ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q, including the following "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations,"” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions oror beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will"“believe”, “expect”, “anticipate”, “project”, “targets”, “optimistic”, “intend”, “aim”, “will” or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products; any projections of sales, earnings, revenue,revenues, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors and risks mentioned in the "Risk Factors"“Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2008 and subsequent SEC filings. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.

Use of Terms

Except as otherwise indicated by the context, references in this report to:

• "We," "us," or "our," and the "Company"

  							•		“We,” “us,” or “our,” and the “Company” are references to the combined business of Sentaida Tire Company Limited, a Nevada corporation, and its wholly-owned subsidiary, Zhongsen International, along with Zhongsen International’s wholly-owned subsidiaries, F.T.Z. Sentaida, Zhongsen Holdings, and Qingdao Sentaida;
  							•		“Zhongsen International” refers to Zhongsen International Company Group Limited, a corporation formed under the laws of Hong Kong;
  							•		“F.T.Z. Sentaida” refers to Qingdao (F.T.Z.) Sentaida International Trade Co. Ltd., a corporation incorporated in the People’s Republic of China;
  							•		“Qingdao Sentaida” refers to Qingdao Sentaida Tires Co., Ltd, a corporation incorporated in the People’s Republic of China;
  							•		“Zhongsen Holdings” refers to Zhongsen Holdings Co., Ltd., a British Virgin Islands company;
  							•		“China” and “PRC” are references to the People’s Republic of China and references to “Hong Kong” are to the Hong Kong Special Administrative Region of China;
  							•		“BVI” refers to the British Virgin Islands;
  							•		“RMB” refers to Renminbi, the legal currency of China;
  							•		“U.S. dollar,” “$” and “US$” are references to the legal currency of the United States; and
  							•		“Securities Act” and “Exchange Act” are references to the Securities Act of 1933, as amended and to the Securities Exchange Act of 1934, as amended, respectively.

  
  

  Overview of Rub a Dub Soap, Inc., a Nevada corporation, and its wholly-owned subsidiary, Zhongsen International Company Group Limited, a corporation formed under the laws of the Special Administrative Region of Hong Kong, or Zhongsen International, along with Zhongsen International's wholly-owned subsidiaries: Qingdao (FTZ) Sentaida International Trading Co. Ltd., or FTZ Sentaida; Zhongsen Holdings Ltd., or Zhongsen Holdings; and Qingdao Sentaida Tires Co., Ltd,, or Sentaida Tire;Our Business

• "China" and "PRC" are references to the People's Republic of China and references to "Hong Kong" are to the Hong Kong Special Administrative Region of China;

• "RMB" are to Renminbi, the legal currency of China;

• "U.S. dollar," "$" and "US$" are to the legal currency of the United States; and

• "Securities Act" are references to the Securities Act of 1933, as amended and references to "Exchange Act" are references to the Securities Exchange Act of 1934, as amended.

Overview

We primarily engagesengage in the global marketing and distribution of tires and rubber without any tire manufacturing operations. We are one of the largest integrated tire and rubber marketers and distributors in China. Our business scope can be generally divided into three (3) main business divisions: rubber import and distribution, tire export, and tire domestic wholesale and retail, which generated approximately 60%38%, 20%24% and 20%38% of itsour consolidated net sales respectively induring the first quarter ended March 31, 2008.2009. We position ourselves as an intermediary between international rubber producers and Chinese tire manufacturers and as an active marketer of tires for the tire manufacturers in the very fragmented replacement tire market. We aim at becomingto become a major player in the world tire and rubber market through steady organic growth, expansion into new markets, entry into the retail service marketmarket.

Affected by the global economic crisis, we have experienced weak demand both in tire and an aggressive acquisition strategy.

Our History

We are a Nevada corporation that was originally incorporated on September 28, 2001 in Coloradorubber markets. Revenues from three divisions all reduced dramatically: rubber revenue down 74%, tire export down 48% and we are headquartered in Shandong Province, China. From our inception in 2001 until February 21, 2006, we were an online retailer of handmade, natural, vegetable-based soaps and gift baskets in the development stage, and we had generated only minimal revenues and a substantial net loss fromdomestic tire sales of soaps and gift baskets.

On February 21, 2006, Lisa Powell, the controlling shareholder of the Company, sold 2,800,000 of her restricted shares to Halter Capital Corporation of Frisco, Texas, representing 74.6% of all of the outstanding shares of the Company. With the change in control, the Company ceased its soap business and began efforts to locate a new business (operating company)down 20%, and offer itself as a merger vehicle for a company that may desire to go public through a merger rather than through its own public stock offering.

On March 6, 2006, the stockholders approved the re-incorporation of the Company in Nevada and in connection therewith a one-for-ten reverse split of the common stock, both of which became effective on April 17, 2006. All share numbers contained herein are expressed in post-reverse-split amounts.

From the time when we began efforts to locate a new business inrespectively during the first quarter of 2006 until February 5, 2008 when we completed the acquisition transaction with Zhongsen International, we had limited operations and did not engage in active business operations other than our search for, and evaluation of, potential business opportunities for acquisition or participation.

Acquisition of Zhongsen

On October 26, 2007, we entered into a Stock Purchase Agreement with Zhongsen International Company Group Limited, a corporation formed under the laws of Hong Kong ("Zhongsen International"), and each of Zhongsen International's shareholders (the "Purchase Agreement"). Pursuant to the Agreement, at the closing on February 5, 2008, we acquired all of the issued and outstanding capital stock of Zhongsen International from the Zhongsen International shareholders in exchange for 25,090,000 shares of our common stock.

Zhongsen International's business began in January 2000 under the name of Qingdao Free-Trading Zone Sentaida International Trade Co., Ltd., or FTZ Sentaida, which involved in the rubber import and domestic distribution as well as tires export businesses. In December 2004, Qingdao Sentaida Tires Co., Ltd., or Sentaida Tires, was established and expanded the company's business to tires distribution in China's domestic market. In January 2005, Zhongsen Trading Co., Ltd. was created and incorporated in the British Virgin Islands to handle some of the Company's tire export business. Zhongsen Trading changed its name into Zhongsen Holdings Co., Ltd., or Zhongsen Holdings, in August 2007. In July 2007, Zhongsen International reached an agreement with the shareholders of both FTZ Sentaida and Sentaida Tires to acquire 100% of the equity interest through a cash purchase. In August 2007, such acquisitions were approved by the appropriate Chinese authorities. Consequently, both of the companies changed their status from China domestic companies to wholly-owned foreign invested enterprises. In October 2007, Zhongsen International Co. Group Ltd. acquired 100% of the equity interest of Zhongsen Holdings Co. Ltd. For accounting purposes, FTZ Sentaida, Sentaida Tires, and Zhongsen Holdings Co. are under common control because they all have the same key management members, including our CEO, Qin Long, and our director and prior CFO, Junbao Liang.

