PART I

FINANCIAL INFORMATION

SENTAIDA TIRE COMPANY LIMITED

Consolidated Balance Sheets

See notes to consolidated financial statements

See notes to consolidated financial statements

SENTAIDA TIRE COMPANY LIMITED

Consolidated Statements of Cash Flows

See notes to consolidated financial statements

SENTAIDA TIRE COMPANY LIMITED

Organization

The Company'sCompany’s name has been changed from "RUB“RUB A DUB SOAP INC." ("RUBD"” (“RUBD”) to "Sentaida“Sentaida Tire Company Limited"Limited”, effective on July 3, 2008.

We areThe Company is a holding company and did not engage in any active operations before and after theprior to its reverse acquisition transaction with Zhongsen International Company Group Limited or Zhongsen International ( “Zhongsen International”),completed on February 5, 2008. We only operateThe Company currently operates through Zhongsen International'sInternational’s wholly-owned subsidiaries: Qingdao Free-Trading Zone Sentaida International Trade Company Limited ("(“F.T.Z. Sentaida"Sentaida”), Qingdao Sentaida Tires Co., Limited ("(“Qingdao Sentaida"Sentaida”) and Zhongsen Holdings Co., Limited ("(“Zhongsen Holdings"Holdings”). Both F.T.Z. Sentaida and Qingdao Sentaida are companies incorporated under the Lawslaws of People'sPeople’s Republic of China, and Zhongsen Holdings is incorporated in the British Virgin Islands under the International Business Company Act (Cap.291).

WeThe Company is primarily engageengaged in the global marketing and distribution of tires and rubber without any tire manufacturing operations. We areoperations, and it is one of the largest integrated tire and rubber marketers and distributors in China. OurThe Company’s business scope can be generally divided into three main business divisions: rubber import and distribution, tire export, and tire domestic wholesale and retail, which generated approximately 60%58%, 19%21% and 21% of its consolidated net sales respectively for the sixnine months ended JuneSeptember 30, 2008. We position ourselvesThe Company has positioned itself 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 becomingIt aims to become a major player in the world tire and rubber market through steady organic growth, expansion into new markets, entry into the retail service market and an aggressive acquisition strategy.

Principles of Consolidation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Before the reverse acquisition of Zhongsen International, RUBD had "zero"“zero” equity; and after the acquisition, RUBD has not had any operations and has not incurred any expenses. Therefore, the accompanying consolidated financial statements include the accounts of Zhongsen International and its wholly-owned subsidiaries and the shares issued in connection with the acquisition on February 5, 2008 are treated as if they were outstanding for all prior periods.

Reclassification

Certain amounts in the 2007 financial statements have been reclassified to conform to the current financial statement presentation with no impact on previous reported net income or stockholder'sstockholder’s equity. The related party receivables in previous presentation were reclassified as accounts receivable-related party and loan receivable-related party. Related party payables were reclassified as accounts payable-related party and loan payable-related party inon current presentation.

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Taxes payable was reclassified as income tax payable and other taxes payable; advance from customers was taken out from other liabilities showing as separate item line on current balance sheet. Commission, rebates and insurance were reclassified into selling expenses on current statements of operations. 

Use of Estimates

The preparation of financial statements on conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all deposits with an original maturity of three months or less and short-term highly liquid investments, which are readily convertible into cash to be cash and cash equivalents in the consolidated financial statements.

All cash in banks in China is placed with accredited financial institutions but is uninsured. Although China is considered economically stable, it is possible that unanticipated events could disrupt banks'banks’ operations. Therefore, the Company has a credit risk exposure of uninsured cash in banks.

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 customers 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 that title and responsibility have passed and the above mentioned criteria 1, 3 and 4 have been met.

In general, the Company does not allow customers to return products unless there are defects in manufacturing or workmanship. Sales returns need to go through a strict process and have to be authorized by management. Sales returns are continually monitored. Based on historical experience of actual returns, management believes that the Company does not need to have a provision for sales returns.

Concentration of Credit Risk

In the normal course of business, the Company may give credit to its customers after performing a credit analysis based on a number of financial and other criteria. The Company performs ongoing credit evaluations of customers'customers’ financial condition and does not normally require collateral. However, letters of credit and other security are required for certain new and existing customers.

