U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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


SECURITIES
EXCHANGE ACT OF 1934





For the
quarterly period ended December 31, 2009





 ̈
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)





224
      Tianmushan  Road,Zhongrong
      Chengshi  Huayuan 5-1-602,Zhangzhou,
      P.R.
      China
                    
                    310007(Address
      of principal executive offices)
                    
                    (Zip
      Code)





Issuer’s
telephone number: (904) 418-9133





Not
Applicable


(Former
name, former address and former


fiscal
year, if changed since last report)





Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 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  xNo
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files.    Yes   ̈No
 ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non accelerated filer, or smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large
accelerated filer  ̈
Accelerated Filer  ̈ Non
accelerated filer  ̈
Smaller reporting company  x





Indicate
by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of
the Exchange
Act).        Yes   ̈No x





APPLICABLE
ONLY TO CORPORATE ISSUERS





Indicate
the number of shares outstanding of each of the issuer’s classes of common
equity, as of the latest practicable date: 27,613,019shares
of common stock, par value $.001 per share, outstanding as of February 10,
2010.







EQUICAP,
INC.





-
INDEX -





PagePART I – FINANCIAL
      INFORMATION:Item
      1.
                      Financial
      Statements
                      4Unaudited
      Consolidated Balance Sheet as of December 31, 2009 and June 30,
      2009
                      4Unaudited
      Consolidated Statements of Operations and Comprehensive Income (Loss) for
      the three and six months ended December 31, 2009 and
    2008
                      5Unaudited
      Consolidated Statements of Cash Flows for the six months ended
      December 31, 2009 and 2008
                      6Notes
      to Consolidated Financial Statements
                      7Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations
                      14Item
      3
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      18Item
      4
                      Controls
      and Procedures
                      18PART II – OTHER
      INFORMATION:Item
      6.
                      Exhibits
                      19Signatures
                      20




2


FORWARD-LOOKING
STATEMENTS





Statements
made in this Form 10-Q (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 focus of the business on the gear and
gearbox (transmission) markets in the
Peoples Republic of China, the need to develop new products and create demand
for them, the effect of the global recession and availability of credit, pricing
pressures on our products and margins, product quality, customer satisfaction
and the ability to sustain and grow sales and expand the customer base, warranty
obligations and claims, operating a business primarily 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.




3




PART I – FINANCIAL
INFORMATION
 
 Item
1.  Financial Statements.




EQUICAP,
INC.




Consolidated
Balance Sheets




December
      31,
                                
                                
                                June
      30,2009
                                
                                
                                2009(Unaudited)AssetsCurrent
      assets:Cash and cash
      equivalents
                                
                                $
                                819,999
                                
                                
                                $
                                3,990,767Restricted cash
                                
                                
                                143,033
                                
                                
                                
                                315,151Accounts receivable, net of
      allowance for doubtful accounts of $9,347and $7,732 at
      December 31, 2009 and June 30, 2009, respectively
                                
                                
                                1,627,674
                                
                                
                                
                                1,540,402Inventory
                                
                                
                                2,168,114
                                
                                
                                
                                1,568,445Notes receivable
                                
                                
                                47,500
                                
                                
                                
                                57,500Trade notes
      receivable
                                
                                
                                378,110
                                
                                
                                
                                391,155Other receivables,
      net
                                
                                
                                555,055
                                
                                
                                
                                76,491Advance payments
                                
                                
                                5,251,501
                                
                                
                                
                                2,988,235Prepaid expenses
                                
                                
                                35,178
                                
                                
                                
                                38,775Total current
    assets
                                
                                
                                11,026,164
                                
                                
                                
                                10,966,921Property
      and equipment, net
                                
                                
                                2,825,632
                                
                                
                                
                                2,662,924Goodwill
                                
                                
                                3,411,913
                                
                                
                                
                                3,407,262Other
      assets:Intangible assets,
      net
                                
                                
                                986
                                
                                
                                
                                1,522Deferred
    compensation
                                
                                
                                9,211
                                
                                
                                
                                63,606Deferred expenses
                                
                                
                                47
                                
                                
                                
                                447Total other
assets
                                
                                
                                10,244
                                
                                
                                
                                65,575Total assets
                                
                                $
                                17,273,953
                                
                                
                                $
                                17,102,682LiabilitiesCurrent
      liabilities:Short-term bank
    loans
                                
                                $
                                1,422,990
                                
                                
                                $
                                2,197,500Accounts payable and accrued
      expenses
                                
                                
                                2,205,539
                                
                                
                                
                                1,562,217Trade notes
    payable
                                
                                
                                143,033
                                
                                
                                
                                315,151Taxes payable
                                
                                
                                6,222
                                
                                
                                
                                54,292Other current
      liabilities
                                
                                
                                729,279
                                
                                
                                
                                635,408Total current
      liabilities
                                
                                
                                4,507,063
                                
                                
                                