Zhongsen International was incorporated under the laws of Hong Kong on July 19, 2007 and is headquartered in Qingdao, China in Shandong Province. Zhongsen International primarily engages in the global marketing and distribution of tires and rubber without any tire manufacturing operations.

First Fiscal Quarter Financial Performance Highlights

The Company experienced a decrease in the consolidated revenues and an increase in net income in the first quarter of 2008. The following are some financial highlights for the first fiscal quarter of 2008:

Revenue: The Company's total revenue decreased by $3.5 million, or 5%, to $67.2 million for the three months ended March 31, 2008 from $70.7 million for2009 compared with the same period last year.

Gross Margin: Gross margin was 6.4% forin 2008. We believe the three months ended March 31, 2008,soften industry demand and our weaken sales were due primarily to economic uncertainty, such as compared to 4% for the same period last year.

Net Income: Net income increased $0.3 million, or 39.4%, to approximate $1 million for three months ended March 31, 2008, from $0.7 million for the same period of last year.

Earnings Per Common Share: Basic and diluted earnings per common share was $0.04 for three months ended March 31, 2008, as compared to $0.03 for the same period last year.

Revenue

Our revenue was mainly generated from rubber import and distribution, tire export,fluctuation in raw material prices, inflationary pressure on consumer behavior, lower auto sales and tire domestic wholesale and retail.

Our operations consist of three business divisions: rubber import and distribution, tire export, and tire domestic wholesale and retail. The rubber import and distribution business is conducted through our subsidiary, Qingdao (FTZ) Sentaida International Trading Co. Ltd. ("FTZ Sentaida"). In the three months ended March 31, 2008 and 2007, the rubber import and distribution division generated revenue of $40 million and $43.3 million, which represented 60% and 61% of our total revenue, respectively. The tire export business is conducted by our subsidiaries FTZ Sentaida and Zhongsen Holdings Ltd. In the three months ended March 31, 2008 and 2007, the tire export division generated revenue of $13.3 million and $16.2 million, which represented 20% and 23% of our total revenue, respectively. The tire domestic wholesale and retail business is conducted by our subsidiary Qingdao Sentaida Tires Co., Ltd ("Qingdao Sentaida"). In the three months ended March 31, 2008 and 2007, the tire domestic wholesale and retail division generated revenue of $13.8 million and $10.6 million, which represented 20% and 16% of our total revenue, respectively.

demand in overseas markets. We anticipate that the price of tires globally willexpect these conditions to continue to increase as a resultimpact us during the following quarters of the increases in raw materials prices since the end of 2007. As a result, our revenues may increase in coming periods, however, our raw materials costs and cost of sales will likely increase as well. We can provide no assurances that we will continue to be able to pass our increased raw materials costs on to our customers in the form of increase tire prices. If we are unable to pass along such costs, our financial condition may be adversely affected.

Cost of sales:2009.

Cost of sales includes the cost of rubber and tires that the Company purchase from our suppliers.

Gross Profit and Gross Margin

Gross profit is equal to the difference between our sales and the cost of sales. Gross margin is equal to gross profit divided by sales. In the three months ended March 31, 2008 and 2007, our average gross margin for rubber import and distribution division, tire export division, and tire domestic wholesale and retail division was 6.31% and 4%, respectively.

Operating Expenses

Our operating expenses mainly consist of selling expense and general and administrative expenses, freight charges, commission and insurance expenses.

General and Administrative Expenses

General and Administrative expenses consist primarily of compensation and benefits to our general management and , finance and administrative staff, professional advisor fees, and other expenses incurred in connection with general operation. We expect our general and administrative expenses will increase as our business grows and we incur increased costs for being a public company.

Selling Expenses

Selling expenses consist primarily of compensation and benefits to our sales and marketing staff, sales commission, business travels, after-sale support, transportation cost, depreciation expense for the infrastructure used in operating activities and other sales related costs.

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Provision for Income Taxes

United States

Rub A Dub Soap, Inc. is: We are subject to the United States, or US, federal income tax at a tax rate of 34%. No provision for income taxes in the United StatesUS has been made, as Rub A Dub Soap, Inc.we had no taxable US income in fiscal year 2007. during the first quarter 2009.

BVI

British Virgin Islands: Our wholly ownedwholly-owned subsidiary Zhongsen Holdings, Ltd. was incorporated in the British Virgin IslandBVI, and under the current laws of the BVI, it is not subject to income taxes.

PRC

Foreign Invested Entities ("FIE") established in

PRC: In China, the PRC are generally subject to an enterprise income tax ("EIT") rate of 33.0%, which includes a 30.0% state income tax and a 3.0% local income tax. Therefore, FTZ sentaida and Sentaida Tire are pay income tax at rate of 33%

On March 16, 2007, the National People's Congress of China passed the new EnterpriseCorporate Income Tax Law, or EIT Law, and on November 28, 2007, the State Council of China passed the Implementing Rules for the EIT Law, or Implementing Rules, which take effect on January 1, 2008. The EIT Law and Implementing Rules, or the CIT Laws, impose a unified EITCIT of 25.0%25% on all domestic-invested enterprises and FIEs,foreign invested entities, unless they qualify under certain limited exceptions. Therefore, nearly all FIEsF.T.Z. Sentaida and Qingdao Sentaida are subject to the newincome tax at a tax rate alongside other domestic businesses rather than benefiting fromof 25%.

Under the FEIT, and its associated preferential tax treatments, beginning January 1, 2008.

Despite these pending changes, the EIT Law gives existing FIEs a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatments. We are expecting that the measures to implement the grandfather period will be enacted by the Chinese government in the coming months and will assess what the impact of the new regulations are at that time. The discontinuation of any such special or preferential tax treatment or other incentives would have an adverse affect on any organization's business, fiscal condition and current operations in China.

In addition to the changes to the current tax structure, under the EITCIT Law, an enterprise established outside of China with "de“de facto management bodies"bodies” within China is considered a resident enterprise and will normally be subject to an EITCIT of 25.0%25% on its global income. The Implementing Rules define the term "de“de facto management bodies"bodies” as "an“an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise".enterprise.” If the PRC tax authorities subsequently determine that Rub A Dub Soap, Inc.the Company should be classified as a resident enterprise, then the organization'sorganization’s global income will be subject to PRC income tax of 25.0%25%. 

Results of Operations

Three Months

Quarter Ended March 31, 20082009 Compared to Three Monthsthe Quarter Ended March 31, 20072008

Quarter ended March 31, 2008 compared to quarter ended March 31, 2007.

The following table sets forthsummarizes the period change for each categoryresults of the statement ofour operations as well as each category as a percentage of total revenues.

