U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

{x} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarter ended March 31, 2004

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

For the transition period from             to

Commission File No. 000-49630

                              CHINA AUTOPARTS, INC.
        (Exact name of small business issuer as specified in its charter)

         DELAWARE                                          13-4168913
--------------------------------------------------------------------------------
(State or other jurisdiction of               (IRS Employer Identification  No.)
incorporation or organization)

                276 Fifth Ave., Suite 703, New York, NY 10001
                   (Address of principal executive offices)

                                212-684-3760
                         (Issuer's telephone number)

        Talram Corporation, 80 Wall Street, Suite 815 New York, NY 10005
      (Former name, address and fiscal year, if changed since last report)

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

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:  as of May 19,  2004  there  were
9,090,910 shares outstanding.

Transitional Small Business Format: Yes { } No {X}

<PAGE>

Item 1.   Financial Statements.
-------   ---------------------

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2004 AND DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                     ASSETS
                                                          March 31,        December 31,
                                                            2004              2003
                                                        ------------      ------------
                                                        (Unaudited)         (Audited)
                                                        ------------      ------------
CURRENT ASSETS:
<S>                                                     <C>               <C>
   Cash                                                 $  4,048,068      $    488,001
   Cash - restricted                                       2,057,000         2,057,000
   Accounts receivable, trade, net of
   allowance for doubtful
      accounts of $20,430 as of March 31, 2004
      and December 31, 2003
      respectively                                         5,810,366         6,789,525
   Accounts receivable, trade special                        143,966           943,800
   Other receivables, net of allowance for
   doubtful accounts of $278,300
      as of March 31, 2004 and December 31,
      2003, respectively                                      34,310           407,470
   Other receivables - related party                       3,738,888         5,462,785
   Prepaid expense                                         1,832,832         1,030,156
   Inventories                                             1,359,898         2,136,674
                                                        ------------      ------------

      Total current assets                                19,025,328        19,315,411
                                                        ------------      ------------

PLANT AND EQUIPMENT, net                                   2,612,711         2,554,007
                                                        ------------      ------------

OTHER ASSETS:

   Intangible asset, net                                     158,506           162,790
   Employee advances                                         323,218           333,247
                                                        ------------      ------------
      Total other assets                                     481,724           496,037
                                                        ------------      ------------
        Total assets                                    $ 22,119,763      $ 22,365,455
                                                        ============      ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

   Accounts payable                                     $  1,038,424      $  1,854,084
   Accounts payable - related party                               --            15,675
   Advances from customers                                    69,574            54,934
   Wages and benefits payable                                287,316           689,225
   Income and other taxes payable                            444,498           527,011
   Accrued liabilities                                       626,569           379,689
   Other payables                                          1,465,432         1,333,471
   Other payables - related party                                 --           242,000
   Notes payable - bank                                    5,445,000         5,445,000
   Short-term loans payable - bank                         4,840,000         4,840,000
                                                        ------------      ------------
      Total current liabilities
                                                          14,216,813        15,381,089
                                                        ------------      ------------

CONTINGENCIES                                                     --                --
                                                        ------------      ------------

SHAREHOLDERS' EQUITY:
   Preferred stock, $.0001 par value,
   1,000,000 shares authorized, none
   issued, Common stock, $.0001 par value,
   20,000,000 shares authorized,
      500,000 shares issued and outstanding                      100               100
   Paid-in-capital                                           321,057           312,971
   Statutory reserve                                       1,561,222         1,561,222
   Retained earnings                                       6,023,616         5,101,798
   Accumulated other comprehensive income                     (3,045)            8,275
                                                        ------------      ------------
      Total shareholders' equity
                                                           7,902,950         6,984,366
                                                        ------------      ------------
        Total liabilities and shareholders'
        equity                                          $ 22,119,763      $ 22,365,455
                                                        ============      ============
</TABLE>

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

<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (LOSS)

               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

                                              2004            2003
                                          ------------     -----------
                                           (Unaudited)     (Unaudited)
                                          ------------     -----------
GROSS REVENUES                            $ 4,041,231      $ 4,563,767

COST OF SALES                               2,637,576        2,478,151
                                          -----------      -----------

GROSS PROFIT                                1,403,655        2,085,616

OTHER OPERATING INCOME                         94,756           85,825
SELLING, GENERAL AND  ADMINISTRATIVE
EXPENSES                                      499,318          452,752
                                          -----------      -----------

INCOME  FROM OPERATIONS                       999,093        1,718,689

OTHER EXPENSE, net of other income              2,533           70,011
                                          -----------      -----------

INCOME BEFORE INCOME TAXES                    996,560        1,648,678

PROVISION FOR INCOME TAXES                     74,742          123,088
                                          -----------      -----------

NET INCOME                                    921,818        1,525,590

OTHER COMPREHENSIVE INCOME (LOSS):
    Foreign currency translation
adjustment                                    (11,320)         (12,864)
                                          -----------      -----------

COMPREHENSIVE INCOME                      $   910,498      $ 1,512,726
                                          ===========      ===========

EARNINGS PER SHARE, BASIC AND DILUTED     $      1.82      $      3.03
                                          ===========      ===========

WEIGHTED AVERAGE NUMBER OF SHARES             500,000          500,000
                                          ===========      ===========

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





<PAGE>


                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                                    Accumulated
                                                                                                        other
                               Number          Common      Paid in      Statutory      Retained    comprehensive
                              of shares        stock        capital     reserves       earnings     income (loss)     Totals
                             ------------  ------------  ------------  ------------  ------------   ------------   ------------
                             (Unaudited)    (Unaudited)  (Unaudited)   (Unaudited)   (Unaudited)    (Unaudited)     (Unaudited)
                             ------------  ------------  ------------  ------------  ------------   ------------   ------------
<S>                               <C>      <C>           <C>           <C>           <C>            <C>            <C>
BALANCE, January 1, 2003          500,000  $        100  $    280,624  $  1,174,549  $  5,253,143   $      8,213   $  6,716,629
  Net income                                                                            1,525,590                     1,525,590
  Land use right                                                8,086                                                     8,086
  Foreign currency
    translation adjustments                                                                              (12,864)       (12,864)
                             ------------  ------------  ------------  ------------  ------------   ------------   ------------

BALANCE, March 31, 2003           500,000           100       288,710     1,174,549     6,778,733         (4,651)     8,237,441
  Net income                                                                            2,347,828                     2,347,828
  Land use right                                               24,261                                                    24,261
  Adjustment to statutory
    reserve                                                                 386,673      (386,673)
  Dividend distributions                                                                              (3,638,090)    (3,638,090)
  Foreign currency
    translation adjustments                                                                               12,926         12,926
                             ------------  ------------  ------------  ------------  ------------   ------------   ------------

BALANCE, December 31, 2003
                                  500,000           100       312,971     1,561,222     5,101,798          8,275      6,984,366
  Net income                                                                              921,818                       921,818
  Land use right                                                8,086                                                     8,086
  Foreign currency
    translation adjustments                                                                              (11,320)       (11,320)
                             ------------  ------------  ------------  ------------  ------------   ------------   ------------

BALANCE, March 31, 2004           500,000  $        100  $    321,057  $  1,561,222  $  6,023,616   $     (3,045)  $  7,902,950
                             ============  ============  ============  ============  ============   ============   ============
</TABLE>

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

<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                         2004             2003
                                                     -----------      -----------
                                                     (Unaudited)     (Unaudited)
                                                     -----------      -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                  <C>              <C>
   Net income                                        $   921,818      $ 1,525,590
   Adjustments to reconcile net income to cash
     provided by (used in) operating activities:
       Foreign currency translation adjustments          (11,320)         (12,864)
       Depreciation                                       53,935           36,446
       Amortization                                        4,284               --
       Land use right                                      8,086            8,086
     (Increase) decrease in assets:
       Accounts receivable - trade                       979,159        1,424,960
       Accounts receivable - trade special               799,834       (1,109,570)
       Other receivables                                 373,160         (436,123)
       Other receivables - related party               1,723,897       (3,161,862)
       Prepaid expenses                                 (802,676)        (455,852)
       Inventories                                       776,776          554,906
       Employee advances                                  10,029         (252,545)
     Increase (decrease) in liabilities:
       Accounts payable                                 (815,660)        (452,598)
       Accounts payable - related party                  (15,675)              --
       Advances from customers                            14,640          273,482
       Wages and benefits payable                       (401,909)        (519,612)
       Income and other taxes payable                    (82,513)         201,146
       Accrued liabilities                               246,880          174,914
       Income and other payables                         131,961       (1,346,409)
       Other payables - related party                   (242,000)            (950)
                                                     -----------      -----------
         Net cash provided by (used in)
         operating activities                          3,672,706       (3,548,855)
                                                     -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

   Purchase of intangible asset - land use right              --           (8,960)
   Purchase of plant and equipment                      (112,639)         (42,109)
                                                     -----------      -----------
         Net cash used in investing activities          (112,639)         (51,069)
                                                     -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings net of payments on short term
   notes payable                                              --        4,840,000
   Decrease in bank overdraft                                 --          (19,617)
                                                     -----------      -----------
         Net cash provided by financing
         activities                                           --        4,820,383
                                                     -----------      -----------

INCREASE IN CASH                                       3,560,067        1,220,459


CASH, beginning of period                                488,001               --
                                                     -----------      -----------


CASH, end of period                                  $ 4,048,068      $ 1,220,459
                                                     ===========      ===========
</TABLE>

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


<PAGE>


                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Background

On May 13, 2004, China Autoparts,  Inc.  (formerly known as Talram  Corporation)
(referred  to as  CHINA  AUTOPARTS  or the  Company),  a  Delaware  corporation,
completed  a "reverse  acquisition"  transaction  in which it  acquired  all the
outstanding  stock of Rhohan Holdings Limited  (referred to as RHOHAN) a British
Virgin  Islands  (BVI)  corporation,  in  consideration  for the  issuance  of a
majority of CHINA AUTOPARTS's shares.