                                4,764,568Total liabilities
                                
                                
                                4,507,063
                                
                                
                                
                                4,764,568EquityStockholders’
      equity:Common stock, $.001 par value,
      500,000,000 shares authorized,27,613,019 shares
      issued and outstanding at December 31, 2009and June 30, 2009,
      respectively
                                
                                
                                27,613
                                
                                
                                
                                27,613Stock subscription
      receivable
                                
                                
                                (33,120
                                )
                                
                                
                                (33,120
                                )Additional paid-in
      capital
                                
                                
                                16,484,097
                                
                                
                                
                                16,484,097Statutory
reserves
                                
                                
                                124,460
                                
                                
                                
                                124,460Retained earnings
      (deficit)
                                
                                
                                (8,422,278
                                )
                                
                                
                                (8,440,255
                                )Accumulated other comprehensive
      income
                                
                                
                                1,432,392
                                
                                
                                
                                1,415,474Total stockholders’
      equity
                                
                                
                                9,613,164
                                
                                
                                
                                9,578,269Noncontrolling
      interest
                                
                                
                                3,153,726
                                
                                
                                
                                2,759,845Total equity
                                
                                
                                12,766,890
                                
                                
                                
                                12,338,114Total liabilities and
      equity
                                
                                $
                                17,273,953
                                
                                
                                $
                                17,102,682





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


4


EQUICAP,
INC.




Consolidated
Statements of Operations and Comprehensive Income (Loss)


(Unaudited)


For
      the Three Months Ended
                    
                    
                    For
      the Six Months EndedDecember 31,
                    
                    
                    December 31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Revenue
                    
                    $
                    1,889,823
                    
                    
                    $
                    820,527
                    
                    
                    $
                    3,838,229
                    
                    
                    $
                    2,007,097Cost
      of sales
                    
                    
                    1,483,353
                    
                    
                    
                    693,897
                    
                    
                    
                    3,026,527
                    
                    
                    
                    1,545,984Gross
      profit
                    
                    
                    406,470
                    
                    
                    
                    126,630
                    
                    
                    
                    811,702
                    
                    
                    
                    461,113Operating
      expensesSelling, general and
      administrative
                    
                    
                    287,950
                    
                    
                    
                    513,528
                    
                    
                    
                    632,190
                    
                    
                    
                    982,216Income
      (loss) from operations
                    
                    
                    118,520
                    
                    
                    
                    (386,898
                    )
                    
                    
                    179,512
                    
                    
                    
                    (521,103
                    )Other
      income (expenses):Interest income (expenses),
      net
                    
                    
                    (15,502
                    )
                    
                    
                    2,815
                    
                    
                    
                    (34,269
                    )
                    
                    
                    5,528Other income, net
                    
                    
                    36,069
                    
                    
                    
                    17,720
                    
                    
                    
                    40,309
                    
                    
                    
                    49,159Total other
income
                    
                    
                    20,567
                    
                    
                    
                    20,535
                    
                    
                    
                    6,040
                    
                    
                    
                    54,687Income
      (loss) before provision for income taxes
                    
                    
                    139,087
                    
                    
                    
                    (366,363
                    )
                    
                    
                    185,552
                    
                    
                    
                    (466,416
                    )Provision
      for income taxes
                    
                    
                    31,588
                    
                    
                    
                    383
                    
                    
                    
                    67,093
                    
                    
                    
                    1,171Net
      income (loss) before noncontrolling interest
                    
                    
                    107,499
                    
                    
                    
                    (366,746
                    )
                    
                    
                    118,459
                    
                    
                    
                    (467,587
                    )Less:
      Noncontrolling interest
                    
                    
                    61,167
                    
                    
                    
                    (45
                    )
                    
                    
                    100,482
                    
                    
                    
                    29,652Net
      income (loss)
                    
                    
                    46,332
                    
                    
                    
                    (366,701
                    )
                    
                    
                    17,977
                    
                    
                    
                    (497,239
                    )Other
      comprehensive incomeForeign currency translation
      adjustment
                    
                    
                    56
                    
                    
                    
                    34,273
                    
                    
                    
                    16,918
                    
                    
                    
                    59,929Comprehensive
      income (loss)
                    
                    $
                    46,388
                    
                    
                    $
                    (332,428
                    )
                    
                    $
                    34,895
                    
                    
                    $
                    (437,310
                    )Loss
      per common share:Basic
                    
                    $
                    0.00
                    
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.00
                    
                    
                    $
                    (0.02
                    )Diluted
                    
                    $
                    0.00
                    
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.00
                    
                    
                    $
                    (0.02
                    )Weighted
      average number of common sharesoutstanding:Basic
                    
                    
                    27,613,019
                    
                    
                    
                    28,169,013
                    
                    
                    
                    27,613,019
                    
                    
                    
                    28,169,013Diluted
                    
                    
                    27,613,019
                    
                    
                    
                    28,169,013
                    
                    
                    
                    27,613,019
                    
                    
                    
                    28,169,013





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


5


EQUICAP,
INC.