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	Unaudited	%	Unaudited	%	%
	2008.3.31	of	2007.3.31	of	of
	US$	Revenues	US$	Revenues	Change
REVENUES
Sales	67,241,880	99.8%	70,723,172	99.8%	(4.9%)
Commissions and other	137,626	0.2%	138,045	0.2%	(0.3%)
	67,379,506	100.0%	70,861,217	100.0%	(4.9%)
COST AND EXPENSES
Cost of sales	62,959,455	93.4%	67,901,096	95.8%	(7.3%)
Freight charges	777,370	1.2%	884,381	1.2%	(12.1%)
Commissions and rebates	-	-	37,363	0.1%	(100.0%)
Insurance	51,907	0.1%	51,295	0.1%	1.2%
Selling expenses	748,033	1.1%	599,305	0.8%	24.8%
General and administrative expenses	204,991	0.3%	161,041	0.2%	27.3%
	64,741,756	96.1%	69,634,481	98.3%	(7.0%)
INCOME FROM OPERATIONS	2,637,750	3.9%	1,226,736	1.7%	115.0%
OTHER INCOME (EXPENSE)
Miscellaneous income	-	-	54,755	0.1%	(100%)
Interest expense	(1,534,308)	(2.3%)	(502,224)	(0.7%)	205.5%
Other net	(1,534,308)	(2.3%)	(447,469)	(0.6%)	242.9%
INCOME BEFORE INCOME TAXES	1,103,442	1.6%	779,267	1.1%	41.6%
Provision for income taxes (current)	137,569	0.2%	86,562	0.1%	58.9%
NET INCOME	965,873	1.4%	692,705	1.0%	39.4%
OTHER COMPREHENSIVE INCOME
Foreign currency translation loss	(36,814)	0.1%	(6,442)	0.0%	471.5%
COMPREHENSIVE INCOME	929,059	1.4%	686,263	1.0%	35.4%

Revenues.

The Company's consolidated sales forduring the first quarter ended March 31, 2009 and 2008, and provides information regarding the dollar and percentage increase or (decrease) from the quarter ended March 31, 2008 to the quarter ended March 31, 2009.

Revenues:

Our revenues were generated from our business of rubber import and distribution, tire export, and tire domestic wholesale and retail sales. Revenues decreased by approximately $67 million, a decline of $3.5$38 million, or 5%56%, compared withto approximately $29.6 million for the correspondingthree months ended March 31, 2009 from approximately $67.2 million for the three months ended March 31, 2008.  

Revenues significantly declined in all of our business divisions. Net sales of $70.7in the rubber division declined by approximately $29 million, inor 74%, to approximately $11 million during the first quarter of 2007.

There2009, from approximately $40 million for the same period of 2008. The decline was a strong growthmainly due to the decrease in the domesticsales volume as a result of low market demand, as many rubber consuming manufacturers (i.e. tire distributionmanufacturers) drastically cut their production volume to save costs, mitigate the pressure of capital turnover and retail division. Salesreduce the risk accompanying price fluctuations of rubber. 

In addition, net sales in thisthe tire export division increased by about $2.8were approximately $7.2 million up 25%, to $13.8 million induring the first quarter of 20082009, a decline of approximately $6.1 million, or 48%, from approximately $11$13.3 million for the same period in 2007.2008. The Company's attention on maintaining and developing distribution network and customers base contributed the increased division revenues.

Net salesoverall decline in our tire export division were approximately $13.3 million in the first quarter of 2008, a decline of approximately $2.9 million, or 18%, from approximately $16.2 million in the first quarter in 2007. The declinevolume was primarily due to an agent sales contract with one ofa reduction in demand in overseas market, especially in the Company's main suppliers that was terminatedAmerican and was under negotiation for renewal inEuropean markets.  

The tire distribution and retail division also decreased by approximately $2.2 million to approximately $11.7 million during the first quarter of2009 from approximately $13.5 million for the same period 2008. The contract termination resultedraw material market, especially the rubber market, was unstable in an approximate $4.8 million decrease in division revenue.2008 with a big price fluctuation, which had adverse impact on many tire manufacturers. In order to minimize the risk, many tire manufacturers reduced the production volume and adjusted the sales price frequently. The manufacturer price increase reached the highest level during the forth quarter of 2008; and then continuously dropped down and was relatively stabled during the first quarter 2009. This market condition adversely affected our sales due to the unfavorable inventory cost layer (i.e. the adverse impact from sales of inventory purchased prior to the manufacturer price decreased), and we could not reduce the sales prices immediately after the manufacturer prices decreased, which inevitably reduced our tire sales during the first quarter 2009.

Our

The following table shows the different components comprising our total revenues during the first quarter 2009 and 2008.

As the table above indicates, the rubber import/import and distribution division generated approximately $40 millionaccounted for an aggregate of 38% and 60% of our revenues in the first quarter 2009 and 2008, respectively. The tire export division accounted for 24% and 20% of 2008. This was a decline of approximately $3.4 million, or 7.8%, from the corresponding period sales of $43.5 million in 2007. The rubber market fluctuated significantlyour revenues in the first quarter 2009 and 2008, respectively. The tire domestic wholesale and retail division accounted for 38% and 20% of 2008. The Company adjusted its operating strategy and discontinued some rubber business with gross margin lower than 1.5%. The overall impact of the Company's revised strategy was an approximate $5.1 million reduction in division revenue. Changes in the business of styrene-butadiene rubber (SBR rubber) also contributed to the decrease in division revenue. In previous years, the Company's SBR rubber business was conducted using both purchase contracts and sales contracts. The Company had the right to determine the sales price of SBR rubber offered to customers and bore all the risk relating to inventory, therefore, sales of SBR rubber were recognized as revenue. According to the new sales agent agreements with SBR rubber suppliers, the Company now serves as their sales agent and receives a commission. This change started gradually from last quarter of 2006, and until the end of second quarter of 2007 approximately 90% of the SBR rubber sales was changed to a commission based business. These contract changes had certain influences on the division revenue when making the comparison between division revenueour revenues for the first quarter 2009 and 2008, respectively.

Costof 2008 Salesand 2007. The commissions are included in revenues in the statements of operations.Operating Expenses:

Costs and operating expenses.

Our total costs and operating expenses were approximately $64.7$30.5 million in the three months ended March 31,first quarter 2009, a reduction of approximately $34.2 million, from approximately $64.7 million for the same period 2008. Costs and operating expenses declined due primarily to reductions in cost of good sold, which resulted from the reduction in sales in all of our business divisions.

Cost of sales includes the cost of rubber and tires that the Company purchases from our suppliers. Cost of sales declined by approximately $35.5 million, or 56%, to approximately $27.4 million in the first quarter 2009 from approximately $62.9 million in the same period 2008. This decrease was mainly due to significantly reduced purchases of rubber and tires from our supplier as the market demand for these products declined during the first quarter of 2009.  

