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Share Name | Share Symbol | Market | Type |
---|---|---|---|
SORL Auto Parts Inc | NASDAQ:SORL | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 4.71 | 4.69 | 4.72 | 0 | 01:00:00 |
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
for the quarterly period ended June 30,
2008
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|
DELAWARE
|
30-0091294
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
|
Large
Accelerated Filer
o
|
Accelerated
Filer
o
|
Non-Accelerated
Filer
o
|
Smaller
Reporting Company
x
|
|
|
Page
|
|
|
|
1
|
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|
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1
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1
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2
|
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3
|
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4
|
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6
|
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16
|
||
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26
|
||
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26
|
||
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26
|
||
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|
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26
|
||
|
|
|
28
|
SORL
Auto Parts, Inc. and Subsidiaries
|
|||||
Consolidated
Balance Sheets
|
|||||
June
30, 2008 (unaudited) and December 31,
2007
|
Jun
30, 2008
|
December
31, 2007
|
||||||
(Unaudited)
|
(Audited)
|
||||||
Assets
|
|||||||
Current
Assets
|
|||||||
Cash
and Cash Equivalents
|
US$ |
4,481,177
|
US$ |
4,340,211
|
|||
Accounts
Receivable, Net of Provision
|
38,862,983
|
30,586,239
|
|||||
Notes
Receivable
|
12,805,169
|
9,410,385
|
|||||
Inventory
|
13,531,271
|
8,220,373
|
|||||
Prepayments
|
3,309,421
|
1,336,212
|
|||||
Other
Current Assets
|
2,259,417
|
4,275,294
|
|||||
Total
Current Assets
|
75,249,438
|
58,168,714
|
|||||
Fixed
Assets
|
|||||||
Property,
Plant and Equipment
|
30,828,160
|
27,889,182
|
|||||
Less:
Accumulated Depreciation
|
(7,676,656
|
)
|
(6,094,229
|
)
|
|||
Property,
Plant and Equipment, Net
|
23,151,504
|
21,794,953
|
|||||
Land
Use Rights, Net
|
14,627,491
|
13,889,705
|
|||||
Other
Assets
|
|||||||
Deferred
Compensation Cost-Stock options
|
39,753
|
69,571
|
|||||
Intangible
Assets
|
160,770
|
76,150
|
|||||
Less:
Accumulated Amortization
|
(31,250
|
)
|
(25,116
|
)
|
|||
Intangible
Assets, Net
|
129,520
|
51,034
|
|||||
Total
Other Assets
|
169,273
|
120,605
|
|||||
Total
Assets
|
US$ |
113,197,706
|
US$ |
93,973,977
|
|||
Liabilities
and Shareholders' Equity
|
|||||||
Current
Liabilities
|
|||||||
Accounts
Payable and Notes Payable
|
8,013,208
|
5,305,172
|
|||||
Deposit
Received from Customers
|
3,557,350
|
2,079,946
|
|||||
Short
Term Bank Loans
|
1,990,622
|
3,370,328
|
|||||
Income
Tax Payable
|
732,316
|
373,769
|
|||||
Accrued
Expenses
|
3,234,970
|
1,859,938
|
|||||
Other
Current Liabilities
|
487,979
|
463,563
|
|||||
Total
Current Liabilities