Consolidated
Statements of Cash Flows


(Unaudited)





For
      the Six Months EndedDecember 31,2009
                    
                    
                    2008Cash
      flows from operating activities:Net
      income (loss)
                    
                    $
                    17,977
                    
                    
                    $
                    (497,239
                    )Adjustments
      to reconcile net income (loss) to net cashprovided by (used in) operating
      activities:Noncontrolling
      interest
                    
                    
                    100,482
                    
                    
                    
                    29,652Depreciation and
      amortization
                    
                    
                    148,156
                    
                    
                    
                    88,988Loss
      on disposal of fixed assets
                    
                    
                    4,846
                    
                    
                    
                    -Provision for bad
      debts
                    
                    
                    1,604
                    
                    
                    
                    86,071Share-based
    payments
                    
                    
                    54,395
                    
                    
                    
                    54,394Non-cash payments of
      rent
                    
                    
                    -
                    
                    
                    
                    2,500Changes in assets and
      liabilities:Accounts
      receivable
                    
                    
                    (86,738
                    )
                    
                    
                    25,095Inventory
                    
                    
                    (597,283
                    )
                    
                    
                    (143,498
                    )Trade
      notes receivable
                    
                    
                    13,573
                    
                    
                    
                    16,939Other
      receivables
                    
                    
                    (478,264
                    )
                    
                    
                    86,591Advance
      payments
                    
                    
                    (2,258,262
                    )
                    
                    
                    3,351,709Prepaid
      expenses
                    
                    
                    3,601
                    
                    
                    
                    148,175Deferred
      expenses
                    
                    
                    400
                    
                    
                    
                    (176
                    )Accounts
      payable and accrued expenses
                    
                    
                    641,186
                    
                    
                    
                    (93,054
                    )Trade
      notes payable
                    
                    
                    (172,478
                    )
                    
                    
                    -Taxes
      payable
                    
                    
                    (48,124
                    )
                    
                    
                    502Other
      current liabilities
                    
                    
                    93,208
                    
                    
                    
                    47,289Total adjustments
                    
                    
                    (2,579,698
                    )
                    
                    
                    3,701,177Net cash (used in) provided by
      operating activities
                    
                    
                    (2,561,721
                    )
                    
                    
                    3,203,938Cash
      flows from investing activities:Additions to property and
      equipment
                    
                    
                    (311,472
                    )
                    
                    
                    (270,032
                    )Proceeds from notes
      receivable
                    
                    
                    10,000
                    
                    
                    
                    -Net cash used in investing
      activities
                    
                    
                    (301,472
                    )
                    
                    
                    (270,032
                    )Cash
      flows from financing activities:Repayment for short-term bank
      loans
                    
                    
                    (777,192
                    )
                    
                    
                    -Contribution from minority
      shareholders
                    
                    
                    293,280
                    
                    
                    
                    -Net cash used in financing
      activities
                    
                    
                    (483,912
                    )
                    
                    
                    -Effect
      of foreign currency translation on cash
                    
                    
                    4,219
                    
                    
                    
                    8,371Net
      (decrease) increase in cash and cash equivalents and restricted
      cash
                    
                    
                    (3,342,886
                    )
                    
                    
                    2,942,277Cash and cash
      equivalentsand
      restricted cash–beginning
                    
                    
                    4,305,918
                    
                    
                    
                    956,973Cash and cash
      equivalentsand
      restricted cash –ending
                    
                    $
                    963,032
                    
                    
                    $
                    3,899,250





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


6


EQUICAP,
INC.


Notes
to Consolidated Financial Statements


December
31, 2009 and 2008


(Unaudited)





Note
1 – Organization and Nature of Business





Equicap,
Inc. (“Equicap” or “the Company”), a Nevada corporation, is a manufacturer and
distributor of gears and gearboxes (transmissions), which are marketed and sold
to customers in China.





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





On March
7, 2007, the Company and Usunco Automotive, Ltd. (“Usunco”), a British Virgin
Islands company, 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 the Company’s common
stock.





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 was 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 June
15, 2009, IBC was sold to certain of the management persons of IBC in exchange
for the following: (i) the cancellation of an aggregate of 555,994 shares of
common stock of the Company which those individuals owned, and (ii) the payment
of $60,000 in installments pursuant to the terms of an unsecured promissory
note, the final payment of which will be November 15, 2010. As part of the
transaction, the Company cancelled $428,261 through the closing date, of
inter-company debt which funds had been used in the business of IBC prior to the
transaction.





On
September 22, 2009, Xinchang Xian Lisheng Machinery Co., Ltd. (“Lisheng”) was
incorporated by Zhongchai and two individual investors. Total registered capital
of Lisheng is RMB 5 million, of which Zhongchai accounts for 60%. The Company
plans to start production of die casting products in 2010 for use in gearboxes,
diesel engines and other machinery products.