Average gross profit margin during the first quarter 2009 was 7.5%, increased 1.1% from gross profit margin of 6.4% for the same period 2008. Gross profit margin of rubber division improved to 11% from 2% for the same period 2008. The price of rubber fluctuated with a large range in 2008, a 7.0% reduction from costsapproximately $3,300 per ton to approximately $1,000 per ton. The improved gross margin of rubber division benefited from the sharply decreased purchase price and the unproportionate change of our sales price. We believed the gross margin of 11% was unusual for rubber; it was sequential impact of the fluctuation of global rubber market and we did not expect that we will be able to maintain our gross profit margin of rubber at this level during the following periods.

Operating expenses consist primarily of freight charges, selling expenses, general and administrative expenses. Overall operating expenses were approximately $3.1 million during the first quarter 2009, an increase of approximately $1.3 million, or 72%, from operating expenses of approximately $69.6$1.8 million duringfor the same period 2008. The increase was primarily due to an increase in 2007. Total costsgeneral and administrative expenses declined as a result of reductions in costs of sales and freight charges which were offset by increases in selling expenses and general and administrative expenses.

Due to favorable purchase prices negotiated with our suppliers, we were able to reduce the overall cost of goods sold as explained below. As a percentage of total revenues, by 2.4% compared to the same quarter in the prior year. Costs of good sold were approximately $63 million in the three months ended March 31, 2008, a 7.3% reduction from costs of good sold of approximately $68 million during the same period in 2007. Overalltotal operating expenses accounted for approximately 2.6%about 10.3% of the total revenues in the first quarter in 2008, increased slightly from the level for the first quarter in 2007 in terms of percentage of total revenues. But in terms of absolute amount of overall operating expenses, there was no obvious increase, with approximately $1.7 million in both first quarters of 2008 and 2007.

Freight charges decreased by $0.1 million in the first quarter in 2008 to approximately $0.8 million, 12% lower than the corresponding amount2009, increased significantly from 2.7% for the same period in 2007. Most of the freight2008.

Freight charges were from the tire export division. Due: Freight charges increased by approximately $0.3 million, or 38%, to the decrease in sales of the tire export division inapproximately $1.1 million during the first quarter of 2008, the decrease in freight charges was expected when considering the mix of the sales terms offered to different customers and reduction in division revenue for the first quarter in 2008.

Selling expenses increased by2009 from approximately $0.14 million from $0.6 million in the first quarter in 2007 to approximately $0.7$0.8 million for the same period 2008. Some customers who were “freight collect” in 2008, an increase of 24.8%. The increase in selling expenses resulted primarily from higher employee cost related expenses such as salaries and social welfare costs. In addition, travel cost and business entertainment cost were bit higher than the level forprevious periods required to be offered with CIF price policy during the first quarter 2009. As a result, we paid the costs and freight to bring the goods to the port of 2007.destination.

General and administrative expenses also increased by

Selling Expense: Selling expense was approximately $0.04$0.7 million to approximately $0.2 million induring the first quarter in 20082009, decreased by approximately $0.1 million, or 17%, from approximately $0.16$0.8 million for the same period in 2007. The Company started listing process in2008. Due to the second quarter of 2007 anddifficult market environment, our sales representatives have incurred some extra costs that did not incur inadditional travel expenses during the first quarter of 2007.2009 to visit our suppliers and clients more frequently than before. In addition, increaseswe took additional actions to stimulate sales, such as increased promotion and advertisement effort. As a result, although our revenues decreased by 56% during the first quarter 2009, the decrease in selling expenses was not in proportional with the decrease in sales.

Administrative Expenses: Administrative expenses include the costs associated with staff salaries contributedand support personnel who manage our business activities, professional fees paid to third party service providers and the increasespotential loss of guarantees offered to other parties. Our administrative expenses were approximately $1.3 million and $0.2 million during the first quarter 2009 and 2008, respectively. As percentage of revenue, administrative expenses accounted for 4.5% and 0.3% of our total revenues during the first quarter 2009 and 2008, respectively. The dollar increase in the administrative expenses was mainly due to approximately $1 million of potential loss of guarantees offered by the Company. The Company provided guarantees to three third-party companies for certain bank loans in 2009. The fair value of such guarantees was appraised by the management during the first quarter 2009. We recognized the potential loss of approximately $1.0 million in the general and administrative expense as well.

Operating Income.

Income from operations was approximately $2.6 million for the first quarter of 2008, which was more than double thatMarch 31, 2009 in case of the first quarter of 2007. Thedefaulted repayment to the lending banks by the three companies under the guarantees. Further more, public listing expenditures such as legal fees, accounting professional fees and other consulting fees also increased slightly. We expect our administrative expense will increase was primarily the result of the decrease in cost of sales.connection with our reporting obligations as a public company.

Interest Expense.:

The Company experienced an increase of approximately $1 million in interest expense and miscellaneous financial charges to approximately $1.5 million in the first quarter of 2008 from approximately $0.5 million for the same period in 2007.Expense: Interest expense forconsists of discounting notes, short termshort-term debt for working capital turnover, trading finance such as import bill advance and export bill purchases, and miscellaneous financial charges, such as feefees for issuing letters of credit and bank charges etc, are all included in interest expense. Thecharges. Interest expense increased by approximately $0.2 million to approximately $1.7 million during the first quarter 2009 from approximately $1.5 million for the same period 2008.The increase in interest expense was due primarily due to the riseincrease in revolving credit facilities the bank interest rate. The average annual interest rate inCompany used during the first quarter of 2007 was2009.

NetIncome (Loss): 

Due to the significant decrease in revenues in all of our business divisions and the increase in our operating expenses, the Company incurred a net loss of approximately 6%, while it was approximately 7% for the same period in 2008. In addition, the total amount of trade finance was approximately $61$2.5 million induring the first quarter in 2008, which was approximately $21 million higher than the amount for the same period in 2007. The increase in the amount of trade finance contributed to the increase in interest expense.

Net Income.

The Company achieved approximately $1 million of net income in the first quarter in 2008. This is an increase of approximately $0.27 million, or 39.4%2009, significantly down 358%, compared with net income of approximately $0.7$1.0 million for the same period in 2007. the increase was primarily related to the decrease in cost of sales.2008.

Liquidity and Capital Resources:Resources

As of March 31, 2009, we had cash and cash equivalents (excluding restricted cash) of approximately $7.8 million. The following table summarizesprovides detailed information about our net cash flow:

Operating Activities

Net cash provided by operating activities was approximately $16.3 million during the cash flows for the periods ended asfirst quarter 2009, which was an increase of March 31, 2008 and 2007.

Operating activities.