The reverse  acquisition  was  completed  pursuant to a Capital  Stock  Exchange
Agreement,  dated April 22, 2004.  Concurrently  with the closing of the reverse
acquisition,   Talram's   shareholders  changed  the  company's  name  to  China
Autoparts,  Inc., its directors  appointed designees of Double Unity Investments
Limited  (100%  shareholder  of  RHOHAN)  as  directors  and  then  resigned  as
directors.  A more detailed  description of this transaction is set forth in the
Company's  Current  Report  on Form 8-K  dated  May 13,  2004.  These  financial
statements  should be read in conjunction  with the Company's  Current Report on
Form 8-K dated May 13, 2004.

China Autoparts,  Inc. was incorporated in the State of Delaware on May 1, 2001.
Until  the   reorganization,   CHINA  AUTOPARTS  had  only  nominal  assets  and
liabilities  and was a  development  stage  company  attempting  to  locate  and
consummate a merger with an ongoing business. As a result of the reorganization,
CHINA AUTOPARTS will continue the business operations of RHOHAN.

Rhohan Holdings  Limited was  incorporated on September 9, 1999 in the territory
of the British Virgin Islands. The Company,  through its wholly owned subsidiary
Chengdu Tonglin Casting Industrial Co., Ltd.  (TONGLIN),  principally engages in
the development,  production,  sales and related  technical service provision of
various  types of engine  blocks  and other  casting  products  in the  People's
Republic of China (PRC).

TONGLIN was established in Dayi County of Chengdu by Chengdu Rongxin Enterprises
Co.,  Ltd.  (Rongxin) and Rhohan  Holdings  Limited  (RHOHAN) as a  Sino-foreign
equity joint  venture on January 21, 2000.  TONGLIN was  classified as a Foreign
Invested  Enterprise (FIE) in the PRC and is subject to the FIE laws of the PRC.
TONGLIN is a Chinese registered limited liability company with a legal structure
similar to a regular corporation and a limited liability company organized under
state laws in the United States of America. The Articles of Association provides
for a 50 year term with original registered capital of approximately $2,005,000.
RHOHAN was formerly owned 100% by Double Unity Investments  Limited (referred to
as Double Unity), a British Virgin Islands corporation. Double Unity Investments
Limited is 100% owned by Mr. Li Yungao.  Rongxin is 100% owned by the  Company's
shareholder, Mr. Li Yungao.

Originally  Rongxin owned 40% and RHOHAN owned 60% of TONGLIN.  On July 5, 2001,
the registered capital of TONGLIN was increased to approximately  $3,214,000 and
RHOHAN's  ownership in TONGLIN  increased  to 75% and  Rongxin's  ownership  was
reduced to 25%.  RHOHAN paid for its increase in capital  through its portion of
undistributed  earnings.  In  October  2002,  Rongxin  agreed  to  transfer  its
remaining 25% ownership in TONGLIN to RHOHAN for approximately  $2,178,000 which
was paid from  dividends  distributed  by TONGLIN.  On November 20,  2003,  this
transfer was approved by the State  Administration  for Industry and Commerce of
the PRC. As a result of this  transfer  TONGLIN  became a wholly  foreign  owned
enterprise (WFOE).

                                      -6-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)

As of April 22, 2004, China Autoparts, Inc. owns the following subsidiaries:

                                               Percentage
     Subsidiary                                Ownership
-------------------------------------------    -------------
Rhohan Holdings Limited (BVI company)                   100 %
owned 100% by China Autoparts, Inc.
Chengdu Tonglin Casting Industrial Co., Ltd             100
     (Chinese registered limited liability
     company), owned 100% by
     Rhohan Holdings Limited

The reporting entity

The  financial  statements  in the fillings of CHINA  AUTOPARTS  become those of
RHOHAN.  The  consolidated  financial  statements of China  Autoparts,  Inc. and
subsidiaries  represent the  activities of its 100% owned  subsidiaries,  Rhohan
Holdings  Limited and Chengdu  Tonglin  Casting  Industrial  Co., Ltd.  Talram's
continuing  operations and balance sheet are insignificant;  however a pro forma
balance  sheet at March 31,  2004 and 2003 and income  statements  for the three
months ended March 31, 2004 and 2003 are presented in Note 11.

Basis of presentation

Talram,  prior to March 31, 2004,  was  considered  to be a  "development  stage
enterprise"  and its  financial  statements  from  December  31,  2003 and prior
periods were  presented in  accordance  with  Statement of Financial  Accounting
Standards  (SFAS)  No.  7,  "Accounting  and  Reporting  by  Development   Stage
Enterprises". As a result of the reverse acquisition of Rhohan Holdings Limited,
the Company is no longer  considered to be a "development  stage enterprise" and
is no longer required to report its financial statements in accordance with SFAS
No. 7.

The consolidated  financial  statements  represent the activities of the Company
and its wholly  owned  subsidiaries.  The  Company's  financial  statements  are
prepared in conformity  with  accounting  principles  generally  accepted in the
United States of America.

Foreign currency translation

The reporting  currency of the Company is the U.S. dollar.  The Company uses the
local currency in the PRC, the Renminbi, as its functional currency.  Results of
operations  and cash flow are  translated at average  exchange  rates during the
period,  and assets and liabilities are translated at the end of period exchange
rates.  Translation  adjustments  resulting  from this  process are  included in
accumulated  other  comprehensive  income  in  the  consolidated   statement  of
shareholders' equity. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional
currency are included in the results of  operations  as incurred.  These amounts
are not material to the consolidated financial statements.

                                      -7-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue recognition

Product  sales are  recognized  when the  products are  delivered  and title has
passed. The Company offers no warranties on its products. However, the customers
have 3-5 days to inspect  the goods and to notify  the  Company if there are any
products  that do not meet the  quality  standards  set forth in the  applicable
contract.  The Company at this time replaces the goods with new products and the
defective  goods are  returned  to TONGLIN  and are  reworked  and  returned  to
inventory.

Sales revenue  represents the invoiced value of goods,  net of a value-added tax
(VAT).  All of the Company's  products that are sold in the PRC are subject to a
Chinese  value-added tax at a rate of 17% of the gross sales price. This VAT may
be offset  by VAT paid by the  Company  on raw  materials  and  other  materials
included in the cost of producing their finished product.

Plant and equipment, net

Plant and equipment  are recorded at cost.  Depreciation  is computed  using the
straight-line method over the estimated useful lives of the assets. Depreciation
expense for the three months  ended March 31, 2004 and 2003  amounted to $53,935
and $36,446, respectively. Estimated useful lives of the assets are as follows:

                                           Estimated Useful Life
                                           ---------------------
Buildings                                       20-30 years
Machinery and equipment                         10-15 years
Furniture and fixtures                           5-10 years

Construction in progress includes  engineering  costs,  insurance costs,  wages,
interest and other costs relating to construction  in progress.  Construction in
progress balances are transferred to equipment when the related assets are ready
for their  intended  use. No  depreciation  is provided for on  construction  in
progress.

Maintenance,  repairs and minor  renewals  are  charged  directly to expenses as
incurred.   Major  additions  and  betterment  to  property  and  equipment  are
capitalized.

Long-term  assets of the  Company  are  reviewed  annually  as to whether  their
carrying value has become impaired.  The Company considers assets to be impaired
if  the  carrying  value  exceeds  projected  future  cash  flows  from  related
operations.  The  Company  also  re-evaluates  the  periods of  amortization  to
determine whether subsequent events and circumstances  warrant revised estimates
of useful lives.  As of March 31, 2004,  the Company  expects these assets to be
fully recoverable.