|
18,016,445
|
13,452,716
|
|||||
Minority
Interest
|
9,493,164
|
8,024,152
|
|||||
Shareholders'
Equity
|
|||||||
Common
Stock - $0.002 Par Value; 50,000,000 authorized,
|
|||||||
18,279,254
Issued and Outstanding as of
|
|||||||
June
30, 2008 and December 31, 2007 respectively
|
36,558
|
36,558
|
|||||
Additional
Paid In Capital
|
37,498,452
|
37,498,452
|
|||||
Reserves
|
2,661,841
|
1,882,979
|
|||||
Accumulated
Other Comprehensive Income
|
10,355,764
|
5,432,189
|
|||||
Retained
Earnings
|
35,135,482
|
27,646,931
|
|||||
85,688,097
|
72,497,109
|
||||||
Total
Liabilities and Shareholders' Equity
|
US$ |
113,197,706
|
US$ |
93,973,977
|
|||
The
accompanying notes are an integral part of these financial
statements
|
SORL
Auto Parts, Inc. and Subsidiaries
|
||||||||||||
Consolidated
Statements of Income and Comprehensive Income
(unaudited)
|
||||||||||||
For
The Three Months and Six Months Ended June 30, 2008 and
2007
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Sales
|
US$
|
42,186,119
|
29,189,572
|
72,844,561
|
53,606,561
|
||||||||
Cost
of Sales
|
30,776,773
|
22,829,287
|
52,793,354
|
41,555,339
|
|||||||||
Gross
Profit
|
11,409,346
|
6,360,285
|
20,051,207
|
12,051,222
|
|||||||||
Expenses:
|
|||||||||||||
Selling
and Distribution Expenses
|
2,771,803
|
1,331,643
|
4,611,078
|
2,515,290
|
|||||||||
General
and Administrative Expenses
|
2,718,217
|
1,027,436
|
4,694,418
|
2,720,623
|
|||||||||
Financial
Expenses
|
383,320
|
114,268
|
752,996
|
257,436
|
|||||||||
Total
Expenses
|
5,873,340
|
2,473,347
|
10,058,492
|
5,493,349
|
|||||||||
Operating
Income
|
5,536,006
|
3,886,938
|
9,992,715
|
6,557,873
|
|||||||||
Other
Income
|
222,762
|
351,932
|
333,840
|
384,272
|
|||||||||
Non-Operating
Expenses
|
(175,785
|
)
|
(80,550
|
)
|
(254,963
|
)
|
(84,639
|
)
|
|||||
Income
(Loss) Before Provision for Income Taxes
|
5,582,983
|
4,158,320
|
10,071,592
|
6,857,506
|
|||||||||
Provision
for Income Taxes
|
318,757
|
(422,721
|
)
|
882,231
|
(60,256
|
)
|
|||||||
Net
Income Before Minority Interest
|
|||||||||||||
&
Other Comprehensive Income
|
US$
|
5,264,226
|
4,581,041
|
9,189,361
|
6,917,762
|
||||||||
Minority
Interest
|
527,929
|
461,930
|
921,948
|
697,119
|
|||||||||
Net
Income Attributable to Shareholders
|
4,736,297
|
4,119,111
|
8,267,413
|
6,220,643
|
|||||||||
Foreign
Currency Translation Adjustment
|
2,110,749
|
1,075,648
|
5,470,639
|
1,697,589
|
|||||||||
Minority
Interest's Share
|
211,075
|
107,565
|
547,064
|
169,759
|
|||||||||
Comprehensive
Income (Loss)
|
6,635,971
|
5,087,194
|
13,190,988
|
7,748,473
|
|||||||||
Weighted
average common share - Basic
|
18,279,254
|
18,275,126
|
18,279,254
|
18,275,126
|
|||||||||
Weighted
average common share - Diluted
|
18,287,764
|
18,322,260
|
18,288,958
|
18,328,526
|
|||||||||
EPS
- Basic
|
0.26
|
0.23
|
0.45
|
0.34
|
|||||||||
EPS
- Diluted
|
0.26
|
0.22
|
0.45
|
0.34
|
|||||||||
SORL
Auto Parts, Inc. and Subsidiaries
|
||||||||||||
Consolidated
Statements of Cash Flows
(unaudited)
|
||||||||||||
For
The Three Months and Six Months Ended June 30, 2008 and