Totalapproximately $21.7 million, from approximately $5.4 million of cash used in operating activities was about $5.4 million infor the first quarter in 2008, ansame period 2008. The increase of approximately $10 million from approximately $4.8 million ofthe cash provided by operating activities in the first quarter of 2007. The increase in cash used in operating activities was mainlyprimarily due to the increases of related party receivable, other receivablesdecrease in inventory and inventory.increase in notes payable and accounts payable. The working capital deficiency atwas approximately $10.2 million as of March 31, 2008 was approximately $21 million2009, down slightly compared to approximately $15.5$11.5 million working capital as of December 31, 2007, a significant increase2008. The change of approximately $5.5 million. The decrease in working capital was mainly attributable to related party receivables, which were reclassified to non- current.the increase in current liabilities, especially notes payable and accounts payables.

Investing activities.Activities

Net cash used in investing activities increased by approximately $1.4 million to approximately $2.1 million induring the first quarter 2009 was approximately $13.9 million, which was an increase of approximately $11.8 million from net cash used in 2008 from about $0.7investing activities of approximately $2.1 million for the same period of 2007. This2008. The increase in cash used in investing activities was primarily due to anthe increase in restricted cash. The increase in restricted cash was due primarily to the increase in the Company’s notes payable, which usually requires certain percentage of approximately $2 million usedcash deposit as collateral withwhen a bank for issuing lettersnote is issued by the Company. Loan receivables-related party consist of creditloans made to related parties, which will be paid by these related parties in the ordinary course of business. We and acceptances.certain of our related parties make inter-company loans from time to time in the ordinary course of business. We periodically borrow money from certain of related parties on terms more favorable than those we could obtain from commercial banks and we periodically lend money to certain of our related parties on similar terms.

Financing activities.Activities

In

Net cash provided by financing activities during the first quarter 2009 was approximately $0.5 million, which was a decrease of approximately $18.5 million from approximately $19 million net cash provided by financing activities for the same period 2008. From the first quarter 2008, the increaseCompany increased its bank crediting facility significantly, and then maintained at the then-current level, therefore the comparative figure of net change in short term borrowings ofwas approximately $19 million was approximately $22 million higher thanat the approximately $3 millionend of decrease for short term borrowings in the same period in 2007. The increase in short term borrowing was due to an increase in trade financing. Export purchases,first quarter 2008. Trade finance such as import advances, export purchases, documents against payment, and documents against acceptance constitutedconstitute most of the Company's short termCompany’s short-term borrowings. Due to the significant increase in cash used in operating activities, the Company hadIn addition, as discussed above, we periodically borrow money from certain of our related parties on more favorable terms. Such loans provide more flexibility for us because they are typically free, or less, interest bearing and it is less time consuming to obtain additionalsuch loan than to seek commercial bank financing. Nevertheless, we believe that we can obtain adequate commercial bank financing if necessary in lieu of such inter-company loans. 

Revolving credit facility.Credit Facility

The Company'sCompany’s total amount of revolving credit line as of March 31, 20082009 was approximately $116.9$114.8 million. At March 31, 2008, theThe outstanding liabilities under these facilitiesimport bill advance, export bill purchase, documents against payment and documents against acceptance were $74.4approximately $77.2 million in total and at December 31, 2007 were $55.5credit available to use was approximately $37.6 million. Corresponding financial charges are based on the interest rate defined in each individual contract between FTZ Sentaidathe Company and the banks. In general, the interest rate for import bill advances and export bill purchases is based on the average of three months LIBOR plus 0.8%approximately 4%. The finance charge for opening a letter of credit is approximately 0.1%; finance charges for documents against payment and documents against acceptance are at a rate fluctuating around 0.1%. The letters of credit negotiation charge is at 0.125%.

The obligationsrepayment of creditthe loans are guaranteed by Qingdao Sentaida, Sentaida Group Ltd, Sentaida Rubber Co. Ltd,Ltd., and Kaiyang Import and Export Company Limited who is one ofand Shandong Yongtai Chemical Co. Ltd, which the Company'slatter two are the Company’s strategic business partners. The someSome of the obligationsloans also bear the personal guarantee of stockholders of Sentaida Group,the Company, including Mr. Long Qin, Long (presidentthe Company’s Chairman of the Company)Board and Xiuqin Li (Mr. Qin long's wife).CEO. The contractual agreements with banks contain covenants which restrict the Company'sCompany’s ability to incur additional debt, enter into guarantees, make loans and investments, and modify certain material agreements, and other customary covenants. The Company has not violated any of the covenants.covenants in the reporting periods.

Depending on our future needs, changes and trends in the capital markets affecting our shares and the Company, we may determine to seek additional equity or debt financing in the private or public markets.

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial conditions and Estimatesresults of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date. The preparationfair value option may be elected on an instrument-by-instrument basis, with few exceptions. SFAS 159 also establishes presentation and disclosure requirements to facilitate comparisons between companies that choose different measurement attributes for similar assets and liabilities. The requirements of SFAS 159 are effective for the 2008 fiscal year. We do not believe the adoption SFAS 159 will have a material impact on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective for the fiscal year beginning after December 15, 2008. We do not expect the adoption SFAS 160 will have a material impact on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”. SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective for the fiscal year beginning after December 15, 2008. The adoption of SFAS 141 does not have material impact on the Company’s financial statements. 

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On March 19, 2008, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of SFAS 161 does not have material impact on the Company’s financial statements.

In May of 2008, the FASB issued Statement No.162, “The Hierarchy of Generally Accepted Accounting Principles.” This statement identifies literature established by the FASB as the source for accounting principles to be applied by entities which prepare financial statements presented in conformity with generally accepted accounting principles generally accepted(GAAP) in the United States requires usStates. This statement is effective 60 days following approval by the SEC of the Public Company Accounting Oversight Board amendments to make assumptions, estimates and judgments that affect the amounts reportedAU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” This statement will require no changes in the Company’s financial statements, includingreporting practices.

In May of 2008 the notes thereto,Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No.163, “Accounting for Financial Guarantee Insurance – an interpretation of FASB Statement No. 60, Accounting and related disclosuresReporting by Insurance Enterprises”.  This statement requires that an insurance enterprise recognize a claim liability prior to an event of commitments and contingencies, if any. We consider our critical accounting policies to be those that require more significant judgments and estimates in the preparation of financial statements, including the following:

•

Allowance for doubtful accounts.

The Company would provide an allowance for doubtful accounts to ensure that accounts receivable and other receivables are not overstated due to any uncollectible accounts. Based on management's evaluation of the customers' ability to make payment, the probability of inability to pay is low; therefore, the Company did not make any allowance for doubtful accounts.

•

Inventories.

For Sentaida Tires, inventories are valued at the lower of cost (computed in accordance with the weighted average method) or market. The Company performs periodic assessments to determine the existence of obsolete, slow-moving and non-saleable merchandise. Based on management's experience and assessments, the level of obsolete and slow-moving merchandise was very low and we believedefault (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation.  This statement also clarifies how Statement 60 applies to financial guarantee insurance contracts. This statement is effective for fiscal years beginning after December 15, 2008. This statement has no need to have an allowance for obsolescence. Terms with a majority of the Company's tires vendors allow return of tires products, within limitations, specified in their supply agreements.