                                      -8-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Plant and equipment consist of the following:

                                                  March 31,         December 31,
                                                     2004               2003
                                                 -----------        -----------
                                                 (Unaudited)          (Audited)
                                                 -----------        -----------

Buildings and improvements                       $ 1,187,128        $ 1,187,128
Machinery and equipment                            2,135,173          2,064,257
Construction in progress                             106,574             64,850
                                                 -----------        -----------
     Totals                                        3,428,875          3,316,235
Accumulated depreciation                            (816,164)          (762,228)
                                                 -----------        -----------
     Property and equipment, net                 $ 2,612,711        $ 2,554,007
                                                 ===========        ===========

In the  year  2000,  Rongxin,  as part  of its  original  capital  contribution,
contributed  certain  buildings,  machinery,  and equipment in the amount of RMB
5,111,248,  or approximately $618,500. The buildings,  machinery,  and equipment
were  originally  purchased by Rongxin through  financing  provided by Rongxin's
banking  institution  and were pledged as collateral  for this loan. The term of
this loan  commenced on August 31, 1999 and will expire on August 30, 2004.  The
titles  of the  buildings,  machinery,  and  equipment  are still in the name of
Rongxin  and  will be  transferred  to  TONGLIN  once  the loan is paid off (and
consequently  the  buildings,  machinery  and  equipment  will  be  released  as
collateral).  As of the date of this report,  the titles of the said  buildings,
machinery,  and equipment (net book value of $146,419) have not been transferred
to TONGLIN.

Use of estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  of the United States of America  requires  management to
make  estimates  and  assumptions  that  affect  the  amounts  reported  in  the
consolidated  financial  statements and accompanying notes.  Management believes
that the estimates utilized in preparing its financial statements are reasonable
and prudent. Actual results could differ from these estimates.

Cash and concentration of risk

Cash  includes  cash on hand and demand  deposits  in accounts  maintained  with
state-owned  banks  within  the  People's  Republic  of  China.  Total  cash  in
state-owned banks at March 31, 2004 and December 31, 2003 amounted to $6,332,320
and $2,500,000, respectively, of which no deposits are covered by insurance. The
Company has not  experienced  any losses in such accounts and believes it is not
exposed to any risks on its cash in bank accounts.

The Company has a concentration  of sales risk because five customers  represent
94% or  $3,792,588  of total sales for the three months ended March 31, 2004, as
compared to 87% or $3,982,065 for five customers in the three months ended March
31, 2003. Total outstanding  accounts receivable for these customers amounted to
$5,294,376  and  $4,959,943  as  of  March  31,  2004  and  December  31,  2003,
respectively.

                                      -9-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash-restricted

The Company through its bank agreements is required to keep certain cash amounts
on deposit that are subject to withdrawal  restrictions.  The restricted amounts
are $2,057,000 as of March 31, 2004 and December 31, 2003.

Inventories

Inventories  are stated at the lower of cost or market on the first in first out
method of accounting and consist of the following:

                                         March 31,       December 31,
                                           2004              2003
                                      -------------     -------------
                                       (Unauidted)         (Auidted)
                                      -------------     -------------

Raw materials                         $     281,173     $     936,619
Finished goods                            1,078,725         1,200,055
                                      -------------     -------------
     Totals                           $   1,359,898     $   2,136,674
                                      =============     =============

Financial instruments

Statement of Financial  Accounting  Standards  No. 107 (SFAS 107),  "Disclosures
About Fair Value of Financial Instruments" requires disclosure of the fair value
of financial instruments held by the Company. SFAS 107 defines the fair value of
financial  instruments as the amount at which the instrument  could be exchanged
in a current  transaction  between willing  parties.  The Company  considers the
carrying  amount  of cash,  accounts  receivable,  other  receivables,  accounts
payable, accrued liabilities and other payables to approximate their fair values
because of the short period of time between the origination of such  instruments
and their expected realization and their current market rate of interest.

Accounts receivable, trade

The Company's  business  operations  are  conducted in the People's  Republic of
China.  During the normal  course of  business,  the Company  extends  unsecured
credit to its customers. Management reviews its accounts receivable on a regular
basis to  determine  if the bad debt  allowance  is adequate  at each  year-end.
However,  the Company records a provision for accounts  receivable,  trade which
ranges  from 0.3% to 1.0% of the  outstanding  accounts  receivable  balance  in
accordance  with  generally  accepted  accounting  principles  in the  PRC.  The
allowance  for  doubtful  accounts  as of March 31, 2004 and  December  31, 2003
amounted to $20,430.

Accounts receivable, trade special

This amount represents trade accounts  receivable due from various customers for
which the customers'  banks have  guaranteed  payments of the  receivable.  This
amount is non-interest  bearing and is normally paid within three to six months.
The Company has the ability to submit its request for payment to the  customer's
bank  earlier than the  scheduled  payment  date;  however,  the Company  incurs
interest and processing fees in such instances.

                                      -10-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)

Intangible assets

All land in the People's Republic of China is owned by the government and cannot
be sold to any individual or company.  However, the government grants the user a
"land use right" (the Right) to use the land.  In 2003,  TONGLIN  purchased  the
Right to use the land for 50 years from the  government  for a fee in the amount
of $171,358.

The Right is being  amortized over a minimum life of 10 years in accordance with
PRC generally accepted accounting  principles.  The expense for the three months
ended March 31, 2004 and 2003 amounted to $4,284 and $0, respectively.  However,
the  Certificate  of Land Use Right for this land is held in the name of Chengdu
Rongxin  Industrial  Co., Ltd., a related party.  TONGLIN has applied for a name
change on the  Certificate of the Land Use Right. As of the date of this report,
this process has not been finalized.

The  Certificates  of Land Use Rights of  approximately  57,347 Chinese acres of
land are occupied by buildings  operated by TONGLIN,  which are held in the name
of Chengdu Rongxin  Industrial  Co., Ltd., a related party.  The land use rights
have been  acquired  from  1998  through  2000 for a life of 50  years.  Chengdu
Rongxin Industrial Co., Ltd. has verbally agreed to let TONGLIN use the property
for agreed upon purposes through the life of the Land Use Rights.  However,  the
Land Use Rights  remains in the name of Chengdu  Rongxin  Industrial  Co.,  Ltd.
TONGLIN is not charged  for the use of the land nor has an asset been  reflected
on TONGLIN's  balance sheet for these rights.  The original cost of the land use
rights  amounted to $324,076.  In order to better report the actual  expenses of
the  operations,  the Company  has  reported  in the  accompanying  consolidated
statements  of income an  expense  for the use of the land with a  corresponding
entry to  paid-in-capital.  The Rights are being  amortized  over 10 years based
upon the original  cost of the rights and the expense for the three months ended
March 31, 2004 and 2003 amounted to $8,086 and $8,086, respectively.

Chengdu  Rongxin  Industrial Co., Ltd. has not indicated to TONGLIN that it will
need  the use of the  land  within  the  next  year.  However,  Chengdu  Rongxin
Industrial Co., Ltd. has the right to occupy the land once notification is given
to TONGLIN.

Income taxes

The Company has adopted  Statement of Financial  Accounting  Standards  No. 109,
"Accounting  for Income Taxes" (SFAS 109).  SFAS 109 requires the recognition of
deferred  income  tax  liabilities  and  assets  for  the  expected  future  tax
consequences  of temporary  differences  between  income tax basis and financial
reporting basis of assets and  liabilities.  Provision for income taxes consists
of taxes  currently due plus deferred  taxes.  There are no deferred taxes as of
March 31, 2004 and 2003.

The charge for  taxation is based on the  results  for the year as adjusted  for
items, which are non-assessable or disallowed.  It is calculated using tax rates
that have been enacted or substantively enacted by the balance sheet date.

Deferred  tax is  accounted  for using the  balance  sheet  liability  method in
respect of temporary  differences  arising from differences between the carrying
amount  of  assets  and   liabilities  in  the  financial   statements  and  the
corresponding tax basis used in the computation of assessable tax profit.

                                      -11-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income taxes, continued

In principle,  deferred tax liabilities are recognized for all taxable temporary
differences,  and  deferred tax assets are  recognized  to the extent that it is
probable  that  taxable  profit  will  be  available  against  which  deductible
temporary differences can be utilized.

Deferred  tax is  calculated  at the tax rates that are expected to apply to the
period when the asset is realized or the  liability is settled.  Deferred tax is
charged or  credited  in the income  statement,  except when it relates to items
credited or charged  directly to equity,  in which case the deferred tax is also
dealt with in equity. Deferred tax assets and liabilities offset each other when
they  relate  to income  taxes  levied by the same  taxation  authority  and the
Company intends to settle its current tax assets and liabilities on a net basis.

The Company through its subsidiary,  TONGLIN,  is governed by the Income Tax Law
of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and
various  local income tax laws (the Income Tax Laws).  The Income Tax Law of the
PRC for Enterprises  with Foreign  Investments and Foreign  Enterprises  states,
"Any enterprise  with foreign  investments of a production  nature  scheduled to
operate  for a period of not less than ten years  shall,  upon  examination  and
verification  by the tax  authorities  in the year the company  begins to make a
profit,  be exempted from income taxes in the first and second years and allowed
a fifty  percent  reduction  in the  standard  tax  rates in the  third to fifth
years."

Under the Income Tax Laws,  foreign  investment  enterprises (FIE) generally are
subject to an income tax at an  effective  rate of 33% (30% state  income  taxes
plus 3% local  income  taxes) on incomes  reported  in the  statutory  financial
statements after  appropriate tax adjustments,  unless the enterprise is located
in a specially  designated  region for which more favorable  effective tax rates
are applicable.