2007
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Cash
Flows from Operating Activities
|
|||||||||||||
Net
Income
|
US$
|
4,736,297
|
4,119,111
|
8,267,413
|
6,220,643
|
||||||||
Adjustments
to reconcile net income (loss) to net cash from operating
activities:
|
|||||||||||||
Minority
Interest
|
527,929
|
461,930
|
921,948
|
697,119
|
|||||||||
Bad
Debt Expense
|
10,450
|
(234,154
|
)
|
21,282
|
187,176
|
||||||||
Depreciation
and Amortization
|
674,504
|
370,097
|
1,329,059
|
710,394
|
|||||||||
Stock-Based
Compensation Expense
|
14,909
|
38,110
|
29,818
|
53,019
|
|||||||||
Loss
on disposal of Fixed Assets
|
2,519
|
2,519
|
1,108
|
||||||||||
Changes
in Assets and Liabilities:
|
|||||||||||||
Account
Receivables
|
(2,142,593
|
)
|
(2,100,597
|
)
|
(6,092,371
|
)
|
(4,634,961
|
)
|
|||||
Notes
Receivables
|
(2,102,462
|
)
|
(1,237,625
|
)
|
(2,731,319
|
)
|
(5,615,402
|
)
|
|||||
Other
Currents Assets
|
(165,931
|
)
|
(680,963
|
)
|
2,181,644
|
(912,057
|
)
|
||||||
Inventory
|
(2,164,427
|
)
|
(2,426,343
|
)
|
(4,642,399
|
)
|
(2,694,515
|
)
|
|||||
Prepayments
|
(712,009
|
)
|
1,413,829
|
(1,828,836
|
)
|
3,332,649
|
|||||||
Accounts
Payable and Notes Payable
|
418,290
|
2,060,032
|
2,276,580
|
991,030
|
|||||||||
Income
Tax Payable
|
218,643
|
64,855
|
358,547
|
72,614
|
|||||||||
Deposits
Received from Customers
|
828,703
|
(4,080
|
)
|
1,311,351
|
282,352
|
||||||||
Other
Current Liabilities and Accrued Expenses
|
1,220,975
|
(255,848
|
)
|
1,203,937
|
(385,245
|
)
|
|||||||
Net
Cash Flows from Operating Activities
|
1,365,797
|
1,588,354
|
2,609,173
|
(1,694,076
|
)
|
||||||||
Cash
Flows from Investing Activities
|
|||||||||||||
Acquisition
of Property and Equipment
|
(552,037
|
)
|
(3,271,641
|
)
|
(1,109,428
|
)
|
(5,335,361
|
)
|
|||||
Investment
in Intangible Assets
|
(78,109
|
)
|
—
|
(78,737
|
)
|
(19,915
|
)
|
||||||
Net
Cash Flows from Investing Activities
|
(630,146
|
)
|
(3,271,641
|
)
|
(1,188,165
|
)
|
(5,355,276
|
)
|
|||||
Cash
Flows from Financing Activities
|
|||||||||||||
Proceeds
from (Repayment of) Bank Loans
|
930,359
|
1,492,936
|
(1,502,107
|
)
|
1,492,936
|
||||||||
Net
Cash flows from Financing Activities
|
930,359
|
1,492,936
|
(1,502,107
|
)
|
1,492,936
|
||||||||
Effects
on changes in foreign exchange rate
|
82,357
|
89,213
|
222,065
|
170,257
|
|||||||||
Net
Change in Cash and Cash Equivalents
|
1,748,367
|
(101,138
|
)
|
140,966
|
(5,386,159
|
)
|
|||||||
Cash
and Cash Equivalents- Beginning of the year
|
2,732,810
|
5,852,480
|
4,340,211
|
11,137,501
|
|||||||||
Cash
and cash Equivalents - End of the period
|
US$
|
4,481,177
|
5,751,342
|
4,481,177
|
5,751,342
|
||||||||
Supplemental
Cash Flow Disclosures:
|
|||||||||||||
Interest
Paid
|
77,081
|
12,914
|
103,125
|
12,914
|
|||||||||
Tax
Paid
|
505,146
|
495,257
|
2,388,521
|
853,436
|
|||||||||
SORL
Auto Parts, Inc. and Subsidiaries
|
||||||||
Consolidated
Statements of Changes in Shareholders'
Equity
|
||||||||
Three
Months Ended June 30, 2008 and
2007
|
|
Number
|
Common
|
Additional
|
Reserves
|
Retained
|
Accumu.