For Zhongsen Holdings and F.T.Z Sentaida, the inventories for rubber and tires are stated at the lower of cost (computed in accordance with the first-in-first-out method) or market. There was no inventory kept in Zhongsen Holdings, while F.T.Z. Sentaida maintains inventory at minimum level. Management adjusts the inventory level basedeffect on the fluctuation of the demand for rubber. The Company's management believes that there is no need to make an allowance for FTZ Sentaida's inventory.Company’s financial reporting.

•

Property, plant and equipment.

Our property, plant and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.

Depreciation is provided on a straight-line basis over the estimated useful life of an asset. The principal depreciation rates are as follows:

Maintenance or repairs are charged to expense as incurred. Upon sale or disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount excluding proceeds from disposal is charged or credited to income.

•

Revenue recognition.

SAB 104 outlines four criteria that all publicly held companies have to follow to recognize revenue: 1. Persuasive evidence of an arrangement exists. 2. Delivery has occurred or services have been rendered. 3. The seller's price to the buyer is fixed or determinable. 4. Collectibility is reasonably assured. The Company recognizes revenue when title and risk of loss pass to the customer and the above criteria have been met. Besides the above criteria, for F.T.Z Sentaida and Zhongsen Holdings, they also recognize the revenue upon shipment of products, provided the above mentioned criteria have been met.

•

Warranty.

The tires that FTZ Sentaida and Sentaida Tires sell are guaranteed directly by the manufacturers, FTZ Sentaida and Sentaida Tires are not accountable to customers. In respect of rubber imported, the FTZ Sentaida has insurance coverage for the quality. Therefore, the Company does not make provisions for warranty.

For Sentaida Tires, although it has no responsibility for defects in quality or workmanship of the tires, it serves as agent for making damage claims on behalf of its customers from manufacturers. Sentaida Tires may compensate customers first, either by replacing the tires or by a cash refund, and then get reimbursement from manufacturers or suppliers in the form of tires or cash.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

Interest Rate Risk

We are exposed to interest rate risk due primarily to our short-term bank loans. Although the interest rates are fixed for the terms of the loans, the terms are typically twelve months and interest rates are subject to change upon renewal. Since September 2007, the People's Bank of China has increased the interest rate of Renminbi bank loans with a term of six months or less by 0.2% and loans with a term of six to 12 months by 0.3%. The new interest rates are approximately 6.5% and 7.3% for Renminbi bank loans with a term six months or less and loans with a term of six to 12 months, respectively. The change in interest rates has will have great influence on our net income before provision for income taxes, yet it depends on the level of trade finance used by the company. We monitor interest rates in conjunction with our cash requirements to determine the appropriate level of trade finance. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.

Foreign Exchange Risk

The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic conditions. Since July 2005, the Renminbi has no longer been pegged to the U.S. Dollar. Although the People's Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the Renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in the Renminbi exchange rate and lessen intervention in the foreign exchange market.

Because substantially all of our earnings and cash assets are denominated in Renminbi, but our reporting currency is the U.S. dollar, fluctuations in the exchange rate between the U.S. dollar and the Renminbi will affect our balance sheet and our earnings per share in U.S. dollars. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue in the future that will be exchanged into U.S. dollars and earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.

Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currencies.

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InflationNot applicable.

Inflationary factors, such as increases in the cost of our products and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of sales revenue if the selling prices of our products do not increase with these increased costs.

ITEM 4. CONTROLS AND PROCEDURES.PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC'sSEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including Mr. Long Qin and Ms. Hailan Xu, our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2008.2009. Based on that evaluation, Mr. Qin and Mr. LiangMs. Xu concluded that as of March 31, 2008,2009, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended.

Changes in Internal Controls over Financial Reporting

During the first quarter ended March 31, 2008,2009, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the fiscal yearperiods covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involvedinvolve in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

ITEM 1A.1A RISK FACTORS.FACTORS

RISKS RELATED TO OUR BUSINESSNot applicable.

Our sales and operating revenues could decline due to macro-economic and other factors outside of its control, such as changes in consumer confidence and declines in employment levels.

Changes in national and regional economic conditions, as well as local economic conditions where the Company conducts its operations, may result in more caution on the part of customers and consequently fewer sales of our products. These economic uncertainties involve, among other things, conditions of supply and demand in local markets and changes in consumer confidence and income, employment levels, and government regulations. These risks and uncertainties could periodically have an adverse effect on customer demand for and the pricing of our products, which could cause its operating revenues to decline. In addition, we are subject to various risks, many of them outside of our control, including availability and cost of materials and labor, changes in government regulations, and increases in taxes and other local government fees. A reduction in its revenues could in turn negatively affect the market price of its securities.

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We are subject to extensive government regulation which could cause us to incur significant liabilities or restrict our business activities.

Regulatory requirements could cause us to incur significant liabilities and operating expenses and could restrict our business activities. We are subject to statutes and rules regulating distribution, sales, safety matters, products and others. Our operating expenses may be increased by governmental regulations and other fees and taxes, which may be imposed. Any delay or refusal from government agencies to grant us necessary licenses, permits and approvals could have an adverse effect on our operations.

We may require additional capital in the future, which may not be available on favorable terms or at all.

Our future capital requirements will depend on many factors, including industry and market conditions, our ability to successfully implement our branding and marketing initiative and expansion of our business. We anticipate that we may need to raise additional funds in order to grow our business and implement our business strategy. We anticipate that any such additional funds would be raised through equity or debt financings. In addition, we may enter into a revolving credit facility or a term loan facility with one or more syndicates of lenders. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. Even if we are able to raise capital through equity or debt financings, as to which there can be no assurance, the interest of existing shareholders in our company may be diluted, and the securities we issue may have rights, preferences and privileges that are senior to those of our common stock or may otherwise materially and adversely effect the holdings or rights of our existing shareholders. If we cannot obtain adequate capital, we may not be able to fully implement our business strategy, and our business, results of operations and financial condition would be adversely affected. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." In addition, we have and will continue to raise additional capital through private placements or registered offerings, in which broker-dealers will be engaged. The activities of such broker-dealers are highly regulated and we cannot assure that the activities of such broker-dealers will not violate relevant regulations and generate liabilities despite our expectation otherwise.

We depend on the availability of additional human resources for future growth.

We are currently experiencing a period of significant growth in our sales volume. We believe that continued expansion is essential for us to remain competitive and to capitalize on the growth potential of our business. Such expansion may place a significant strain on our management and operations and financial resources. As our operations continue to grow, we will have to continually improve our management, operational and financial systems, procedures and controls, and other resources infrastructure, and expand our workforce. There can be no assurance that our existing or future management, operating and financial systems, procedures and controls will be adequate to support our operations, or that we will be able to recruit, retain and motivate our personnel. Further, there can be no assurance that we will be able to establish, develop or maintain the business relationships beneficial to our operations, or to do so or to implement any of the above activities in a timely manner. Failure to manage our growth effectively could have a material adverse effect on our business and the results of our operations and financial condition.