The Company is exempt from income tax from 2000 to 2001. TONGLIN is located in a
Special Economic Zone and the PRC tax authorities have approved a special income
tax rate of 15% for this area.  In addition,  TONGLIN is subject to the Circular
of  Transmission  the State  Administration  of Taxation of Sichuan  Province on
Implementing  the Relevant Tax Policies of  Development  of the West Regions and
Implement of the  Suggestion  Concretely  of State  Administration  of Taxation,
which states:  "the enterprise income tax of the foreign investment  enterprises
in the legal tax reduction  period shall be reduced by 7.5%." TONGLIN  generated
profits in the year  ended  March 31,  2000.  Effective  January  1,  2002,  the
two-year  100%  exemption for income taxes had expired for TONGLIN and it became
subject to income  tax at a reduced  rate of 7.5% for 2002,  2003 and 2004.  The
Company is not  subject to any local  income tax of 3% until its  exemption  and
reduction periods expire in 2005.

The provision for income taxes at March 31 consisted of the following:

                                           2004           2003
                                        -----------   -----------
Provision for China income tax          $    74,742   $   123,088
Provision for China local tax                  --            --
Deferred taxes                                 --            --
                                        -----------   -----------
     Total provision for income taxes   $    74,742   $   123,088
                                        ===========   ===========

                                      -12-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income taxes (continued)

The  following  table  reconciles  the U.S.  statutory  rates  to the  Company's
effective tax rate:

                                                         2004         2003
                                                      ----------   ----------
U.S.  Statutory  rates                                      34.0 %       34.0 %
Foreign  income not recognized in USA                      (34.0)       (34.0)
China income taxes                                           7.5          7.5
                                                      ----------   ----------
     Totals                                                  7.5 %        7.5 %
                                                      ==========   ==========

The Company has recorded an allowance for bad debts in the amount of $278,300 as
further  described  in note 5. This  amount has been  recorded as an expense for
financial statement purposes. However, the ultimate deduction for Chinese income
tax  purposes  has not been  determined  and the amount to be  deducted  must be
approved by the appropriate Chinese taxing authority.  A valuation allowance for
the entire amount has been  established  due to the uncertainty of realizing the
deduction  of  this  expense  for  income  tax  purposes.  As a  result  of this
uncertainty no deferred taxes has been provided in the accompanying consolidated
financial statements.

Value added tax

Enterprises  or  individuals  who  sell   commodities,   engage  in  repair  and
maintenance  or import and export  goods in the PRC are subject to a value added
tax in accordance with Chinese laws. The value added tax standard rate is 17% of
the gross sales price.  A credit is available  whereby VAT paid on the purchases
of  semi-finished  products  or raw  materials  used  in the  production  of the
Company's  finished  products  can be used to offset the VAT due on sales of the
finished product.

From TONGLIN's inception in the year 2000 through the year 2002, TONGLIN adopted
the Tax Package  Policy  issued by the Dayi County  Government,  which  requires
TONGLIN to pay its tax to the appropriate taxing authority based upon the annual
fixed amount set forth by the Dayi County  Government.  The fixed tax amount set
forth for TONGLIN in 2002 amounted to RMB 8,000,000.  The Tax Package Policy was
terminated on January 1, 2003.  The Company is subject to the value added tax at
the standard  rate of 17% on the gross sales price of all  products  sold within
the PRC.

On August 14, 2003, a certificate issued by the State Taxation Administration of
Dayi County Sichuan Province, stated that the income tax and valued added tax of
TONGLIN from inception  through the year ended December 31, 2002 have been fully
paid.

                                      -13-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 2 - CONDENSED FINANCIAL STATEMENTS AND FOOTNOTES

The  interim  consolidated  financial  statements  presented  herein  have  been
prepared by the Company  and include the  unaudited  accounts of the Company and
its subsidiaries.  All significant  inter-company accounts and transactions have
been eliminated in the consolidation.

These  condensed  financial  statements  have been prepared in  accordance  with
generally  accepted  accounting  principles  in the United  States  for  interim
financial  information  and the  instructions  to Form  10-Q and  Article  10 of
Regulation S-X. Certain information and footnote  disclosures  normally included
in  financial   statements  presented  in  accordance  with  generally  accepted
accounting principles have been condensed or omitted.  Management of the Company
believes the disclosures made are adequate to make the information presented not
misleading.  The condensed  consolidated  financial statements should be read in
conjunction with CHINA AUTOPARTS' audited financial  statements  included in its
Annual  Report  on Form  10-KSB  dated  March  19,  2004  and  RHOHAN's  audited
consolidated financial statements for the year ended December 31, 2003 and notes
thereto included in CHINA  AUTOPARTS'  Current Report on Form 8-K, dated May 13,
2004.

In the opinion of management,  the unaudited  condensed  consolidated  financial
statements   reflect  all  adjustments  (which  include  only  normal  recurring
adjustments)  necessary to present fairly the financial  position of the Company
as of March 31, 2004,  and the results of operations,  changes in  shareholders'
equity  and cash  flows  for the three  months  ended  March 31,  2004 and 2003.
Interim results are not necessarily  indicative of full year performance because
of the impact of seasonal and short-term variations.


NOTE 3 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income  taxes paid  amounted to $10,663 and $37,439 for the three  months  ended
March 31, 2004 and 2003, respectively.  Interest paid for the three months ended
March 31, 2004 and 2003 amounted to $136,804 and $91,600 respectively.

In 2003, the Company made a non-cash shareholders' distribution of $3,638,090 to
offset other receivables/payables due from/to related parties.

NOTE 4 - EARNINGS PER SHARE

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 128,
"Earnings Per Share" (SFAS 128). SFAS 128 requires the  presentation of earnings
per share (EPS) as Basic EPS and Diluted EPS. There are no  differences  between
Basic and Diluted EPS for the three  months  ended March 31, 2004 and 2003.  The
weighted  average  number of shares used to  calculate  EPS for the three months
ended March 31, 2004 and 2003 reflect only the 500,000  shares  outstanding  for
those periods and does not include the 8,590,910 shares issued on April 22, 2004
in the reverse acquisition transaction.

                                      -14-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 5 - OTHER RECEIVABLES

In 2003 the Company made a prepayment  of $278,300 to purchase  several molds to
be used in its  operations.  As of  December  31,  2003,  the molds  were  never
delivered by the vendor. The Company is currently in litigation with the vendor.

Management intends to pursue collection of this receivable;  however, management
is uncertain that the Company will prevail in collecting  the entire amount.  As
of March 31,  2004,  management  has  decided to fully  reserve  this  amount as
uncollectible.

NOTE 6 - NOTES PAYABLE-BANK

The Company has the following lines of credit outstanding:

<TABLE>
<CAPTION>
                                                              March 31,    December 31,
                                                                2004           2003
                                                            ------------   ------------
                                                              Unaudited       Audited
                                                            ------------   ------------
<S>                                                         <C>            <C>
Shanghai Pu Dong Development Bank, Chengdu Branch
      due June 2004, transaction fee at 0.05%
      restricted cash requirement of 30% or $363,000
      and Chengdu Rongxin Ruigao Machinery Co., Ltd.
      guaranteed the difference between the cash
      amount deposited and the credit line amount           $  1,210,000   $  1,210,000

Chengdu City Commercial Bank, Dayi Branch
      due May 2004,  transaction fee at 0.05%
      restricted cash requirement of 40% or $726,000
      Chengdu Rongxin Industrial Co., Ltd. guaranteed the
      difference between the cash amount deposited
      and the credit line amount                               1,815,000      1,815,000

Chengdu City Commercial Bank, Dayi Branch
      due June 2004, transaction fee at 0.05%
      restricted cash requirement of 40% or $968,000
      Chengdu Rongxin Industrial Co., Ltd. guaranteed the
      difference between the cash amount deposited             2,420,000      2,420,000
      and the credit line amount
                                                            ------------   ------------
                 Totals                                     $  5,445,000   $  5,445,000
                                                            ============   ============
</TABLE>

The proceeds of the above debt were loaned to Chengdu Taichang Metals Co., Ltd.,
a related  party.  In return for this loan,  Chengdu  Taichang  Metals Co.  Ltd.
deposited  $242,000  cash  with  TONGLIN  as a  partial  guarantee  for the loan
repayment.  The amount loaned to Chengdu Taichang Metals Co. Ltd. is recorded in
other  receivables-related  party on the accompanying consolidated balance sheet
and is further explained in Note 8.

This amount is non interest bearing and due and payable in May 2004. On April 1,
2004, Chengdu Taichang Metals Co., Ltd. repaid these amounts in full.