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the consolidated net sales, the concentration of risk mainly comes from the customers of F.T.Z. Sentaida and Zhongsen Holdings. The top ten customers accounted for approximately 50%47% and 49%52% of the consolidated net sales for the sixnine months ended JuneSeptember 30, 2008 and 2007, respectively.

Accounts receivableReceivable

The top ten of our customers accounted for 73%77% of the accounts receivable as of JuneSeptember 30, 2008 and 85% as of December 31, 2007. As of JuneSeptember 30, 2008, the top one customer accounted for 19%21% of the accounts receivable; the second and the third largest customers both represented 9% and 8%, respectively;; and the fourth one accounted for 7%8% of accounts receivable.

Allowance for doubtful accountsDoubtful 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'smanagement’s evaluation of the customers'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 Qingdao Sentaida, inventories consist primarily of automotive tires, wheels, automotive service accessories and related products. 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 merchandises.merchandise. If any, these merchandisesthis merchandise would be sold on discount or returned to vendors at discount in exchange for other merchandisesmerchandise relatively easier to sell. However, based on management'smanagement’s experience and assessments, the level of obsolete and slow-moving merchandisesmerchandise was very low and we believe there is no need to have an allowance for obsolescence. Terms with a majority of the Company'sCompany’s tires vendors allow return of tires products, within limitations, specified in their supply agreements. The inventory of Qingdao Sentaida as of JuneSeptember 30, 2008 was approximately $9.8$11.9 million.

SENTAIDA TIRE COMPANY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For Zhongsen Holdings and F.T.Z. Sentaida, the inventoryinventories 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 based on the fluctuation of the demand for rubber. As of JuneSeptember 30, 2008, the inventory of rubber in F.T.Z. Sentaida was approximately $2.3$1.5 million.

Property, Equipment and Land Use Rights

Property, equipment and land use rights are stated asat cost at the date of acquisition. The Company adopts the straight-line method of depreciation and amortization at annual rates sufficient to depreciate or amortize the cost of the assets less estimated salvage value over the assets'assets’ estimated useful lives. Maintenance and repairs are charged to expense as incurred and expenditures for improvements and major renewals are capitalized. When an asset is sold or retired, the carrying amount of the asset and the related accumulated depreciation isare removed from the account in the year of disposal, and any resulting gain or loss is reflected in the statement of operations. Depreciation is determined by using the straight-line method based on the following estimated useful lives:

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

These buildings are bought and used by the Company'sCompany’s Chain Stores to provide car services, retail tires and other merchandise used in cars.

Office building, warehouses and the related land that are currently used by the Company are not held under the Company's name. They are held by Sentaida Rubber, one of the Company'sCompany’s related parties. The office building, warehouses and related land used by the Company are free of charge.

Impairment

Impairments of long-lived assets are recognized when events or changes in circumstances indicate that the carrying amount of the asset or related groups of assets may not be recoverable and the Company'sCompany’s estimate of undiscounted cash flows over the assets'assets’ remaining estimated useful lives are less than the assets'assets’ carrying value. Measurement of the amount of impairment may be based on appraisals, market values of similar assets or estimated discounted future cash flows resulting from the use and ultimate disposition of the asset.

Throughout the reporting periods,period, management has reviewed the carrying value of long-term fixed assets for impairment when events or circumstances indicate possible impairment. Management has concluded that the estimated future cash flows anticipated to be generated during the remaining liveslife of these assets support their current net carrying value, thus, no impairment charges have been recorded for such periods.

Goodwill and Other Intangible Assets

Under SFAS No. 142 "Goodwill“Goodwill and Other Intangible Assets,"” goodwill and intangible assets with indefinite lives are no longer amortized, but are tested for impairment annually and more frequently in the event of an impairment indicator. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives, and reviewed whenever events or circumstances indicate impairment may exist.

Foreign currency translationCurrency Translation

The functional currency of the Company is Chinese Yuan (RMB) and their reporting currency is U.S. dollar. Consolidated balance sheet accounts are translated into U.S. dollars at the period-end exchange rate and all revenue and expenses are translated into U.S. dollars at the average exchange rate prevailing during the periods in which these items arise. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in the shareholders'shareholders’ equity section of the balance sheet.