On
December 16, 2009, Equicap and its wholly owned subsidiaries, Usunco and
Zhongchai Holding (Hong Kong) Limited, a Hong Kong company (“Zhongchai
Holding”), took action to approve transfer of the shares of Zhejiang Zhongchai
Machinery Co., from Usunco to Zhongchai Holding. The transfer was completed on
December 23, 2009. The purpose of the transfer was to take advantage of the tax
treaty between the Peoples Republic of China and the Special Administrative
Region of Hong Kong which reduces the withholding tax rate of the PRC on
payments to entities outside of China. Usunco no longer has any assets after
transferring all of them to Zhongchai Holding and therefore will be dissolved in
the future. The consolidated financial statements will continue to account for
Zhejiang Zhongchai Machinery Co., in the same manner as before the transfer of
the ownership. Shareholder approval by the shareholders of Equicap was not
required under Nevada law, as there was no sale of all or substantially all the
assets of the Company. The shareholder ownership and shareholder rights of
Equicap remain the same as before the transaction.


7


Note
2 – Summary of Significant Accounting Policies





Basis
of Presentation





The
Company’s consolidated financial statements include the accounts of Equicap,
Inc. and its wholly and majority owned subsidiaries. All intercompany balances
and transactions are eliminated in consolidation. The accompanying unaudited
financial statements have been prepared in accordance with generally accepted
accounting principles (“GAAP”) applicable to interim financial information and
the requirements of Form 10-Q and Rule 10-01 of Regulation S-X 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.





Interim
Financial Statements





These
interim financial statements should be read in conjunction with the Company’s
audited financial statements for the years ended June 30, 2009 and 2008, as not
all disclosures required by GAAP 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 years ended June 30,
2009 and 2008.





Recent
Accounting Pronouncements





On July
1, 2009, the Financial Accounting Standards Board (“FASB”) officially launched
the FASB Accounting Standards Codification (“ASC”), which has become the single
official source of authoritative nongovernmental U.S. GAAP, in addition to
guidance issued by the Securities and Exchange Commission. The ASC is designed
to simplify U.S. GAAP into a single, topically ordered structure. All guidance
contained in the ASC carries an equal level of authority. The ASC is effective
for all interim and annual periods ending after September 15, 2009. The
Company’s implementation of this guidance effective July 1, 2009 did not have a
material effect on the Company’s condensed consolidated financial
statements.





On July
1, 2009, the Company adopted the accounting and disclosure requirements of
Statement of Financial Accounting Standard (“SFAS”) No. 160, Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No. 51,
which is now included with ASC Topic 810 Consolidation.  This standard
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that do not result in deconsolidation.  On a
prospective basis, any changes in ownership will be accounted for as equity
transactions with no gain or loss recognized on the transactions unless there is
a change in control.





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 intangible assets with indefinite lives are
subject to annual impairment test using the guidance and criteria described in
Statement of Financial Accounting Standard No. 142, (ASC 350) “Goodwill and
Other Intangible Assets”. This test compares carrying values to fair values and,
when appropriate, the carrying value of these assets is reduced to fair
value.





Note
3 – Restricted Cash





As of
December 31, 2009 and June 30, 2009, the Company had restricted cash of $143,033
and $315,151, respectively. These restricted cash balances are reserved for
settlement of trade notes payable in connection with inventory
purchases.  The cash held in custody by bank issuing the trade notes
payable is restricted as to withdrawal or use, and is currently earning
interest.


8


Note
4 – Inventory





Inventory
at December 31, 2009 and June 30, 2009 consists of the following:





December
      31,
                  
                  
                  June
      30,2009
                  
                  
                  2009Gears
      products
                  
                  $
                  1,006,376
                  
                  
                  $
                  885,559Gearbox
      products
                  
                  
                  1,064,591
                  
                  
                  
                  680,317Other
                  
                  
                  97,147
                  
                  
                  
                  2,569Total
                  
                  $
                  2,168,114
                  
                  
                  $
                  1,568,445





Note
5 – Advance Payments





Advance
payments amounted to approximately $5.3 million as of December 31, 2009,
approximately $4.6 million of which represented an advance payment made by the
Zhongchai JV to Zhejiang Xinchai Holdings Co., Ltd. ("Xinchai Holdings"), a
corporation in China, for the purchase of land use rights and building for
Zhongchai JV’s future expansion of its production capabilities. Zhongchai JV is
currently leasing a portion of the land and building to be purchased. The total
land area to be purchased is approximately 250,000 square feet. The total
contract price for the land use rights, building and fixtures is approximately
$4.6 million. The Company is currently in the process of transferring
title.