                                      -15-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 7 - SHORT-TERM LOANS PAYABLE - BANK

The Company has the following short-term loans payable:

<TABLE>
<CAPTION>
                                                                   March 31,    December 31,
                                                                     2004           2003
                                                                 ------------   ------------
                                                                   Unaudited      Audited
                                                                 ------------   ------------
<S>                                                              <C>            <C>
Chengdu City  Commercial  Bank, Dayi Branch
      due January 15, 2005 and January 29, 2004, respectively,
      monthly interest only payment at 0.57525%, guaranteed
      by Chengdu High Pressure Valve Plant, a related party      $  1,210,000   $  1,210,000


Shanghai Pu Dong Development Bank, Chengdu Branch
      due March 29, 2005 and March 9, 2004, respectively,
      monthly interest only payment at 0.48675%, guaranteed
      by Chengdu Rongxin Ruigao Machinery Co., Ltd., a
      related party                                                 3,630,000      3,630,000
                                                                 ------------   ------------
        Totals                                                   $  4,840,000   $  4,840,000
                                                                 ============   ============
</TABLE>

The above loans have been refinanced  into short-term  loans due within one year
during 2004 in the amount of $4,840,000.

Total  interest  expense on all bank debt for the three  months  ended March 31,
2004 and 2003 amounted to $136,804 and $91,600 respectively.

NOTE 8 - RELATED PARTY TRANSACTIONS AND CONTINGENCIES

The following are related  parties  described in the  accompanying  consolidated
financial statements:

Chengdu Rongxin Enterprises Co., Ltd. is owned 100% by Mr. Li Yungao.

Chengdu  Rongxin  Industrial Co., Ltd. is owned by Mr. Li Yungao and a number of
managers and directors of TONGLIN.

Chengdu  Rongxin  Ruigao  Machinery Co., Ltd. is owned 70% by Mr. Li Yungao with
the remaining 30% owned by a number of managers and directors of TONGLIN.

Chengdu Begin Pipeline Co., Ltd. is owned 75% by Chengdu Rongxin Industrial Co.,
Ltd. and 25% by Chengdu Begin Technology Development Co., Ltd.

Chengdu  High  Pressure  Valve  Plant is owned by Mr. Li Yungao  and a number of
managers and directors of TONGLIN.

Chengdu Taichang Metals Co., Ltd. is 95% owned by Mr. Li Jing, who is the son of
Mr. Li Yungao.

                                      -16-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 8 - RELATED PARTY TRANSACTIONS AND CONTINGENCIES, (CONTINUED)

During the three months ended March 31, 2004 and 2003, the Company  entered into
the following transactions with related parties:

Sales, purchases and other expenses

                                                        2004            2003
                                                   -------------   -------------
Sales
Chengdu Rongxin Ruigao Machinery Co., Ltd.         $       5,899   $       9,577
                                                   =============   =============

Cost of sales
Chengdu Rongxin Ruigao Machinery Co., Ltd.         $       5,728   $       8,784
                                                   =============   =============

Interest expense
Chengdu Rongxin Ruigao Machinery Co., Ltd.         $        --     $      10,197
                                                   =============   =============

Lease expense
Chengdu Rongxin Ruigao Machinery Co., Ltd.         $      30,250   $      30,250
                                                   =============   =============

Amounts due to/from related parties

                                                     March 31,      December 31,
                                                        2004           2003
                                                   -------------   -------------
                                                    (Unaudited)      (Audited)
                                                   -------------   -------------
Other receivables - related party:
      Chengdu Rongxin Ruigao Machinery Co., Ltd.   $   3,595,648   $      17,785
      Chengdu High Pressure Valve Plant                   22,240            --
      Chengdu Taichang Metals Co., Ltd.                  121,000       5,445,000
                                                   -------------   -------------
                                           Totals  $   3,738,888   $   5,462,785
                                                   =============   =============

Other payables - related party:
      Chengdu Taichang Metals Co., Ltd.            $        --     $     242,000
                                                   =============   =============

On May 20, 2003,  TONGLIN entered into an agreement with Chengdu Taichang Metals
Co.,  Ltd.  to make a  12-month  loan in the  amount of  $3,025,000  to  Chengdu
Taichang  Metals Co., Ltd. using the proceeds from TONGLIN's bank line of credit
described in Note 6. In addition,  TONGLIN deposited $1,089,000 with its bank as
restricted cash deposit as required by the loan agreement.

The  $3,025,000  was required to be paid to TONGLIN upon maturity  together with
interest calculated based on the amount of the restricted cash deposit using the
bank's  monthly  interest  rate of 0.4425%.  Chengdu  Taichang  Metals Co., Ltd.
agreed to pay a  consultation  fee of $121,000 to TONGLIN  upon  maturity of the
loan. On April 1, 2004,  Chengdu  Taichang Metals Co., Ltd. repaid these amounts
in full.

                                      -17-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 8 - RELATED PARTY TRANSACTIONS AND CONTINGENCIES (CONTINUED)

On May 29, 2003,  TONGLIN entered into an agreement with Chengdu Taichang Metals
Co., Ltd. to make a loan in the amount of $2,420,000 to Chengdu  Taichang Metals
Co., Ltd.  using the proceeds from  TONGLIN's  bank line of credit  described in
Note 6. In addition,  TONGLIN deposited $968,000 with its bank as the restricted
cash deposit as required by the loan agreement.

The  $2,420,000  was required to be paid to TONGLIN upon maturity  together with
interest calculated based on the amount of the restricted cash deposit using the
bank's monthly  interest rate of 0.4425%.  Chengdu Taichang Metals Co., Ltd. was
required to pay a fee of $77,101 to TONGLIN upon  maturity of the loan. On April
1, 2004, Chengdu Taichang Metals Co., Ltd. repaid these amounts in full.

As part of the  above  loan  transactions  Chengdu  Taichang  Metals  Co.,  Ltd.
deposited  $242,000 of cash with  TONGLIN as a partial  guarantee to ensure that
the loans would be paid in full at maturity.

The other amounts due from related parties are generated from the Company making
various  cash  advances  and short  term  loans and the  allocation  of  various
expenses to related parties.  These transactions are recurring in nature and are
generally  repaid during the current year on a revolving basis. The Company does
not charge interest on these receivables.

On January 1, 2000,  TONGLIN and Chengdu Rongxin  Enterprises  Co., Ltd. entered
into a Working Ground and  Transportation  Equipment  Leasing  Agreement,  under
which TONGLIN leases office  building  space,  living areas and vehicles with an
annual rent of $121,000.

Short-term  loans from Chengdu  Rongxin Ruigao  Machinery  Co., Ltd.  (formerly,
Chengdu  Rongxin  Enterprises  Co., Ltd.)  amounted to $544,500  during the year
ended December 31, 2002. This loan included interest at rates ranging from 7.49%
to 12.10% per annum and was paid off in 2003. Interest paid for the three months
ended March 31, 2004 and 2003 amounted to $0 and $10,197, respectively.

On November 4, 2003,  TONGLIN and Industrial  and Commercial  Bank of China Dayi
County Branch  entered into the  "Intangible  Right Security  Agreement",  under
which TONGLIN has guaranteed a $1,089,000  bank line of credit issued to Chengdu
Rognxin Ruigao  Machinery Co., Ltd. The term of this bank line of credit expired
on April 29, 2004.

NOTE 9 - LEASES

The Company leases office building  space,  living  quarters,  and vehicles from
Chengdu Rongxin Ruigao Machinery Co., Ltd, formerly Chengdu Rongxin  Enterprises
Co.,  Ltd.,  a related  party,  in the amount of  $121,000  per year.  The lease
expenses  paid for the three  months  ended March 31, 2004 and 2003  amounted to
$30,250 and $30,250,  respectively.  Chengdu Rongxin  Enterprises  Co., Ltd. was
dissolved in October 2002.  All of the assets,  including  the lease  agreement,
were taken over by Chengdu Rongxin Ruigao  Machinery Co., Ltd., a related party.
This agreement has no expiration date at this time.

                                      -18-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 10 - OTHER OPERATING INCOME

The Company has entered into various contractual arrangements to act as an agent
for Chengdu  Zhengheng  Engine  Parts Co.,  Ltd.  where the  Company  receives a
commission on sales of products  purchased from Chengdu  Zhengheng  Engine Parts
Co.,  Ltd.  For the three  months  ending  March 31, 2004 and 2003,  this income
amounted to $94,756 and $85,825, respectively.

NOTE 11 - PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

As set forth in Note 1 to the  financial  statements,  Rhohan  Holdings  Limited
entered  into a reverse  merger  with China  Autoparts,  Inc.,  a publicly  held
non-operational  corporation,  for which RHOHAN was the acquirer for  accounting
purposes.

The accompanying  consolidated financial statements illustrate the effect of the
merger (Pro Forma) on the  financial  position  and results of  operations.  The
consolidated  balance  sheets  as of March  31,  2004 and 2003 are  based on the
historical  balance  sheets of RHOHAN  and CHINA  AUTOPARTS  as of that date and
assumes the acquisition took place as of January 1, 2003.

Pro forma consolidated statements of income for the three months ended March 31,
2004 and 2003 are based on the historical statements of operations of RHOHAN and
CHINA AUTOPARTS for those periods and assumes the acquisition  took place at the
beginning of the earliest period.

The pro forma  consolidated  financial  statements  may not be indicative of the
actual results of the merger. The accompanying  consolidated pro forma financial
information  should  be  read  in  connection  with  the  historical   financial
statements of Rhohan Holdings Limited and China Autoparts, Inc.