SENTAIDA TIRE COMPANY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Exchange transaction gains and losses that arise from exchange rate fluctuations affecting transactions denominated in a currency other than the functional currency are included in the statement of operation as incurred. 

The foreign currency exchange losstranslation gain in the sixnine months ended JuneSeptember 30, 2008 and 2007 was $292,045$1,013,662 and $88,560 for the same period in 2007.$939,038, respectively. 

Fair Value of Financial Instruments

SFAS No. 107, "Disclosures“Disclosures about Fair Values of Financial Instruments"Instruments”, requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

For certain financial instruments, including cash, current accounts receivable, other receivables, related party receivables and other receivables,payables, accounts payable, other payables and accruals, and short-term debt, it is assumed that the carrying amounts approximate fair value because of the near term maturities of such obligations. The carrying value of revolving credit facility approximates their fair value due to the variable rate of interest paid. For long-term debt, the carrying amount is assumed to approximate fair value based on the current rates at which the Company could borrow funds with similar terms. Non-current accounts receivable is also assumed to approximate cost, because they are expected to be settled for property and equipment in the near future.

Vendor Rebates

The Company receives rebates from its vendors under a number of different programs. Many of the vendor programs provide for the Company to receive rebates when any of a number of measures isare achieved, generally related to the volume of purchases. These rebates are accounted for as a reduction to the price of the product, which reduces the carrying value of inventory. Throughout the reporting periods, the amount recognized for quarterly rebates is based on purchases that management considers probable for the periods. These estimates are continually revised to reflect rebates earned based on actual purchase level.

Customer Rebates

The Company offers rebates to its customers under a number of different programs. The majority of these programs provide for the customers to receive rebates generally in the form of a reduction in the related accounts receivable balance when certain measures are achieved generally related to the volume of product purchased from the Company. The amount of rebates is recorded in the form of a reduction to the related accounts receivable balance based on the actual level of purchases made by customers that participate in the rebate programs.

Income Taxes

The Company accounts for its income taxes under the provisions of SFAS No. 109 "Accounting“Accounting for Income Taxes."” This statement requires the use of the asset and liability method of accounting for deferred income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes, at the applicable enacted tax rates. The Company provides a valuation allowance against its deferred tax assets when the future realizability of the assets is no longer considered to be more likely than not.

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Legal and Tax Proceedings

The Company is involved occasionally in lawsuits as well as audits and reviews regarding its state and local tax filings, arising out of the ordinary conduct of its business. Although no assurances can be given, management does not expect that any of these matters will have a material adverse effect on the Company'sCompany’s financial statements. As to tax filings, the Company believes that the various tax filings have been made timely such as income tax, stamp duty, business tax and value-added tax etc. and in accordance with applicable national, regional and local tax code requirements. Appropriate payments have been made of all taxes due.

SENTAIDA TIRE COMPANY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Product warrantyWarranty

The tires that F.T.Z. Sentaida and Qingdao Sentaida sell are guaranteed directly by the manufacturers against defects in manufacturing and workmanship, andworkmanship. F.T.Z. Sentaida and Qingdao Sentaida are not accountable to customers. In respect of rubber imported, the F.T.Z. Sentaida has insurance coverage for the quality. Therefore, the Company does not make provisions for warranty.

For Qingdao Sentaida, although it has no responsibility for defects in quality or workmanship of the tires, it serves as agent for making damage claims against manufacturers on behalf of its customers against manufacturers.customers. Qingdao Sentaida may compensate customers first, either by replacing the tires or by a cash refund, and then, will get reimbursement from manufacturers or suppliers in tires or cash. Approximately $0.4$1.1 million of tires returned by customers was included in the value of inventory as of JuneSeptember 30, 2008.

Freight

Freight

For the customers to whom the Company offers CIF sales terms, the Company recognizes freight included in the pricesprice as revenue and meanwhile, the freight paid to common carriers is recognized as expense. Non-CIF customers'customers’ terms are "freight collect."“freight collect”.