Note
6 – Property and Equipment





Property
and equipment at December 31, 2009 and June 30, 2009 consists of the
following:





December
      31,
                  
                  
                  June
      30,2009
                  
                  
                  2009Manufacturing
      equipment
                  
                  $
                  3,238,314
                  
                  
                  $
                  2,923,420Office
      equipment and furniture
                  
                  
                  50,158
                  
                  
                  
                  56,597Vehicles
                  
                  
                  62,124
                  
                  
                  
                  62,039Subtotal
                  
                  
                  3,350,596
                  
                  
                  
                  3,042,056Less:
      Accumulated depreciation
                  
                  
                  524,964
                  
                  
                  
                  379,132Total
                  
                  $
                  2,825,632
                  
                  
                  $
                  2,662,924





Depreciation
expense for the three months ended December 31, 2009 and 2008 was $75,728 and
$46,535, and for the six months ended December 31, 2009 and 2008 was $147,618
and $88,451, respectively.





Note
7 – Intangible Assets





Intangible
assets at December 31, 2009 and June 30, 2009 consist of the
following:





December 31, 2009
                    
                    
                    June 30, 2009Computer
      Software
                    
                    $
                    3,227
                    
                    
                    $
                    3,223Less:
      accumulated amortization
                    
                    
                    2,241
                    
                    
                    
                    1,701Total
                    
                    $
                    986
                    
                    
                    $
                    1,522





Amortization
expenses for the three months ended December 31, 2009 and 2008 were $269 and
$269, and for the six months ended December 31, 2009 and 2008 were $538 and
$537, respectively.


9


Note
8 – Accounts Payable and Accrued Expenses





Accounts
payable and accrued expenses consist of the following:





December
      31,
                  
                  
                  June
      30,2009
                  
                  
                  2009Accounts
      payable
                  
                  $
                  1,950,618
                  
                  
                  $
                  1,400,162Accrued
      expenses
                  
                  
                  254,921
                  
                  
                  
                  162,055Total
                  
                  $
                  2,205,539
                  
                  
                  $
                  1,562,217





The
carrying value of accounts payable and accrued expenses approximates their fair
value due to the short-term nature of these obligations.





Note
9 – Short Term Bank Loans





Short-term
bank loans consist of the following:





December
      31,
                      
                      
                      June
      30,2009
                      
                      
                      2009On
      May 25, 2009, the Company obtained a loan from Agricultural Bank of China,
      which was re-paid on August 26, 2009. The annual interest was At the fixed
      interest rate of 4.374% and paid monthly. The loan was secured by a third
      party.
                      
                      $
                      -
                      
                      
                      $
                      776,450On
      June 15, 2009, the Company obtained a loan from Agricultural Bank of
      China, which is due on June 16, 2010. The interest is calculated
      using an annual fixed interest rate of 5.31% and paid monthly. The loan
      is secured by a third party.
                      
                      
                      1,422,990
                      
                      
                      
                      1,421,050Total
      short-term bank loans
                      
                      $
                      1,422,990
                      
                      
                      $
                      2,197,500





Note
10 – Rental Expense





The
Company’s Chinese operations are located in Zhejiang, China, and the rental
expense for the three months ended December 31, 2009 and 2008 was $13,062 and
$27,753, and for the six months ended December 31, 2009 and 2008 was $23,932 and
$42,356, respectively.





Note
11 – Risk Factors





Two
customers, Zhejiang Xinchai Co., Ltd. and Lonking (Shanghai) Forklift Co., Ltd.,
accounted for 45% and 17%, respectively, of the Company’s net revenue for the
three months ended December 31, 2009. The same two customers accounted for 46%
and 23%, respectively, of the Company’s net revenue for the six months ended
December 31, 2009,





Five
major suppliers, Zhejiang Yuyang Machinery Co., Ltd., Xinchang Liyuan Foundry
Co., Ltd., Chongqing Shenjian Auto Transmission Parts Co., Ltd., Zhejiang
Hengchun Machinery Co., Ltd., and Hangzhou Qianjin General Machinery Co., Ltd.,
accounted for approximately 21%, 11%, 9%, 5% and 5%, respectively, of the
Company’s total purchases for the three months ended December 31, 2009. Six
suppliers, Zhejiang Yuyang Machinery Co., Ltd., Chongqing Shenjian Auto
Transmission Parts Co., Ltd., Xinchang Liyuan Foundry Co., Ltd.,Changzhou No. 2
Gears Co., Ltd., Wuxi Hydraulic Marchinery Co., Ltd., and Hangzhou Qianjin
General Machinery Co., Ltd., accounted for approximately 24%, 7%, 7%, 5%, 4% and
4%, respectively, of the Company’s total purchases for the six months ended
December 31, 2009.


10


Note
12 – Deferred Compensation





As
described in Note 14 (“Share-Based Payments”), the Company granted options to
employees and warrants to the private placement agent.  Following SFAS
No. 123R (ASC 718), the Company recognizes expenses based on the fair value of
the options and warrants. Deferred compensation represents share based payments
that will be expensed in future periods based on the vesting time of such
options and warrants.





