP,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**MARCH
      31, 2008 AND 2007**





**(UNAUDITED)**





**NOTE
      5 – ADVANCE PAYMENTS**





Advance
      payments amounted to approximately $3.55 million as of March 31, 2008, 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 March 31, 2008 and 2007 was $1,250 and $1,050,
      respectively. Rental expense for the nine months ended March 31, 2008 and 2007
      was $3,750 and $3,150 respectively. The Company’s Chinese operations are located
      in Hangzhou, China, and the rental expense for three months ended March 31,
      2008
      and 2007 was $3,921 and $5,274, respectively. The rental expense for nine months
      ended March 31, 2008 and 2007 was $25,157 and $10,451,
      respectively.





**NOTE
      7 – SIGNIFICANT CUSTOMERS AND SUPPLIERS**





For
      the
      auto parts segment, four major customers, BBB-OCA, Sankaku Auto Parts Co.,
      Ltd,
      IAP and JNS TSUSHO Corporation, accounted for 69%, 14%, 9% and 8%, respectively,
      of the net revenue of auto parts in North America for the three months ended
      March 31, 2008. For the gear segment, one customer, Zhejiang Xinchai Stock
      Co.,
      Ltd., accounted for 100% of the net revenue in China, for the three months
      ended
      March 31, 2008. These five customers accounted for 26%, 5%, 5%, 3% and 62%,
      respectively, of the Company’s consolidated revenue for the three months ended
      March 31, 2008. For the nine months ended March 31, 2008, three major customers,
      BBB-OCA, JNS TSUSHO Corporation and Ltd/Visteon, accounted for approximately
      33%, 28% and 27% 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 89% and 11%, respectively, of the net revenue in China.
      These five customers accounted for 10%, 9%, 9%, 60% and 7%, respectively, of
      the
      Company’s consolidated revenue for the nine months ended March 31,
      2008.





For
      the
      auto parts segment, three major suppliers, Zhejiang Boyu Industrial Co., LTD,
      Wuzi Susun Autoparts Co., Ltd and Fittswell (Hong Kong) Industries Co., Ltd
      provided 36%, 27% and 8%, respectively, of the Company's purchases of the auto
      parts in North America for the three months ended March 31, 2008. For the gear
      segment, three major suppliers, Zhejiang Yuyang Machinery Co., Ltd., Changzhou
      No. 2 Gears Co., Ltd., and Xinchang Zhaofeng Machinery Co., Ltd. accounted
      for
      approximately 22%, 18% and 8%, of the total purchases in China for the three
      months ended March 31, 2008. These six suppliers accounted for 14%, 13%, 3%,
      22%, 18% and 8%, respectively, of the Company’s consolidated purchases for the
      three months ended March 31, 2008. For the nine months ended March 31, 2008,
      three major suppliers, Zhejiang Yongkang Boyu, Fittswell (Hong Kong) Industries
      Co., Ltd and Wuxi Susun provided approximately 38%, 26% and 23%, 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 34%,
      17%
      and 7%, of the total purchases in China. These six suppliers accounted for
      11%,
      8%, 7%, 24%, 12% and 5%, respectively, of the Company’s consolidated purchases
      for the nine months ended March 31, 2008.


8


**EQUICAP,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**MARCH
      31, 2008 AND 2007**





**(UNAUDITED)**





**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/ Gear 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
      1
      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 nine months ended March 31, 2008 and
      2007.


**Three months ended March 31,**
              
              **Nine months ended March 31,****Segment
                  revenues**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**North
                  America/Auto Parts
              
              $
              369,515
              
              $
              491,981
              
              $
              788,942
              
              $
              1,206,077China/
                  Gear
              
              $
              599,399
              
              $
              -
              
              $
              1,654,558
              
              $
              -Corporate
                  and Elimination
              
              $
              -
              
              $
              -
              
              
              
              
              $
              -Consolidated
              
              $
              968,914
              
              $
              491,981
              
              $
              2,443,500
              
              $
              1,206,077
 
 **Three months ended March 31,**
              
              **Nine months ended March 31,****Segment
                  operating earnings (loss)**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**North
                  America/Auto Parts
              
              $
              (
                  4, 063
              )
              $
              (934,892
              )
              $
              (251,127
              )
              $
              (1,003,226
              )China/
                  Gear
              
              $
              22,366
              
              $
              -
              
              $
              126,748
              
              $
              -Corporate
                  and Elimination
              
              $
              (201,417
              )
              $
              -
              
              $
              (562,726
              )
              $
              -Consolidated
              