We may be adversely affected by the fluctuation in raw material prices and selling prices of our products.

The raw materials and the products we trade and distribute have experienced significant price fluctuations in the past. There is no assurance that they will not be subject to future price fluctuations or pricing control. These price changes may ultimately result in increases in the selling prices of our products, in turn, adversely affect our sales volume, revenue and operating profit.

We could be adversely affected by the occurrence of natural disasters. From time to time, our developed sites may experience strong winds, storms, flooding and earth quakes. Natural disasters could impede operations, damage infrastructure necessary to our constructions and operations. The occurrence of natural disasters could adversely affect our business, the results of our operations, prospects and financial condition, even though we currently have insurance against damages caused by natural disasters, including typhoons, accidents or similar events.

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Intense competition from existing and new entities may adversely affect our revenues and profitability.

In general, the tire distribution industry is intensely competitive and highly fragmented. We compete with various companies. Many of our competitors are more established than we are and have significantly greater financial, technical, marketing and other resources than we presently possess. Some of our competitors have greater name recognition and a larger customer base. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to customers, and adopt more aggressive pricing policies. We intend to create greater awareness for our brands so that we can successfully compete with our competitors. We cannot assure you that we will be able to compete effectively or successfully with current or future competitors or that the competitive pressures we face will not harm our business.

Our operating subsidiary must comply with environmental protection laws that could adversely affect our profitability.

We are generally required to comply with the environmental protection laws and regulations promulgated by the national and local governments of the PRC. Some of these regulations govern the level of fees payable to government entities providing environmental protection services. If we fail to comply with any of these environmental laws and regulations in the PRC, depending on the types and seriousness of the violation, we may be subject to, among other things, warning from relevant authorities, imposition of fines, specific performance and/or criminal liability, forfeiture of profits made, being ordered to close down our business operations and suspension of relevant permits.

There may be a conflict of interest which may hurt our shareholders' interest due to related parties transactions.

Currently, we use and share resources of our affiliated and related parties, including office space and warehouse space. There are risks involved in such an arrangement in which the Company's interest may be harmed due to such related party transactions.

Our success depends on our management team and other key personnel, the loss of any of whom could disrupt its business operations.

Our future success will depend in substantial part on the continued service of our senior management. The loss of the services of one or more of our key personnel could impede implementation of our business plan and result in reduced profitability. We do not carry life or other insurance covering officers or key personnel. Our future success will also depend on the continued ability to attract, retain and motivate highly qualified technical sales and marketing customer support. Because of the rapid growth of the economy in the People's Republic of China, competition for qualified personnel is intense. We cannot guarantee that we will be able to retain our key personnel or that we will be able to attract, assimilate or retain qualified personnel in the future.

We may be subject to product liabilities.

Although we distribute and export products made by others, we may be still subject to potential product related liabilities. We may not have sufficient insurance coverage for such claims if we fail to defend against them.

RISKS RELATED TO THE PEOPLE'S REPUBLIC OF CHINA

Changes in China's political or economic situation could harm us and our operational results.

Economic reforms adopted by the Chinese government have had a positive effect on the economic development of the country, but the government could change these economic reforms or any of the legal systems at any time. This could either benefit or damage our operations and profitability. Some of the things that could have this effect are:

• Level of government involvement in the economy;

• Control of foreign exchange;

• Methods of allocating resources;

• Balance of payments position;

• International trade restrictions; and

• International conflict.

The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in many ways. As a result of these differences, we may not develop in the same way or at the same rate as might be expected if the Chinese economy were similar to those of the OECD member countries.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

China only recently has permitted provincial and local economic autonomy and private economic activities. The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.

Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.

Future inflation in China may inhibit our ability to conduct business profitably in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as -2.2%. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products.

Any recurrence of severe acute respiratory syndrome, or SARS, or another widespread public health problem, could harm our operations.

A renewed outbreak of SARS or another widespread public health problem in China, where our operations are conducted, could have a negative effect on our operations.

Our operations may be impacted by a number of health-related factors, including the following:

• quarantines or closures of some of our offices which would severely disrupt our operations,

• the sickness or death of our key officers and employees,

• and a general slowdown in the Chinese economy.

Any of the foregoing events or other unforeseen consequences of public health problems could damage our operations.

Capital outflow policies in the People's Republic of China may hamper our ability to remit income to the United States.

The People's Republic of China has adopted currency and capital transfer regulations. These regulations may require us to comply with complex regulations for the movement of capital. Although our directors believe that it is currently in compliance with these regulations, should these regulations or the interpretation of them by courts or regulatory agencies change; we may not be able to remit all income earned and proceeds received in connection with our operations or from the sale of our operating subsidiary to our stockholders.

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It may be difficult to effect service of process and enforcement of legal judgments upon our company and our officers and directors because some of them reside outside the United States.

As our operations are presently based in China and some of our key directors and officers reside outside the United States, service of process on our key directors and officers may be difficult to effect within the United States. Also, substantially all of our assets are located outside the United States and any judgment obtained in the United States against us may not be enforceable outside the United States.

If relations between the United States and China worsen, our stock price may decrease and we may have difficulty accessing the U.S. capital markets.

At various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect the market price of our common stock and our ability to access U.S. capital markets.

We may have difficulty establishing adequate management, legal and financial controls in the People's Republic of China.

The People's Republic of China historically has not adopted a Western style of management and financial reporting concepts and practices, modern banking, computer or other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the People's Republic of China. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards.

It will be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets based in the People's Republic of China.

Because the Company's executive officers and directors, including, the chairman of its board of directors, are Chinese citizens, it may be difficult, if not impossible, to acquire jurisdiction over these persons in the event a lawsuit is initiated against us and/or its officers and directors by a stockholder or group of stockholders in the United States. Also, because the majority of our assets are located in the People's Republic of China it would also be extremely difficult to access those assets to satisfy an award entered against it in a United States court.

Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.

The majority of our revenue will be settled in RMB and U.S. Dollars, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB.

We may be unable to complete a business combination transaction efficiently or on favorable terms due to complicated merger and acquisition regulations which became effective on September 8, 2006.

On August 8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September 8, 2006. This new regulation, among other things, governs the approval process by which a PRC company may participate in an acquisition of assets or equity interests. Depending on the structure of the transaction, the new regulation will require the PRC parties to make a series of applications and supplemental applications to the government agencies. In some instances, the application process may require the presentation of economic data concerning a transaction, including appraisals of the target business and evaluations of the acquirer, which are designed to allow the government to assess the transaction. Government approvals will have expiration dates by which a transaction must be completed and reported to the government agencies. Compliance with the new regulations is likely to be more time consuming and expensive than in the past and the government can now exert more control over the combination of two businesses. Accordingly, due to the new regulation, our ability to engage in business combination transactions has become significantly more complicated, time consuming and expensive, and we may not be able to negotiate a transaction that is acceptable to our stockholders or sufficiently protect their interests in a transaction.