                                      -19-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 11 - PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                              AS OF MARCH 31, 2004

                                     ASSETS

<TABLE>
<CAPTION>
                                                    China                         Pro forma       Adjusted
                                                  Autoparts        Rhohan        Adjustments     Pro forma
                                                 -----------    ------------     -----------    ------------
CURRENT ASSETS:

<S>                                              <C>            <C>              <C>     <C>
       Cash                                      $              $  4,048,068     $              $  4,048,068

       Cash - restricted                                           2,057,000                       2,057,000

       Accounts receivable, trade                                  5,810,366                       5,810,366
       Accounts receivable, trade
       special                                                       143,966                         143,966

       Other receivables                                              34,310                          34,310
       Other receivables - related
       party                                                       3,738,888                       3,738,888

       Prepaid expense                                             1,832,832                       1,832,832

       Inventories                                                 1,359,898                       1,359,898
                                                 -----------    ------------     -----------    ------------


          Total current assets                            --      19,025,328              --      19,025,328
                                                 -----------    ------------     -----------    ------------


PLANT AND EQUIPMENT, net                                           2,612,711                       2,612,711
                                                 -----------    ------------     -----------    ------------

OTHER ASSETS:

       Intangible asset, net                                         158,506                         158,506

       Employee advances                                             323,218                         323,218
                                                 -----------    ------------     -----------    ------------

          Total other assets                              --         481,724              --         481,724
                                                 -----------    ------------     -----------    ------------


             Total assets                        $        --    $ 22,119,763     $        --      22,119,763
                                                 ===========    ============     ===========    ============


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
       Accounts payable                          $              $  1,038,424     $              $  1,038,424
       Advances from customers                                        69,574                          69,574
       Wages and benefits payable                                    287,316                         287,316
       Income and other taxes payable                                444,498                         444,498
       Accrued liabilities                                           626,569                         626,569
       Other payables                                              1,465,432                       1,465,432
       Notes payable - bank                                        5,445,000                       5,445,000
       Short term loans payable -
        bank                                                       4,840,000                       4,840,000
                                                 -----------    ------------     -----------    ------------
          Total current liabilities
                                                          --      14,216,813              --      14,216,813
                                                 -----------    ------------     -----------    ------------

SHAREHOLDERS' EQUITY:

       Common stock                                       50             100           8,591 (1)         100
                                                                                      (8,641)(2)          --

       Paid-in-capital                                12,059         321,057          (8,591)(1)     321,057
                                                                                      (3,468)(2)          --

       Statutory reserve                                           1,561,222                       1,561,222

       Retained earnings                             (12,109)      6,023,616          12,109 (2)   6,023,616
       Accumulated other comprehensive
       income (loss)                                                  (3,045)                         (3,045)
                                                 -----------    ------------     -----------    ------------
          Total shareholders' equity
                                                          --       7,902,950              --       7,902,950
                                                 -----------    ------------     -----------    ------------
             Total liabilities and               $        --    $ 22,119,763     $        --    $ 22,119,763
                                                 ===========    ============     ===========    ============
</TABLE>

(1)   Reflects stock issuance by China Autoparts.

(2)   Capitalization  of post merger Rhohan  reflects the pro forma common stock
      and  paid  in  capital.

<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 11 - PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                              AS OF MARCH 31, 2003

                                     ASSETS

<TABLE>
                                          China                              Pro forma       Adjusted
                                        Autoparts          Rohan           Adjustments       Pro forma
                                      ------------     ------------        -----------     ------------
<S>                                   <C>              <C>                 <C>             <C>
CURRENT ASSETS:

      Cash                            $        140     $ 1,220,459         $      (140)(3) $  1,220,459

      Cash - restricted                                     363,000                             363,000
      Accounts receivable,
       trade                                              6,107,820                           6,107,820
      Accounts receivable,
       trade special                                      1,484,670                           1,484,670

      Other receivables                                     641,896                             641,896
      Other receivables -
       related party                                      5,104,482                           5,104,482

      Prepaid expense                                     1,167,507                           1,167,507

      Inventories                                           650,134                             650,134
                                      ------------     ------------        -----------     ------------


         Total current assets                  140       16,739,968               (140)      16,739,968
                                      ------------     ------------        -----------     ------------


PLANT AND EQUIPMENT, net                                    975,532                             975,532
                                      ------------     ------------        -----------     ------------

OTHER ASSETS:

      Intangible asset, net                                   8,960                               8,960

      Employee advances                                     323,343                             323,343
                                      ------------     ------------        -----------     ------------

         Total other assets                     --          332,303                 --          332,303
                                      ------------     ------------        -----------     ------------


            Total assets              $        140     $ 18,047,803$              (140)    $ 18,047,803
                                      ============     ============        ===========     ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable                      $      1,100     $  1,065,444        $    (1,100)(2) $  1,065,444

Advances from customers                                     314,067                              314,067
Wages and benefits
payable                                                     266,332                             266,332
Income and other taxes
payable                                                     389,477                             389,477

Accrued liabilities                                         425,942                             425,942

Other payables                                              754,600                             754,600
Other payables - related
party                                                       544,500                             544,500

Notes payable - bank                                      1,210,000                           1,210,000
Short term loans payable
- bank                                                    4,840,000                           4,840,000
                                      ------------     ------------        -----------     ------------
   Total current
   liabilities                               1,100        9,810,362             (1,100)       9,810,362
                                      ------------     ------------        -----------     ------------

SHAREHOLDERS' EQUITY:

      Common stock                              50              100              8,591(1)           100

                                                                                (8,641)(2)

      Paid-in-capital                        6,550          288,710              1,100(1)       288,710

                                                                                (7,650)(2)

      Statutory reserve                                   1,174,549                           1,174,549
      Retained earnings                     (7,560)       6,778,733              7,560(2)     6,778,733
      Accumulated other
      comprehensive income (loss)                            (4,651)                             (4,651)
                                      ------------     ------------        -----------     ------------
         Total shareholders'
         equity                               (960)       8,237,441                960        8,237,441
                                      ------------     ------------        -----------     ------------
            Total liabilities
            and shareholders'
            equity                    $        140     $ 18,047,803        $      (140)    $ 18,047,803
                                      ============     ============        ===========     ============
</TABLE>

(1)   Reflects stock issuance by China Autoparts.

(2)   Capitalization  of post merger  Rohan  reflects the pro forma common stock
      and paid in capital.

(3)   Cash used to pay for certain expenses.

                                      -21-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


NOTE 11 - PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
                    FOR THE THREE MONTHS ENDED MARCH 31, 2004



<TABLE>
<CAPTION>
                                                                            Adjusted
                              China                         Pro forma          Pro
                            Autoparts        Rhohan        Adjustments        forma
                           -----------     -----------     -----------     -----------

<S>                        <C>             <C>             <C>             <C>
GROSS REVENUES             $               $ 4,041,231     $               $ 4,041,231


COST OF SALES                                2,637,576                       2,637,576
                           -----------     -----------     -----------     -----------


GROSS PROFIT                        --       1,403,655              --       1,403,655

OTHER OPERATING
INCOME                                          94,756                          94,756
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES          4,309         499,318              --         503,627
                           -----------     -----------     -----------     -----------

INCOME  FROM
OPERATIONS                      (4,309)        999,093              --         994,784

OTHER EXPENSE, net
of other income                                  2,533                           2,533
                           -----------     -----------     -----------     -----------

INCOME BEFORE
INCOME TAXES                    (4,309)        996,560              --         992,251

PROVISION FOR
INCOME TAXES                                    74,742              --          74,742
                           -----------     -----------     -----------     -----------


NET INCOME                      (4,309)        921,818              --         917,509

OTHER COMPREHENSIVE
INCOME (LOSS):
    Foreign
currency
translation
adjustment                          --         (11,320)                        (11,320)
                           -----------     -----------     -----------     -----------
COMPREHENSIVE
INCOME (LOSS)              $    (4,309)    $   910,498     $        --     $   906,189
                           ===========     ===========     ===========     ===========
</TABLE>

                                      -22-
<PAGE>

                     CHINA AUTOPARTS, INC. AND SUBSIDIARIES

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


NOTE 11 - PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
                    FOR THE THREE MONTHS ENDED MARCH 31, 2003



<TABLE>
<CAPTION>
                                   China                        Pro forma       Adjusted
                                 Autoparts        Rohan        Adjustments     Pro forma
                               -----------     -----------     -----------    -----------

<S>                                 <C>          <C>           <C>              <C>
GROSS REVENUES                 $               $ 4,563,767     $              $ 4,563,767


COST OF SALES                                    2,478,151                      2,478,151
                               -----------     -----------     -----------    -----------


GROSS PROFIT                            --       2,085,616              --      2,085,616


OTHER OPERATING INCOME                              85,825                         85,825
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES              1,143         452,752                        453,895
                               -----------     -----------     -----------    -----------


INCOME  FROM OPERATIONS             (1,143)      1,718,689              --      1,717,546

OTHER EXPENSE, net of other
income                                  (1)         70,011                         70,010
                               -----------     -----------     -----------    -----------