Other
|
|
|
|||||||||||||||||
of
Share
|
Stock
|
Paid-in
|
Earnings
|
Comprehensive
|
Shareholders'
|
Minority
|
|||||||||||||||||||
|
|
|
Capital
|
|
(Deficit)
|
Income
|
Equity
|
Interest
|
|||||||||||||||||
Beginning
Balance - April 1, 2007
|
18,275,126
|
36,550
|
37,444,051
|
1,008,786
|
19,878,625
|
1,662,216
|
60,030,228
|
6,633,940
|
|||||||||||||||||
Net
Income
|
—
|
—
|
—
|
—
|
4,119,111
|
—
|
4,119,111
|
461,930
|
|||||||||||||||||
Other
Comprehensive Income
|
—
|
—
|
—
|
—
|
—
|
968,083
|
968,083
|
107,565
|
|||||||||||||||||
Transfer
to reserve
|
—
|
—
|
—
|
415,737
|
(415,737
|
)
|
—
|
—
|
—
|
||||||||||||||||
4,128
options issued
|
—
|
—
|
23,201
|
|
—
|
—
|
23,201
|
—
|
|||||||||||||||||
Ending
Balance - June 30, 2007
|
18,275,126
|
36,550
|
37,467,252
|
1,424,523
|
23,581,999
|
2,630,299
|
65,140,623
|
7,203,435
|
|||||||||||||||||
Beginning
Balance - April 1, 2008
|
18,279,254
|
36,558
|
37,498,452
|
2,237,597
|
30,823,429
|
8,456,090
|
79,052,126
|
8,754,160
|
|||||||||||||||||
Net
Income
|
—
|
—
|
—
|
—
|
4,736,297
|
—
|
4,736,297
|
527,929
|
|||||||||||||||||
Other
Comprehensive Income
|
—
|
—
|
—
|
—
|
—
|
1,899,674
|
1,899,674
|
211,075
|
|||||||||||||||||
Transfer
to reserve
|
—
|
—
|
—
|
424,244
|
(424,244
|
)
|
—
|
—
|
—
|
||||||||||||||||
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||
Ending
Balance - June 30, 2008
|
18,279,254
|
36,558
|
37,498,452
|
2,661,841
|
35,135,482
|
10,355,764
|
85,688,097
|
9,493,164
|
|||||||||||||||||
Six
Months Ended June 30, 2008 and
2007
|
|
Number
|
Common
|
Additional
|
Reserves
|
Retained
|
Accumu.
Other
|
|
|
|||||||||||||||||
of
Share
|
Stock
|
Paid-in
|
Earnings
|
Comprehensive
|
Shareholders'
|
Minority
|
|||||||||||||||||||
|
|
|
Capital
|
|
(Deficit)
|
Income
|
Equity
|
Interest
|
|||||||||||||||||
Beginning
Balance - January 1, 2007
|
18,275,126
|
36,550
|
37,444,051
|
797,116
|
17,988,763
|
1,102,469
|
57,368,949
|
6,336,557
|
|||||||||||||||||
Net
Income
|
—
|
—
|
—
|
—
|
6,220,643
|
6,220,643
|
697,119
|
||||||||||||||||||
Other
Comprehensive Income
|
—
|
—
|
—
|
—
|
—
|
1,527,830
|
1,527,830
|
169,759
|
|||||||||||||||||
Transfer
to reserve
|
—
|
—
|
—
|
627,407
|
(627,407
|
)
|
—
|
—
|
—
|
||||||||||||||||
4,128
options issued
|
—
|
—
|
23,201
|
—
|
—
|
—
|
23,201
|
—
|
|||||||||||||||||
Ending
Balance - June 30, 2007
|
18,275,126
|
36,550
|
37,467,252
|
1,424,523
|
23,581,999
|
2,630,299
|
65,140,623
|
7,203,435
|
|||||||||||||||||
Beginning
Balance - January 1, 2008
|
18,279,254
|
36,558
|
37,498,452
|
1,882,979
|
27,646,931
|
5,432,189
|
72,497,109
|
8,024,152
|
|||||||||||||||||
Net
Income
|
—
|
—
|
—
|
—
|
8,267,413
|
8,267,413
|
921,948
|
||||||||||||||||||
Other
Comprehensive Income
|
—
|
—
|
—
|
—
|
—
|
4,923,575
|
4,923,575
|
547,064
|
|||||||||||||||||
Transfer
to reserve
|
—
|
—
|
—
|
778,862
|
(778,862
|
)
|
—
|
—
|
—
|
||||||||||||||||
4,128
options issued
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||
Ending
Balance - June 30, 2008
|
18,279,254
|
36,558
|
37,498,452
|
2,661,841
|
35,135,482
|
10,355,764
|
85,688,097
|
9,493,164
|
|||||||||||||||||
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
PURCHASES
FROM:
|
|
|
|
|
|||||||||
Ruili
Group Co., Ltd.