The new regulation allows PRC government agencies to assess the economic terms of a business combination transaction. Parties to a business combination transaction may have to submit to the Ministry of Commerce and other relevant government agencies an appraisal report, an evaluation report and the acquisition agreement, all of which form part of the application for approval, depending on the structure of the transaction. The regulations also prohibit a transaction at an acquisition price obviously lower than the appraised value of the PRC business or assets and in certain transaction structures, require that consideration must be paid within defined periods, generally not in excess of a year. The regulation also limits our ability to negotiate various terms of the acquisition, including aspects of the initial consideration, contingent consideration, holdback provisions, indemnification provisions and provisions relating to the assumption and allocation of assets and liabilities. Transaction structures involving trusts, nominees and similar entities are prohibited. Therefore, such regulation may impede our ability to negotiate and complete a business combination transaction on financial terms that satisfy our investors and protect our stockholders' economic interests.

The value of our securities will be affected by the foreign exchange rate between U.S. dollars and RMB.

The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and RMB, and between those currencies and other currencies in which our sales may be denominated. Currently, RMB is stronger than U.S. Dollars. For example, to the extent that we need to convert U.S. dollars into RMB for our operational needs and should RMB appreciate against the U.S. dollar at that time, our financial position, the business of the Company, and the price of our common stock may be harmed. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of declaring dividends on our common stock or for other business purposes and the U.S. dollar appreciates against RMB, the U.S. dollar equivalent of our earnings from our subsidiaries in China would be reduced.

We are subject to the risks related to the evolving legal systems in China.

China's legal system is still evolving with many uncertainties, particularly in the promulgation and implementation and interpretation of rules and laws that are changing, being adopted and being interpreted and applied on an uneven basis, sometimes arbitrarily. Our Company, its structure and organization are subject to those risks. If such laws and rules are applied or interpreted against the Company in an unfavorable way, we may be subject to penalties or even lose our business license and you may lose your investment in us.

RISKS RELATED TO OUR SHARES

Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTC Bulletin Board. The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or Nasdaq system. The quotation of our shares on the OTC Bulletin Board may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.

We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally define so-called "penny stocks" to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. If our common stock becomes a "penny stock", we may become subject to Rule 15g-9 under the Exchange Act, or the "Penny Stock Rule". This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and "accredited investors" (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

Our principal stockholders, current executive officers and directors own a significant percentage of our company and will be able to exercise significant influence over our company.

Our executive officers and directors and principal stockholders together will beneficially own a majority of the total voting power of our outstanding voting capital stock. These stockholders will be able to determine the composition of our Board of Directors, will retain the voting power to approve all matters requiring stockholder approval and will continue to have significant influence over our affairs. This concentration of ownership could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material and adverse effect on the market price of the common stock or prevent our stockholders from realizing a premium over the market prices for their shares of common stock. See "Principal Stockholders" for information about the ownership of common by our executive officers, directors and principal stockholders.

We do not anticipate paying dividends on the Common Stock.

We have never paid dividends on our common stock and do not anticipate paying dividends in the foreseeable future. Our directors intend to follow a policy of retaining all of our earnings, if any, to finance the development and expansion of our business.

Broker-dealer requirements may affect trading and liquidity.

Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account.

Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

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Shares eligible for future sale may adversely affect the market price of our common stock, as the future sale of a substantial amount of our restricted stock in the public marketplace could reduce the price of our common stock.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act ("Rule 144"), subject to certain limitations. Under Rule 144, a person who is not deemed to have been one of our affiliates at the time of or at any time during the three months preceding a sale, and who has beneficially owned the restricted ordinary shares proposed to be sold for at least six months, including the holding period of any prior owner other than an affiliate, is entitled to sell their ordinary shares without complying with the manner of sale and volume limitation or notice provisions of Rule 144. We must be current in our public reporting if the non-affiliate is seeking to sell under Rule 144 after holding his ordinary shares between six months and one year. After one year, non-affiliates do not have to comply with any other Rule 144 requirements. Any substantial sale of common stock pursuant to Rule 144 or pursuant to any resale prospectus may have an adverse effect on the market price of our securities.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Except the

There is no unregistered sales of equity securities previously disclosed in a Current Report Amendment No. 1 on Form 8-K/A filed with SEC on April 29, 2008, there is no other unregistered sales of equity securities. during the three-month period ended March 31, 2009.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

None.

ITEM 5.      OTHER INFORMATION.INFORMATION.

None.

ITEM

It is customary for Chinese companies to provide guarantees on behalf of their business partners in connection with bank loans. During the first quarter 2009, our subsidiary, F.T.Z. Sentaida entered into three guarantee agreements (the “Guarantee Agreements”) with various banks to provide guarantee to Shandong Yongtai Chemical & Industrial Co., Ltd. (“Shandong Yongtai”), Qingdao Kaiyang Imports & Exports Co., Ltd. (“Qingdao Kaiyang”), and Shandong Huitong Tire Co., Ltd. (Shandong Huitong) in connection with their bank loans. Shandong Yongtai and Shandong Huitong are our trading partners, to which we sell natural rubber and from which we purchase their tires. We have no trading relation with Qingdao Kaiyang but Qingdao Kaiyi provides guarantee to our bank loans in an amount of approximately $4 million. The following table sets forth the term of each guarantee agreement and the amount guaranteed by F.T.Z. Sentaida as of March 31, 2009.

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In addition, upon the occurrence of certain events, including but not limited to, the failure of the borrowers to repay the loans timely, the liquidation, dissolution or bankruptcy of the borrowers and the occurrence of events that may materially adversely affect the interests of the banks, the banks have the right to accelerate the repayment, partially or entirely.

The management of the Company has assessed the fair value of the obligations arising from the above financial guarantees. The table below sets forth the respective fair value of guarantee obligations recognized as of March 31, 2009 under FIN 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.”

The foregoing description of the Guarantee Agreements does not purport to be a complete statement of the parties’ respective rights and obligations under these agreements or the transactions contemplated thereby, or a complete explanation of the material terms of thereof. The foregoing description is qualified in its entirety by reference to the Guarantee Agreements attached hereto as Exhibit 10.1 through Exhibit 10.3. and by reference to the Guarantee Agreements attached to the Company’s 10K filed on March 30, 2009 as Exhibit 10.4 through Exhibit 10.7

ITEM 6.      EXHIBITS.

EXHIBITS.

SIGNATURES

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



Dated: May 14, 2009

DATED: May 9, 2008

EXHIBIT INDEX

EXHIBIT INDEX

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