              $
              (183,114
              )
              $
              (934,892
              )
              $
              (687,105
              )
              $
              (1,003,226
              )


9


**EQUICAP,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**MARCH
      31, 2008 AND 2007**





**(UNAUDITED)**





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





**Three months ended March 31,**
            
            **Nine months ended March 31,****Depreciation
                expense**
            
            **2008**
            
            **2007**
            
            **2008**
            
            **2007**North
                America/Auto Parts
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -China/
                Gear
            
            $
            40,326
            
            $
            -
            
            $
            73,313
            
            $
            -Corporate
                and Elimination
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Consolidated
            
            $
            40,326
            
            $
            -
            
            $
            73,313
            
            $
            -





**As of March 31,****Segment
                identifiable assets**
            
            **2008**
            
            **2007**North
                America/Auto Parts
            
            $
            342,544
            
            $
            13,478,097China/
                Gear
            
            $
            12,996,254
            
            $
            -Corporate
                and Elimination
            
            $
            801,768
            
            $
            -Consolidated
            
            $
            14,140,566
            
            $
            13,478,097





**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 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.




10


**EQUICAP,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**MARCH
      31, 2008 AND 2007**





**(UNAUDITED)**





**NOTE
      11 – STOCK-BASED COMPENSATION**





As
      of
      March 31, 2008, 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 nine months ended March 31, 2008,
      the Company recorded approximately $27,197 and $81,592, 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 – COMITTMENTS AND CONTINGENCIES**





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.





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.


11


**EQUICAP,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**MARCH
      31, 2008 AND 2007**





**(UNAUDITED)**





**NOTE
      12 – COMITTMENTS AND CONTINGENCIES** (continued)





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.


12


**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/Gear Segment”). Through its operating subsidiaries, the company is
      engaged in the manufacturing and distribution of industrial equipment and
      automotive parts and components, such as gears, transmissions, starters,
      alternators, and emission control devices that are marketed and sold primarily
      in China and North America.




Because
      of market conditions and operational difficulties relating to the sale of diesel
      engines in the PRC, the company has shifted its business focus away from the
      sale of diesel engines to that of industrial equipment and automotive parts
      and
      components.




**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 at the time of the reverse merger owned
      approximately 65% of the shares of common stock of Equicap, the former
      shareholders of Usunco had control over Equicap immediately after the Share
      Exchange. As a result, Usunco was deemed to have been the acquiring company
      in
      the Share Exchange for accounting purposes, and the Share Exchange transaction
      was 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.


13




*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.




*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.


14




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.




**Results
      of Operations**




***Three
      Months Ended*** **March
      31, 2008 Compared to Three Months Ended March 31, 2007**




*Revenue*




Revenue
      increased by $476,933 or 97% to $968,914 for the three months ended March 31,
      2008 compared with $491,981 for the three months ended March 31, 2007. Revenue
      for the three months ended March 31, 2008, consists of sales of automotive
      parts
      in North America and sales of gears and transmissions in China, for $369,515
      and
      $599,399, respectively. All sales revenue for the three months ended March
      31,
      2007 were generated by its IBC subsidiary, from distribution of starters and
      alternators.




*Cost
      of Sales and Gross Margin*




Cost
      of
      sales was $786,371 for the three months ended March 31, 2008, increasing by
      $349,734 or 80%, from $436,637 for the three months ended March 31, 2007. The
      gross margin was approximately 19% for the three months ended March 31, 2008,
      compared to approximately 11% for the three months ended March 31, 2007. The
      improvement in overall gross margin for the quarter ended March 31, 2008,
      compared with same period last year, was because of the higher margin from
      manufacturing business by China/Gear Segment.




*Selling,
      General and Administrative Expenses*




Selling,
      general and administrative (“SG&A”) expenses consisted primarily of labor
      costs and 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 decreased by $624,579 to $365,657 in the three months ended March
      31,
      2008 ,
      from
      $990,236 in three months ended March
      31,
      2007 .
      Included in SG&A for the three months ended March 31,
      2007
      was a non-cash expense of $897,131 recognized for conversion of the outstanding
      principal and accrued interest of convertible note for amount of approximately
      $100,000 by Fountainhead Capital Partners Limited into 702,132 shares of common
      stock of the Company at a 90% discount from the $1.42 per share price that
      the
      Company received for the sale of common stock in a private placement transaction
      closed concurrent with the conversion. Without taking into account the expense
      of the note conversion, SG&A increased comparatively for the current period
      over the same period in the prior fiscal year as a results of the 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, 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).