INCOME BEFORE INCOME TAX       $    (1,142)      1,648,678              --      1,647,536


PROVISION FOR INCOME TAXES                         123,088              --        123,088
                               -----------     -----------     -----------    -----------


NET INCOME                          (1,142)      1,525,590              --      1,524,448

OTHER COMPREHENSIVE INCOME
(LOSS):
  Foreign currency
   translation adjustment               --         (12,864)                       (12,864)
                               -----------     -----------     -----------    -----------
COMPREHENSIVE INCOME (LOSS)
                               $    (1,142)    $ 1,512,726     $        --    $ 1,511,584
                               ===========     ===========     ===========    ===========
</TABLE>

                                      -23-
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Overview

      China  Autoparts,  Inc. (the  "Company") was  incorporated in the State of
Delaware  on May 1,  2001 and it is a  holding  company  for,  and owns 100% of,
Rhohan Holdings Limited, a British Virgin Islands company ("Rhohan").  Rhohan is
a holding company for, and owns 100% of, Chengdu Tonglin Casting Industrial Co.,
Ltd.  ("Tonglin").  Tonglin is a  manufacturer  of engine blocks in the People's
Republic of China ("PRC") which currently manufactures and is developing a total
of 20 different  engine  blocks which  accommodate  three or four  cylinders for
cars, mini vans and light trucks manufactured in the PRC.

      On May 13, 2004, the Company  acquired 100% of Rhohan pursuant to an April
22, 2004 Capital Stock  Exchange  Agreement in exchange for 8,590,910  shares of
the Company's $.001 par value per share common stock.

      Tonglin sells its products  through an internal  sales staff and primarily
to five  customers.  For the  quarters  ended March 31, 2004 and March 31, 2003,
those five customers accounted for 94.0% and 87.4% of total sales, respectively.
The loss of any of these  customers and Tonglin's  lack of a very large customer
base could adversely impact its business.

      Tonglin  does not  recognize  sales until its products are accepted by its
customers.  Pursuant to the terms of its contracts  with  customers,  Tonglin is
responsible  for the shipments of its products and bears the risk of loss during
those  shipments.  In addition,  the terms of the contracts  also stipulate that
upon the delivery of each shipment at the customer's facility,  the customer and
a Tonglin  representative  must  jointly  inspect  the newly  arrived  products.
Customer  rejections  due to  defective  products  or  non-conformity  with  the
shipping  orders  placed  must be  agreed up by both  parties  at the end of the
inspection.

      Products  that are  rejected by  customers  are  repaired  and returned to
inventory. Tonglin has not experienced returns in material quantities for any of
its products  during the quarter ended March 31, 2004,  and  therefore  does not
believe that it is subject to material risk of inventory buildup attributable to
returns.

      Over the previous  two years,  Tonglin has  expanded  its  operations  and
production   facilities  in  order  to  meet  increased  demands  from  existing
customers, who have expressed satisfaction with Tonglin's products. Accordingly,
in the fiscal years ended  December  31, 2003 and  December  31,  2002,  Tonglin
invested   approximately  $1.8  million  and  $.3  million,   respectively,   on
improvements  of existing  production  facilities  and acquiring new  equipment.
These expenditures resulted in an increase in Tonglin's production capacity from
approximately  400,000 to  approximately  700,000  engine blocks during the same
period.

      Tonglin operates in a highly competitive  environment.  The competition is
expected to intensify with PRC's admission into the World Trade Organization. We
expect  to see an  influx  of  foreign  products  and  further  dilution  of the
autoparts  market in PRC.  Tonglin  believes  that the  selling  prices  for its
products  may  decrease in future  periods,  although  the timing and amounts of
these  decreases  cannot be predicted  with any  certainty at the present  time.
These  decreases  may be  offset by the  introduction  of new  products  and the
increasing sales volume.

<PAGE>

RESULTS OF OPERATIONS

Sales and Gross Profit

      Net sales for the quarter  ended March 31,  2004 were  approximately  $4.0
million compared to  approximately  $4.6 million for the quarter ended March 31,
2003, a decrease of  approximately  11.4%.  The  decrease in net sales  resulted
primarily  from the  decrease  of sales  price for some  products  due to market
competition.

      Gross profit for the quarter ended March 31, 2004 was  approximately  $1.4
million,  a decrease of approximately  32.7% or approximately  $0.7 million from
approximately $2.1 million for the prior year. The decrease in gross profits was
primarily  due to an  increase  in the cost of iron  used in the  production  of
Tonglin's engine blocks and lower sales.

      During the fiscal  quarters  ended March 31, 2004 and March 31, 2003 there
was a  substantial  concentration  of sales.  During the quarter ended March 31,
2004,  approximately  94.0% of sales  were sales to the top five  customers  and
approximately  76.9% of sales  were  sales to the top three  customers.  For the
quarter ended March 31, 2003, approximately 87.4% of sales were sales to the top
five  customers  and  approximately  69.7% of sales  were sales to the top three
customers.

Cost of Sales

      Cost of sales increased to approximately $2.6 million in the quarter ended
March 31, 2004, or  approximately  6.4% from  approximately  $2.5 million in the
prior year primarily due to the increase in the cost of iron noted above.

      Tonglin's  increase in  production  resulted  from  increased  orders from
certain  existing  customers and increased  sales of Tonglin's 465Q product from
43,201  units  during the quarter  ended March 31, 2003 to 44,808  units for the
quarter ended March 31, 2004.

Selling, General and Administrative Expenses

      Selling,  general and  administrative  expenses  were  approximately  $0.5
million,  in the quarter  ended March 31, 2004,  or  approximately  12.4% of net
sales,  compared to approximately  $0.45 million,  or approximately 10.0% of net
sales, for the quarter ended March 31, 2003.

      Selling,  general and administrative  expenses for the quarter ended March
31, 2004 were  primarily  made up of salaries  and wages  ($142,787)  and engine
block assembly and delivery charges ($107,288). The increase in selling, general
and  administrative  expenses primarily resulted from the consulting fee paid by
the  Company  in the  quarter  ended  Marc h 31,  2004 and a minor  increase  in
electricity expenses.

Income Taxes

      The Company did not carry on any business, and did not maintain any branch
office,  in the United  States  during the  quarter  ended March 31, 2004 or the
quarter ended March 31, 2003.  Therefore,  no provision for  withholding or U.S.
federal income taxes or tax benefits on the undistributed earnings and/or losses
of the Company has been made.

      Pursuant to the relevant laws and  regulations in the PRC,  Tonglin,  as a
wholly foreign owned enterprise in the PRC, is entitled to an exemption from the
PRC enterprise income tax for two years commencing from its first  profit-making
year,  after the losses  carry-forward  from the  immediate  previous five years

<PAGE>

being  recovered.  Tonglin is  profitable  and all losses were  recovered  as of
January 1, 2002.  Beginning on that date,  Tonglin,  as a wholly  foreign  owned
enterprise, became entitled to 50% relief from the PRC enterprise income tax for
the following three years.

      Furthermore,  because  Tonglin  is  located  in a  Special  Economic  Zone
designated  by the  PRC  government,  it is  entitled  to a  special  discounted
enterprise income tax rate of 15%.  Therefore  Tonglin's income tax rate for the
quarters  ended March 31, 2004 and March 31, 2003 is 50% of the  discounted  tax
rate of 15%,  which is 7.5%.  Tonglin's  income tax rate will  remain 7.5% until
December 31, 2004, at which time the full rate of 15% will come into effect.

      Tonglin is also  exempt  from local  income  taxes of 3% until  January 1,
2005.

Plan of Operation

      Starting  on April 1, 2004 and over the next  12-month  period,  Tonglin's
plan of operation  centers on continuing  to increase its sales and  production.
Tonglin  has  already  made  capital  investments  which  allow it to produce an
additional  250,000 more engine blocks than  production in the fiscal year ended
December 31, 2003. Now, it is focusing on marketing  additional  products to its
existing  customers and adding new customers through  increased  advertising and
calls on potential  customers in Shenyang  Xinguang and SAIC-Chery where Tonglin
does not currently have a presence.

      In order to increase  its sales to existing  customers,  Tonglin  plans to
increase its sales and service personnel, particularly personnel who are on site
at Tonglin's  customers.  In addition,  Tonglin plans to continue working on its
nine new products under development,  including five products which have already
been sent to  customers  for  testing,  and also  plans to put at least two more
products into its development pipeline prior to the end of fiscal 2004.

      Tonglin  believes  that it will be able to execute  its plan of  operation
over  the  next 12  months  using  its  existing  income,  earnings  and  credit
facilities without having to raise capital from outside sources.

Liquidity and Capital Resources

      Since Tonglin's inception,  it has financed its operations and met capital
expenditure  requirements  primarily  through cash flows from  operations,  bank
loans and  lines of  credit,  and  capital  from its  shareholders  and  related
parties. Although Tonglin is, and has been profitable, it currently needs to use
short-term loans to finance its operations.  Because of the seasonal fluctuation
of the automobile market in the PRC (which tends to be slow in the summer months
and then peaks in February and March when PRC  automobile  purchases  tend to be
made) and a slower  payment cycle than in the U.S.,  Tonglin  extends  unsecured
credit to its customers  during the fiscal year and finances its operations with
short term bank loans and loans from related parties.