|
$
|
10,649,765
|
$
|
7,300,184
|
$
|
19,153,909
|
$
|
12,678,779
|
|||||
Total
|
$
|
10,649,765
|
$
|
7,300,184
|
$
|
19,153,909
|
$
|
12,678,779
|
|||||
|
|
|
|
|
|||||||||
SALES
TO:
|
|||||||||||||
Ruili
Group Co., Ltd.
|
$
|
1,004,231
|
$
|
—
|
$
|
1,822,149
|
$
|
914,683
|
|||||
Total
|
$
|
1,004,231
|
$
|
—
|
$
|
1,822,149
|
$
|
914,683
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
ACCOUNTS
PAYABLE
|
|||||||
Ruili
Group Co., Ltd.
|
$
|
3,453,244
|
$
|
97,503
|
|||
Total
|
$
|
3,453,244
|
$
|
97,503
|
|||
OTHER
CURRENT ASSETS
|
|||||||
Ruili
Group Co., Ltd.
|
$
|
—
|
$
|
1,761,007
|
|||
Total
|
$
|
—
|
$
|
1,761,007
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Beginning
balance
|
$
|
27,987
|
$
|
8,769
|
|||
Add:
Increase to allowance
|
3,309
|
19,218
|
|||||
Less:
Accounts written off
|
|||||||
Ending
balance
|
$
|
31,296
|
$
|
27,987
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Accounts
receivable
|
$
|
38,894,279
|
$
|
30,614,226
|
|||
Less:
allowance for doubtful accounts
|
(31,296
|
)
|
(27,987
|
)
|
|||
Account
receivable balance, net
|
$
|
38,862,983
|
$
|
30,586,239
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Raw
Material
|
$
|
3,419,860
|
$
|
2,354,637
|
|||
Work
in process
|
698,483
|
4,157,643
|
|||||
Finished
Goods
|
9,412,928
|
1,708,093
|
|||||
Total
Inventory
|
$
|
13,531,271
|
$
|
8,220,373
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Machinery
|
$
|
20,150,149
|
$
|
18,118,125
|
|||
Molds
|
1,271,005
|
1,193,488
|
|||||
Office
equipment
|
486,988
|
358,163
|
|||||
Vehicle
|
973,256
|
757,311
|
|||||
Building
|
7,946,761
|
7,462,096
|
|||||
Construction
In Progress
|
|
|
|||||
Sub-Total
|
30,828,160
|
27,889,182
|
|||||
Less:
Accumulated depreciation
|
(7,676,656
|
)
|
(6,094,229
|
)
|
|||
Fixed
Assets, net
|
$
|
23,151,504
|
$
|
21,794,953
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Cost:
|
$
|
14,874,021
|
$
|
13,966,870
|
|||
Less:
Accumulated amortization:
|
246,531
|
77,165
|
|||||
Land
use rights, net
|
$
|
14,627,491
|
$
|
13,889,705
|
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
||||||||||
$
|
7,616
|
$
|
15,231
|
$
|
15,231
|
$
|
15,231
|
$
|
15,231
|
$
|
60,979
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Raw
material suppliers
|
$
|
2,643,620
|
$
|
929,178
|
|||
Equipment
purchase
|
665,801
|
407,035
|
|||||
Total
prepayment
|
$
|
3,309,421
|
$
|
1,336,212
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Secured
|
$
|
1,990,622
|
$
|
3,370,328
|
|||
Less:
Current portion
|
$
|
(1,990,622
|
)
|
$
|
(3,370,328
|
)
|
|
Non-current
portion
|
$
|
—
|
$
|
—
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Accrued
payroll
|
$
|
971,493
|
$
|
601,733
|
|||
Other
accrued expenses
|
2,263,477
|
1,258,205
|
|||||
Total
accrued expenses
|
$
|
3,234,970
|
$
|
1,859,938
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Statutory
surplus reserve fund
|
$
|
2,661,841
|
$
|
1,882,979
|
|||
Total
|
$
|
2,661,841
|
$
|
1,882,979
|
Statutory
tax rate
|
25.0
|
%
|