15




*Net
      Loss*




Net
      loss
      reached $140,428 in three months ended March 31, 2008, compared with net loss
      of
      $936,790 in the three months ended March 31, 2007. The net loss was mainly
      attributed to the increase in general and administrative expenses (except the
      note conversion expense recognized as mention above), 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, and non-cash expenses recognized for stock based
      compensation related to stock options and warrants granted in the period
      pursuant to SFAS 123(R).




***Nine
      Months Ended*** **March
      31, 2008 Compared to Nine Months Ended March 31, 2007**




*Revenue*




Revenue
      increased by $1,237,423 or 103% to $2,443,500 for the nine months ended March
      31, 2008 compared with $1,206,077 for the nine months ended March 31, 2007.
      Revenue for the nine months ended March 31, 2008, consists of sales of
      automotive parts in North America and sales of gears and transmissions in China,
      for $788,942 and $1,654,558, respectively. All sales revenue for the nine months
      ended March 31, 2007 were generated by its IBC subsidiary from distribution
      of
      starters and alternators.




*Cost
      of Sales and Gross Margin*




Cost
      of
      sales was $1,928,981 for the nine months ended March 31, 2008, increasing by
      $828,266 or 75%, from $1,100,715 for the nine months ended March 31, 2007.
      The
      gross margin was approximately 21% for the nine months ended March 31, 2008,
      compared to approximately 9% for the nine months ended March 31, 2007. The
      improvement in overall gross margin for the nine months ended March 31, 2008,
      compared with same period last year, was because of the higher margin from
      manufacturing business by China/Gear Segment.




*Selling,
      General and Administrative Expenses*




Selling,
      general and administrative (“SG&A”) expenses consisted primarily of labor
      costs and 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 $93,036 to $1,201,624 in the nine months
      ended March
      31,
      2008 ,
      from
      $1,108,588 in nine months
      ended March
      31,
      2007 .
      Included in SG&A for the three months ended March 31,
      2007
      was a non-cash expense of $897,131 recognized for conversion of the outstanding
      principal and accrued interest of convertible note for amount of approximately
      $100,000 by Fountainhead Capital Partners Limited into 702,132 shares of common
      stock of the Company at a 90% discount from the $1.42 per share price that
      the
      Company received for the sale of common stock in a private placement transaction
      closed concurrent with the conversion. The increase in SG&A was mainly
      attributable 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 $81,592 recognized for
      stock
      based compensation related to stock options and warrants granted in the period
      pursuant to SFAS 123(R).


16




*Net
      Loss*




Net
      loss
      reached $634,943 in nine months ended March 31, 2008, compared with net loss
      of
      $1,005,124 in the nine months ended March 31, 2007. The net loss was mainly
      attributed to the increase in general and administrative expenses (except the
      note conversion expense recognized as mention above), 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.




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
      March 31, 2008, Equicap had current assets equal to $8,100,882 which primarily
      were comprised of cash and cash equivalents of $ 1,249,268, inventory of
      $937,114 and net trade receivables and other receivables of $2,038,533.
      Equicap’s current liabilities as of March 31, 2008 were $1,126,575, which
      primarily were comprised of trade accounts payable, accrued expenses, taxes
      payable and other payables. At March 31, 2008, Equicap had working capital
      of
      $6,974,307. 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
      manufacturing, 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.


17


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.





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.





From
      time
      to time since the Share Exchange, some of the private placement investors have
      sought to end their investment in the company through a repurchase. There have
      been discussions about the company liquidating assets or obtaining capital
      to
      orchestrate a buy back of the investors’ shares of common stock, at a price and
      on terms to be negotiated. Alternatively, there have been discussions about
      arranging a sale of the investors’ shares to other investors. The company has
      considered selling its interest in the ZhongChai JV and may explore the sale
      of
      some of its other assets. To date, the company and the investors do not have
      any
      definitive arrangements or any written agreements about any aspect of the
      foregoing discussions or considerations. Any transaction would have to be
      reviewed by the company and investors legal counsel, and would be subject to
      proper notice and documentation, depending on the nature of the
      transaction.





**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.


18




*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/Gear 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.




*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 nine months ended March 31, 2008 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 nine months ended March 31, 2008. For the
      China/Gear 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 25%.


19




*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.




**Item
      3A(T).**  **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.


20


**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 March 31,
                2008.31.2
            
            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 March 31,
                2008.32.1
            
            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.


21


**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:
                May 8, 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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