Note
13 – Supplemental Disclosure of Cash Flow Information





For the Six Months Ended December
      31,2009
                  
                  
                  2008Cash
      paid for interest
                  
                  $
                  43,871
                  
                  
                  $
                  191Cash
      paid for income taxes
                  
                  $
                  78,163
                  
                  
                  $
                  1,171





Note
14 – 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 of their anti-dilutive effect.





Three
      Months Ended December 31,2009
                                
                                
                                2008Net
      income (loss)
                                
                                $
                                46,332
                                
                                
                                $
                                (366,701
                                )Weighted
      average common shares(denominator
      for basic loss per share)
                                
                                
                                27,613,019
                                
                                
                                
                                28,169,013Effect
      of dilutive securities:
                                
                                
                                -
                                
                                
                                
                                -Weighted
      average common shares(denominator
      for diluted loss per share)
                                
                                
                                27,613,019
                                
                                
                                
                                28,169,013Basic
      net income (loss) per share
                                
                                $
                                0.00
                                
                                
                                $
                                (0.01
                                )Diluted
      net income (loss) per share
                                
                                $
                                0.00
                                
                                
                                $
                                (0.01
                                )Six
      Months Ended December 31,2009
                                
                                
                                2008Net
      income (loss)
                                
                                $
                                17,977
                                
                                
                                $
                                (497,239
                                )Weighted
      average common shares(denominator
      for basic loss per share)
                                
                                
                                27,613,019
                                
                                
                                
                                28,169,013Effect
      of dilutive securities:
                                
                                
                                -
                                
                                
                                
                                -Weighted
      average common shares(denominator
      for diluted loss per share)
                                
                                
                                27,613,019
                                
                                
                                
                                28,169,013Basic
      net income (loss) per share
                                
                                $
                                0.00
                                
                                
                                $
                                (0.02
                                )Diluted
      net income (loss) per share
                                
                                $
                                0.00
                                
                                
                                $
                                (0.02
                                )




11


Note
15 – Share-Based Payments





As of
December 31, 2009, there were 366,550 outstanding options to employees
(“Employee Options”) and 422,535 outstanding warrants to the private placement
agent (“Agent Warrants”). 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, 2009, the Company recorded approximately $27,197 and $54,395,
respectively, of stock-based compensation based on the fair value method of
SFAS. No. 123R (ASC 718) 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 and warrants.





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
16 – 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 represented approximately 30% of the
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
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 caused the registration statement to
become effective on or prior to 150 days after the closing date. The
registration statement was filed within the 45 day limit thus fulfilling part of
this obligation. 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. This obligation ends if the shares can be sold pursuant to Rule
144.





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 the portion of a 30-day period of a Registration Default.





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
17 – Employee Welfare Plan





The
Company has established an employee welfare plan in accordance with Chinese laws
and regulations. Full-time employees of the Company in the PRC participate in a
government-mandated multi-employer defined contribution plan pursuant to which
certain pension benefits, medical care, unemployment insurance, employee housing
fund and other welfare benefits are provided to employees. PRC labor regulations
require the Company to accrue for these benefits based on a certain percentage
of the employees’ salaries.


12


Note
18 – Legal Proceedings





On
November 6, 2008, a group of the investors filed a law suit in federal court in
New York against the Company, Usunco Automotive Ltd., Mr. Peter Wang and
vFinance Investment, Inc. based on alleged violations of the Securities Exchange
Act of 1934 and Rule 10b-5, fraud, fraudulent inducement, professional
malpractice and negligent misrepresentation arising out of the private placement
closed on March 7, 2007. The action was settled by an agreement dated July 31,
2009, which provided (i) for a third party, Ruihua International Limited
("Ruihua"), to purchase all the shares of common stock of the Company owned and
held by the plaintiffs, (ii) upon the purchase of the shares, for the Company
and Mr. Wang and each of the plaintiffs to exchange general mutual releases as
to all matters arising concerning the plaintiffs' purchase and holding of the
common shares of the Company, and (iii) for a stipulation to dismiss the
action.  The action was discontinued with prejudice by stipulation
among all the parties which was ordered by the court on August 4,
2009.





In
connection with the purchase by Ruihua of the shares sold to it as part of the
settlement of the above described action, Ruihua also bought shares from another
shareholder who was not a party to the action.  As a result of the
two share acquisitions, Ruihua acquired a total of 17,431,104 shares,
currently representing 61.88% of the issued and outstanding shares of common
stock of the Company.  Ruihua does not have any registration rights
with respect to the shares or other provisions related to control of the
Company, such as the right to have specific representation on the board of
directors or nominate potential directors for election, other than their rights
as a shareholder under the certificate of incorporation and by laws of the
Company and under the provisions of Nevada law and the United States securities
laws.





NOTE
19 – Subsequent
Events





None.