||
Tax
holidays and concessions
|
-12.5
|
%
|
||
Effective
tax rate
|
12.5
|
%
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
Thereafter
|
|||||||
Buildings
|
$
|
140,082
|
|
$
|
280,163
|
|
$
|
280,163
|
|
$
|
280,163
|
|
$
|
67,975
|
|
$
|
—
|
|
Total
|
$
|
140,082
|
|
$
|
280,163
|
|
$
|
280,163
|
|
$
|
280,163
|
|
$
|
67,975
|
|
$
|
—
|
Beginning
balance at Jan 01, 2008
|
$
|
863,428
|
||
Accrued
during the six months ended June 30, 2008:
|
$
|
1,060,353
|
||
Less:
Actual Paid during the six months ended June 30, 2008:
|
$
|
706,863
|
||
Ending
balance at June 30, 2008
|
$
|
1,216,918
|
Number
of Shares
|
|
%
of Shares Issued
|
Initial
Vesting Date
|
|
60,000
|
|
100%
|
March
1, 2009
|
|
|
|
|
|
Dividend
Yield
|
|
|
0.00
|
%
|
Expected
Volatility
|
|
|
96.54
|
%
|
Risk-Free
Interest Rate
|
|
|
4.59
|
%
|
Contractual
Term
|
|
|
3
years
|
|
Stock
Price at Date of Grant
|
|
$
|
4.79
|
|
Exercise
Price
|
|
$
|
4.79
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||
|
|
|
|
||||||||||
January
1, 2006
|
—
|
$
|
—
|
—
|
$
|
—
|
|||||||
Granted
|
60,000
|
4.79
|
3
Years
|
—
|
|||||||||
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
Forfeited
|
—
|
—
|
—
|
—
|
|||||||||
Outstanding
at June 30, 2008
|
60,000
|
$
|
4.79
|
0.7
Years
|
$
|
34,200
|
|||||||
|
|||||||||||||
Exercisable
at June 30, 2008
|
—
|
—
|
—
|
—
|
Number
of Shares
|
|
%
of Shares Issued
|
|
Initial
Vesting Date
|
|
|
|
|
|
4,128
|
|
100%
|
|
June
20, 2007
|
|
|
|
|
|
Dividend
Yield
|
|
|
0.00
|
%
|
Expected
Volatility
|
|
|
141.47
|
%
|
Risk-Free
Interest Rate
|
|
|
5.14
|
%
|
Contractual
Term
|
|
|
3
years
|
|
Stock
Price at Date of Grant
|
|
$
|
7.09
|
|
Exercise
Price
|
|
$
|
7.25
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||
|
|
|
|
|
|||||||||
January
1, 2007
|
—
|
$
|
—
|
—
|
$
|
—
|
|||||||
Granted
|
4,128
|
$
|
7.25
|
3
Years
|
—
|
||||||||
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
Forfeited
|
—
|
—
|
—
|
—
|
|||||||||
Outstanding
at June 30, 2008
|
4,128
|
$
|
7.25
|
2
Years
|
$
|
—
|
|||||||
|
|||||||||||||
Exercisable
at June 30, 2008
|
4,128
|
$
|
7.25
|
2
Years
|
$
|
—
|
Number
of Shares
|
|
%
of Shares Issued
|
|
Initial
Vesting Date
|
|
|
|
|
|
100,000
|
|
100%
|
|
January
5, 2006
|
|
|
|
|
|
Dividend
Yield
|
|
|
0.00
|
%
|
Expected
Volatility
|
|
|
95.01
|
%
|
Risk-Free
Interest Rate
|
|
|
4.36
|
%
|
Contractual
Term
|
|
|
4
years
|
|
Stock
Price at Date of Grant
|
|
$
|
4.70
|
|
Exercise
Price
|
|
$
|
6.25
|
|
Warrants
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||
|
|
|
|||||||||||
January
1, 2006
|
—
|
$
|
—
|
—
|
$
|
—
|
|||||||
Granted
|
100,000
|
$
|
6.25
|
4
Years
|
—
|
||||||||
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
Forfeited
|
—
|
—
|
—
|
—
|
|||||||||
Outstanding
at June 30, 2008
|
100,000
|
$
|
6.25
|
1.5
Years
|
$
|
—
|
|||||||
|
|||||||||||||
Exercisable
at June 30, 2008
|
100,000
|
$
|
6.25
|
1.5
Years
|
$
|
—
|
Information
regarding land use rights and lease commitments is provided in Notes
H and
O.