      Tonglin  believes that over the next 12 months it will continue to rely on
short term bank loans to finance its operations.  As of March 31, 2004,  Tonglin
had the following short term loans outstanding with the following terms:

<PAGE>

Lender and Terms                                            Amount Due
----------------                                            ----------

Chengdu City Commercial Bank, Dayi Branch                   $1,210,000
Due January 15, 2005
Monthly interest only payment at 0.57525%.
Guaranteed by Chengdu High Pressure Valve
Plant, a related party

Shanghai Pu Dong Development Bank, Chengdu Branch           $3,630,000
Due March 29, 2005
Monthly interest only payment at 0.48675%
Guaranteed by Chengdu Rongxin Ruigao
Machinery Co., Ltd, a related party

      In the past Tonglin has loaned monies to Chengdu Taichang Metals Co., Ltd.
("Taichang"), a company principally owned by Li Jing, an officer and Director of
the Company,  and the son of Li Yungao,  the Company's Chairman and CEO, as well
as  Tonglin's  and  Rhohan's  Chairman  and CEO.  All such loans were  repaid by
Chengdu Taichang Metals Co., Ltd. on April 1, 2004 with no further  liability to
Tonglin.  As of  March  31,  2004,  Tonglin  had the  following  line of  credit
outstanding for the benefit of Chengdu Taichang Metals Co., Ltd.:

Lender and Terms                                            Amount Due
----------------                                            ----------

Shanghai Pu Dong Development Bank, Chengdu Branch           $1,210,000
due June, 2004, transaction fee at 0.05%
restricted cash requirement of 30% or $363,000
and Chengdu Rongxin Ruigao Machinery Co., Ltd
guaranteed the difference between the cash amount
deposited and the credit line amount

Chengdu City Commercial Bank, Dayi Branch                   $1,815,000
due May 2004, transaction fee at 0.05%
restricted cash requirement of 40% or $726,000
and Chengdu Rongxin Industrial Co., Ltd guaranteed
the difference between the cash amount deposited and
the credit line amount

Chengdu City Commercial Bank, Dayi Branch                   $2,420,000
due June 2004,  transaction fee at 0.05%
restricted cash requirement of 40% or $968,000
and Chengdu Rongxin Industrial Co., Ltd guaranteed
the difference  between the cash amount deposited and
the credit line amount

      Because of the  repayment  of the loans for the benefit of  Taichang,  the
Company's  cash  increased  from $0.5  million as of  December  31, 2003 to $4.0
million as of March 31, 2004.

Accounts Receivable

      The decrease in trade accounts  receivable from December 31, 2003 to March
31, 2004 is primarily  attributable  to faster  collections  and the transfer of
more receivables into arrangements  where the customer's bank guarantees payment
of the receivables  within a three to six month period as explained in Note 1 to
the Company's Consolidated Financial Statements.

      The  decrease in Other  Receivables  to  approximately  $3.7 million as of
March 31, 2004 from  approximately  $5.5 million as of December  31,  2003,  was

<PAGE>

primarily due to the repayment from our related party - Chengdu  Taichang Metals
Co., Ltd.

Inventory

      Inventories  of finished  goods  decreased  between  December 31, 2003 and
March 31, 2004 from  approximately  $1.2 million to approximately  $1.1 million.
Inventories of raw materials  decreased  between December 31, 2003 and March 31,
2004 from approximately $0.9 million to approximately $0.3 million. The decrease
in finished  goods and raw materials was  primarily to reduce  inventory  levels
because of the increase in the cost of iron.

Accounts Payable

      Accounts  payable,  accrued  expenses and other  payables  decreased  from
December 31, 2003 to March 31, 2004  primarily as a result of the Company paying
its suppliers and employee bonuses in the first quarter of 2004.

Cash

      The  increase  in cash  from  December  31,  2003 to  March  31,  2004 was
primarily attributable to the repayment of loans from related parties.

Critical Accounting Policies

      Management's  discussion  and  analysis  of its  financial  condition  and
results  of  operations  are based  upon the  Company's  consolidated  financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the United  States.  The Company's  financial  statements
reflect the  selection and  application  of  accounting  policies  which require
management  to make  significant  estimates  and  judgments.  See  note 1 to the
Company's consolidated financial statements,  "Summary of Significant Accounting
Policies."  Management  bases its  estimates  on  historical  experience  and on
various  other  assumptions  that  are  believed  to  be  reasonable  under  the
circumstances.  Actual results may differ from these  estimates  under different
assumptions or conditions.  The Company believes that the following  reflect the
more critical  accounting policies that currently affect the Company's financial
condition and results of operations.

Revenue recognition

      Product sales are recognized when the products are delivered and title has
passed. The Company offers no warranties on its products.  However the customers
have 3-5 days to inspect  the goods and to notify  the  Company if there are any
products that do not meet the quality standards set forth in their contract. The
Company at this time  replaces  the goods with new  products  and the  defective
goods are returned to Tonglin and are reworked and returned to inventory.

      Sales revenue represents the invoiced value of goods, net of a value-added
tax (VAT). All of the Company's products that are sold in the PRC are subject to
a Chinese  value-added  tax at a rate of 17% of the gross sales price.  This VAT
may be offset by VAT paid by the Company on raw  materials  and other  materials
included in the cost of producing their finished product.

<PAGE>

Accounting for long-lived assets

      Plant and equipment are recorded at cost.  Depreciation  is computed using
the  straight-line  method  over  the  estimated  useful  lives  of the  assets.
Depreciation is recorded  utilizing the straight-line  method over the estimated
original useful life ranging from 5-30 years.

      Long-term assets of the Company are reviewed  annually as to whether their
carrying value has become impaired.  The Company considers assets to be impaired
if the  carrying  value  exceeds the future  projected  cash flows from  related
operations.  The  Company  also  re-evaluates  the  periods of  amortization  to
determine whether subsequent events and circumstances  warrant revised estimates
of useful lives.  As of March 31, 2004,  the Company  expects these assets to be
fully recoverable.

Bad debts

      The Company's  business  operations are conducted in the People's Republic
of China.  During the normal course of business,  the Company extends  unsecured
credit to its customers. Management reviews its accounts receivable on a regular
basis to  determine  if the bad debt  allowance  is adequate  at each  year-end.
However,  the Company records a provision for accounts  receivable,  trade which
ranges  from 0.3% to 1.0% of the  outstanding  accounts  receivable  balance  in
accordance with generally accepted accounting principles in the PRC.

Item 3. Controls and Procedures

      As of May 20, 2004 we carried out an evaluation, under the supervision and
with the  participation  of our  management,  including  our  Chairman and Chief
Executive Officer,  and our Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures.  Based upon that
evaluation,  the Chairman and Chief  Executive  Officer and the Chief  Financial
Officer, concluded that our disclosure controls and procedures were effective in
alerting them in a timely manner to information relating to the Company required
to be disclosed in this report.

                           PART II - OTHER INFORMATION

Item 2. Changes in Securities

      On May 13, 2004,  the Company  issued a total of  8,590,910  shares of its
$.001 par value per share common stock to a total of eight  persons and entities
at the closing of an April 22, 2004 Capital Stock Exchange Agreement pursuant to
which the Company  acquired  all of the issued and  outstanding  stock of Rhohan
Holdings  Limited,  a BVI company,  which owns 100% of Chengdu  Tonglin  Casting
Industrial Co., Ltd, a PRC company. The issuances were accomplished  pursuant to
Regulation  S on the basis that each of the  persons  and  entities  to whom the
common stock was issued is a non-U.S. person as defined under Regulation S.


<PAGE>

Item 6.     Exhibits and Reports on Form 8-K

EXHIBIT NUMBER                DESCRIPTION
--------------                -----------

      2.1         April 22, 2004 Capital Stock Exchange Agreement (1)

      3.1         Amended Certificate of Incorporation (1, 2)

      3.2         Amended By-Laws (1)

      3.3         Specimen stock certificate (2)

      21.1        List of Subsidiaries

      31.1        Certification  of Li Yungao  pursuant  to  Exchange  Act Rules
                  13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002;

      31.2        Certification of Chen Weisheng  pursuant to Exchange Act Rules
                  13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002;

      32.1        Certification of Li Yungao pursuant to 18 U.S.C. 1350;

      32.2        Certification Chen Weisheng pursuant to 18 U.S.C. 1350.

      (1)   Filed as an exhibit to our  Current  Report on Form 8-K filed on May
            13, 2004.

      (2)   Filed as an exhibit to our  Registration  Statement Form 10 filed on
            February 13, 2002.

(b) The Company did not file any reports on Form 8-K for the quarter ended March
31, 2004.

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        CHINA AUTOPARTS, INC.


Date: May 20, 2004                      /s/ Chen Weisheng
                                        -------------------------------
                                    By: Chen Weisheng, CFO