13


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


Equicap,
Inc. (“Equicap”), a Nevada corporation, does business through its subsidiary,
Zhongchai Holding (Hong Kong) Limited, a Hong Kong company (“Zhongchai
Holding”), which in turn operates 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”), Zhejiang Shengte
Transmission Co., Ltd. (“Shengte”) a company established under the laws of the
PRC and wholly owned by ZhongChai JV, and Xinchang Xian Lisheng Machinery Co.,
Ltd. (“Lisheng”), a company established under the laws of the PRC and 60% owned
by ZhongChai JV.  Through its operating subsidiaries, Equicap is
currently engaged in the manufacturing and sale of gears and gearboxes
(transmissions) in China.




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.




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.




For
advice in connection with the Share Exchange, vFinance Investments, Inc., was
issued 161,633 shares of restricted common stock as compensation.




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.




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.




2007
Private Placement Offering




As a
condition to the Share Exchange, Equicap conducted a private placement of its
common stock to 11 accredited, institutional investors in which Equicap raised
gross proceeds of $12 million (“Offering”) under an exemption from registration
under Section 4(2) of the Securities Act of 1933.  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.




14




vFinance
Investment, Inc. was the exclusive placement agent for the
Offering.  For their services as placement agent, Equicap paid
vFinance a fee of 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, vFinance 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. In addition, if certain make good shares were
distributed to the investors, Equicap was obligated to register these shares in
addition. If any of the registrable 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 45 day 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 were not achieved by
the specified dates, then Equicap had to pay each of, and only, the investors an
amount equal to 1% of the share purchase price actually paid by such investor
for each month thereafter that the shares could not be sold under the
registration statement. Similar penalties for the failure to file or have
declared effective a registration statement within the stated time periods and
maintain its effectiveness 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 registration statements required
for the investors and vFinance under the registration rights agreement had to be
kept effective until all the shares of these parties are sold or may be sold
without limitation under Rule 144.  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 the then 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. Currently, Equicap believes that the shares may be sold under Rule
144, being the effective equivalent of Rule 144k or the obligation is no longer
applicable because the shares have been sold.




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 December 31, 2009 Compared to Three Months Ended December 31,
2008




Revenue




Revenue
increased by $1,069,296 or 130% to $1,889,823 for the three months ended
December 31, 2009 compared to $820,527 for the three months ended December 31,
2008. Sales revenue for the three months ended December 31, 2009 consisted
solely of sales of gears and gearboxes in China, as a result of the Company’s
sale of IBC, the North America / Auto Parts segment in June 2009. Revenue for
the three months ended December 31, 2008, consisted of sales of automotive parts
in North America and sales of gears and gearboxes in China, for $288,470 and
$532,057, respectively. The sales revenue of gears and gearboxes for the period
grewby approximately255% compared to the sales of the same
products in China for comparable period in the prior fiscal year. The
increase in gears and gearboxes sales was attributable to the Company’s
introduction of new gearbox products, expansion in production capacity and its
continued marketing efforts to develop its customer base.  Revenues
during the period were also beneficially affected by the recovery of domestic
market in China for gear and gearbox products as a result of Chinese
government’s economic stimulus plan.




15




Cost
of Sales and Gross Margin




Cost of
sales was $1,483,353 for the three months ended December 31, 2009, increasing by
$789,456, or 114%, from $693,897 for the three months ended December 31, 2008.
The gross margin was approximately 22% for the three months ended December 31,
2009, compared to approximately 24% (excluding auto parts business) for the
three months ended December 31, 2008. The decrease in gross margin in this
quarter as compared to the same period in prior fiscal year was attributable
mainly to a general decrease in gear prices and the launch of new gearbox
products, the margin of which is lower than for gears. The shift in product mix
and development of new products has been implemented by the Company as a
strategy to quickly penetrate the market for its products and build
sales.




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 SFAS 123R (ASC 718).




SG&A
expenses decreased by $225,578 to $287,950 in the three months ended December
31, 2009, from $513,528 in three months ended December 31, 2008. The decrease
primarily was attributable to the exclusion of the expenses associated with IBC,
reduction in rental expense for less office space leased, and reduction in some
professional and consulting service expenses due to less capital market related
services incurred in the period compared to the same period in the prior fiscal
year.




Net
Income (Loss)




Net
income was $46,332 in three months ended December 31, 2009, compared to a net
loss of ($366,701) in the three months ended December 31, 2008. The Company
became profitable in the quarter mainly attributable to increased revenue and
gross profit and lower operating expenses.




Six
Months Ended December 31, 2009 Compared to Six Months Ended December 31,
2008




Revenue




Revenue
increased by $1,831,132 or 91% to $3,838,229 for the six months ended December
31, 2009 compared to $2,007,097 for the six months ended December 31, 2008.
Sales revenue for the six months ended December 31, 2009 consisted solely of
sales of gears and gearboxes in China, as a result of the Company’s sale of IBC,
the North America / Auto Parts segment in June 2009. Revenue for the six months
ended December 31, 2008, consisted of sales of automotive parts in North America
and sales of gears and gearboxes in China, for $628,033 and $1,379,064,
respectively. The sales revenue of gears and gearboxes for the period grewby approximately 178% compared to the sales of the same
products in China for same period inthe prior fiscal year. The
increase in gears and gearboxes sales was attributable to the Company’s
introduction of new gearbox products, expansion in production capacity and its
continued marketing efforts to develop its customer base.  Revenues
during the period were also beneficially affected by the recovery of domestic
market in China for gear and gearbox products as a result of Chinese
government’s economic stimulus plan.