|
(1) |
Results
of operations for the three months ended June 30, 2008 as compared
to the
three months ended June 30,
2007.
|
Three
Months ended
|
Three
Months ended
|
||||||||||||
30-Jun-08
|
30-Jun-07
|
||||||||||||
(U.S.
dollars in millions)
|
|||||||||||||
Air
brake valves & related components
|
$
|
31.6
|
75
|
%
|
$
|
22.2
|
76
|
%
|
|||||
Non-valve
products
|
$
|
10.5
|
25
|
%
|
$
|
7
|
24
|
%
|
|||||
Total
|
$
|
42.1
|
100
|
%
|
$
|
29.2
|
100
|
%
|
Three
Months
|
Three
Months
|
||||||||||||
ended
|
|
ended
|
|||||||||||
30-Jun-08
|
%
|
30-Jun-07
|
%
|
||||||||||
(U.S.
dollars in millions)
|
|||||||||||||
China
OEM market
|
$
|
17.5
|
42
|
%
|
$
|
12
|
41
|
%
|
|||||
China
Aftermarket
|
$
|
10.5
|
25
|
%
|
$
|
6.3
|
22
|
%
|
|||||
International
market
|
$
|
14.1
|
33
|
%
|
$
|
10.9
|
37
|
%
|
|||||
Total
|
$
|
42.1
|
100
|
%
|
$
|
29.2
|
100
|
%
|
(1)
|
Increased
transportation expense: During the second quarter of 2008, transportation
costs increased by $601,609 as compared to $ 335,397 for the same
period
of 2007. The increase in transportation expense was mainly due to
increased sales and the rise in the transportation cost resulted
from the
increased price of oil and the increased number of loads necessitated
by
the overloading control measures imposed by the Chinese government
since
the third quarter of 2007.
|
(2)
|
Increased
packaging expense: Packaging costs were $737,920 for the three months
ended June 30, 2008, an increase of $274,166 as compared with the
same
period of 2007, which was consistent with the revenue growth.
|
(3)
|
Increased
product warranty expense. The Company recorded $612,994 of product
warranty expenses for the three months ended June 30, 2008, as compared
to
$
321,083
for the three months ended June 30, 2007, an increase of $291,911.
|
(1) |
The
expansion of economic activities, facilities and workforce resulted
in
increased depreciation, office expenses, staff salary, work insurance
and
welfare, travel expenses and other miscellaneous fees totaling an
increase
of $ 437,985 as compared to the same period of
2007.
|
(2) |
R&D
expense, which is included in general and administrative expenses,
increased by $936,867, as compared to $330,797 of R&D expense for the
same period of 2007, as discussed
below.
|
(3) |
During
the three months ended June 30, 2007, the reversal of the bad debt
provision resulted in a negative $ 234,154 for bad debt provision,
which
was included in the General and Administrative expenses. Even though
the
bad debt provision recognized during the three months ended June
30, 2008
was $ 10,450, such number combined with the negative $234,154 number
results in an increase of $244,604 in General and Administrative
expenses.
|
(2) |
Results
of operations for the six months ended June 30, 2008 as compared
to the
six months ended June 30,
2007.
|
Six
Months ended
|
Six
Months ended
|
||||||||||||
30-Jun-08
|
30-Jun-07
|
||||||||||||
(U.S.