16




Cost
of Sales and Gross Margin




Cost of
sales was $3,026,527 for the six months ended December 31, 2009, increasing by
$1,480,543 or 96%, from $1,545,984 for the six months ended December 31, 2008.
The gross margin was approximately 21% for the six months ended December 31,
2009, compared to approximately 27% (excluding auto parts business) for the six
months ended December 31, 2008. The decrease in gross margin in the period as
compared to the same period in prior fiscal year was attributable mainly to a
general decrease in gear prices and the launch of new gearbox products, the
margin of which is lower than for gears. The shift in product mix and
development of new products has been implemented by the Company as a strategy to
quickly penetrate the market for its products and build sales.




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 SFAS 123R (ASC 718).




SG&A
expenses decreased by $350,026 to $632,190 in the six months ended December 31,
2009, from $982,216 in six months ended December 31, 2008. The decrease
primarily was attributable to the exclusion of the expenses associated with IBC,
reduction in rental expense for less office space leased, and reduction in some
professional and consulting service expenses due to less capital market related
services incurred in the period compared to the same period in the prior fiscal
year.




Net
Income (Loss)




Net
income was $17,977 for the  six months ended December 31, 2009,
compared to a net loss of ($497,239) for the six months ended December 31, 2008.
The Company became profitable for the period mainly attributable to increased
revenue and gross profit and lower operating expenses.




Liquidity
and Capital Resources




As of
December 31, 2009, Equicap had current assets equal to $11,026,164, current
liabilities equal to $4,507,063 and working capital of
$6,519,101.  Equicap believes that it has sufficient operating capital
for its current operations.




Operating
Activities




Net cash
used in operating activities was approximately $2.56 million for the six months
ended December 31, 2009, as compared to $3.2 million net cash provided by
operating activities for the same period in the prior fiscal year. The net
outflow from our operating activities was mainly due to the increase of $2.26
million in advance payment during the six-month period. The advance payment was
made by the Zhongchai JV to Zhejiang Xinchai Holdings Co., Ltd. ("Xinchai
Holdings"), a corporation in China, for the purchase of land use rights and
building for Zhongchai JV’s future expansion of its production capabilities.
Inventory and receivables also increased during the period along with the growth
in sales.




Investing
Activities




Net cash
used in investing activities was $0.3 million for the six-month period ended
December 31, 2009, increased from $0.27 million for the same period in fiscal
year 2008. The Company continued purchasing new equipment to expand its
production capacity to meet increasing demand for its products.




17




Financing
Activities




Net cash
used in financing activities was $0.48 million for the six-month period ended
December 31, 2009. During this period, the Company repaid bank loan of $0.78
million. There was also $0.29 million capital contribution to Lisheng from
minority shareholders.




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, therefore, it would need 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




Please
refer to “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” in our Annual Report on Form 10-K for the year ended
June 30, 2009, for disclosures regarding Equicap Inc.’s critical accounting
policies and estimates.  The interim financial statements follow the
same accounting policies and methods of computations as those for the year ended
June 30, 2009.  There was no new accounting policies and estimates
during the period ended December 31, 2009 which affects the
Company.




Recent
Accounting Pronouncements




On July
1, 2009, the Financial Accounting Standards Board (“FASB”) officially launched
the FASB Accounting Standards Codification (“ASC”), which has become the single
official source of authoritative nongovernmental U.S. GAAP, in addition to
guidance issued by the Securities and Exchange Commission. The ASC is designed
to simplify U.S. GAAP into a single, topically ordered structure. All guidance
contained in the ASC carries an equal level of authority. The ASC is effective
for all interim and annual periods ending after September 15, 2009. Accordingly,
the Company refers to Codification in respect to the appropriate accounting
standards throughout this document as “ASC”. Implementation of the Codification
did not have any impact on the Company’s consolidated financial
statements.




Item
3. Quantitative and Qualitative Disclosures about Market Risk




The
information is not required for smaller reporting companies.




Item
4.     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.




18




PART II — OTHER
INFORMATION




Item
6.    Exhibits.




Exhibit
                    
                    Description31.1
                    
                    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-Q for the quarter ended December 31,
    2009.31.2
                    
                    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-Q for the quarter ended December 31,
    2009.32.1
                    
                    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.


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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 10, 2010
                  
                  EQUICAP,
      INC.By:
                  /s/ Peter WangName: 
      Peter WangTitle:   
      PresidentBy:
                  /s/ David Ming HeName: 
      David Ming HeTitle:   
      Chief Financial
Officer


20