dollars in millions)
|
|||||||||||||
Air
brake valves & related components
|
$
|
55.7
|
77
|
%
|
$
|
41.3
|
77
|
%
|
|||||
Non-valve
products
|
$
|
17.1
|
23
|
%
|
$
|
12.3
|
23
|
%
|
|||||
Total
|
$
|
72.8
|
100
|
%
|
$
|
53.6
|
100
|
%
|
Six
Months
|
Six
Months
|
||||||||||||
ended
|
ended
|
||||||||||||
30-Jun-08
|
%
|
30-Jun-07
|
%
|
||||||||||
(U.S.
dollars in million)
|
|||||||||||||
China
OEM market
|
$
|
28.2
|
39
|
%
|
$
|
20.9
|
39
|
%
|
|||||
China
Aftermarket
|
$
|
20.4
|
28
|
%
|
$
|
13.4
|
25
|
%
|
|||||
International
market
|
$
|
24.2
|
33
|
%
|
$
|
19.3
|
36
|
%
|
|||||
Total
|
$
|
72.8
|
100
|
%
|
$
|
53.6
|
100
|
%
|
(1) |
Increased
transportation expense: During
the
six months
of
2008, transportation costs increased by $865,519 as compared to $584,397
for the same period of 2007. The increase in transportation expense
was
mainly due to increased sales and the rise in the transportation
cost
resulted from the increased price of oil and the increased number
of loads
necessitated by the overloading control measures imposed by the Chinese
government since the third quarter of 2007.
|
(2) |
Increased
packaging expense: Packaging costs were $1,311,023 for
the
six months
ended June 30, 2008, an increase of $ 409,458 as compared with the
same
period of 2007, which was consistent with the revenue growth.
|
(3) |
Increased
product warranty expense. The Company recorded $1,060,353 of product
warranty expenses for
the
six months
ended June 30, 2008, as compared to $
585,888
for the six months ended June 30, 2007, an increase of $474,465.
|
(1) |
The
expansion of economic activities, facilities and workforce resulted
in
increased depreciation, office expenses, staff salary, work insurance
and
welfare, travel expenses and other miscellaneous fees totaling $2,506,665,
an increase of $739,624 as compared to the same period of
2007.
|
(2) |
R&D
expense, which is included in general and administrative expenses,
increased by $1,096,616, as compared to $ 553,672 of R&D expense for
the same period of 2007, as discussed below.
|
EXHIBIT NO. |
DOCUMENT
DESCRIPTION
|
3.1 (1) |
Articles
of Incorporation
|
3.2 (1) |
Bylaws
|
4.1 (2) |
Form
of Underwriters’ Common Stock Purchase
Warrants
|
4.2 (2) |
Specimen
Common Stock Certificate
|
31.1 (3) |
Certification
of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a), promulgated under the Securities and Exchange Act of
1934, as
amended.
|
31.2 (3) |
Certification
of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a), promulgated under the Securities and Exchange Act of
1934, as
amended.
|
32.1 (4) |
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief
Financial Officer).
|
(1)
|
Incorporated
herein by reference from the Registrant’s Form 10-QSB filed with the
Securities and Exchange Commission on May 28,
2003.
|
(2)
|
Incorporated
herein by reference from the Registrant’s Registration Statement on Form
S-1, Commission File No. 333-137019, as filed with the Securities
and
Exchange Commission on August 31,
2006.
|
(3)
|
Filed
herewith.
|
(4)
|
Furnished
herewith. In accordance with Item 601(b)(32) of Regulation S-K, this
Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange
Act or otherwise subject to the liabilities of that section. Such
certifications will not be deemed incorporated by reference into
any
filing under the Securities Act of 1933, as amended, or the Exchange
Act,
except to the extent that the registrant specifically incorporates
it by
reference.
|
Dated
: August 13, 2008
|
SORL
AUTO PARTS, INC.
|
|
|
|
|
By:
/s/ Xiao Ping Zhang
|
||
|
Name:
Xiao Ping Zhang
|
|
Title:
Chief Executive Officer
|
|
||
By:
/s/ Zong Yun Zhou
|
||
Name:
Zong Yun Zhou
|
||
Title:
Chief Financial Officer
|
||
1 Year SORL Auto Parts Chart |
1 Month SORL Auto Parts Chart |
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