Advertising

Almost all cost relating to advertising and promotion expenses for different brands of tires the Company sells are provided for and assumed by tirestire manufacturers. The Company usually does not bear these costs but would expend them, if and when incurred.

Related Party Transactions

The Company has mutually beneficial, longstanding arrangements with certain related parties set forth below. Related party sales were approximately $16.9$27 million, which accounted for 11%12% of the Company'sCompany’s net sales in the sixnine months ended JuneSeptember 30, 2008. For the same period in 2007, related party sales were approximately $28.5$45 million, 17% of the Company'sCompany’s net sales.

One of the Company’s related parties, Qingdao Sentaida Rubber Co. Ltd. (", or Sentaida Rubber")Rubber, is a subsidiary of Sentaida Group, Ltd., which previously owned 51% of the shares of Qingdao Sentaida and F.T.Z. Sentaida before Qingdao Sentaida and F.T.Z. Sentaida were acquired by Zhongsen International. Sales toThe Company has a longstanding arrangement with Sentaida Rubber did not occurto purchase products on their behalf, in exchange for an 8% commission on the six months ended June 30, 2008. The amountssale of such products by Sentaida Rubber. Amounts due from Sentaida Rubber increased approximately $10$11 million, as of JuneSeptember 30, 2008, which primarily due to the increased payments made by F.T.Z. Sentaida and Zhongsen Holdings on behalf of Sentaida Rubber, which payments will be reimbursed by Sentaida Rubber later. The amount owed byRubber. Sentaida Rubber accounted for 47%54% of the related party receivables.receivables, as of September 30, 2008. The Company believes that thethese receivables are collectable because all the related party receivablesince receivables from Sentaida Rubber isare guaranteed by Sentaida Group, Ltd. In addition,which is also a related third party. Sentaida Rubber is planninghas indicated that it plans to repay the debt partially byCompany, partly in cash and partially by transferringpartly through the transfer to the Company of land and building worthbuildings owned by Sentaida Rubber that we have valued at approximately $24 millionmillion. For several years Sentaida Rubber has allowed the Company to use such land and buildings, free of cost, based on its longstanding relationship with the Company. All these buildings and lands have been currently being used by the Company free of charge from Sentaida Rubber for several years based on the agreements between the Company and Sentaida Rubber. The $38.2$36.4 million of the related party receivable from Sentaida Rubber washas been reclassified as non currentnon-current related party receivables on the Company’s consolidated balance sheets.

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSsheet.

LQJ Global Tire, ("LQJ")or LQJ, is another related party, which nowas it is a wholly-owned subsidiary of Sentaida Group. On December 1, 2007, Sentaida Group Ltd. authorized the transfer of LQJ'sLQJ’s tire business operation into Sentaida International Inc., which is also a wholly-owned subsidiary of Sentaida Group. Sentaida International Inc. has assumed all the LQJ's liabilities.LQJ’s liabilities related to its operation before the operation integrated into Sentaida International. LQJ and Sentaida International Inc. accounted for nearly 90%94% of the related party sales, and about 46%45% of the related party receivables in the sixnine months ended JuneSeptember 30, 2008. The sales to LQJ and Sentaida International Inc. are normal business transactions and the documents are released against acceptance with a maturity of 90 days (D/A 90 days). The short-term debt to LQJ was approximately $8.7 million as of September 30, 2008, accounted for 58% of the related party loan receivable.

Nanjing Sentaida Tire Company Limited, ("or Nanjing Sentaida") becameSentaida, is a related party of the Company through one top management member in Nanjing Sentaida'sSentaida’s management team, Mr. Junfeng Liang, one of our directors. It accounted for 7.1%3% of the related party sales in the sixnine months ended JuneSeptember 30, 2008, which were all normal business transactions. AdvancesAccounts receivable from Nanjing Sentaida werewas approximately $0.3$0.4 million as of JuneSeptember 30, 2008.

SENTAIDA TIRE COMPANY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sentaida Group is related to the Company through Mr. Qin (our(the Company’s Chief Executive Officer), who owns 76% of Sentaida Group'sGroup’s shares. Amounts due from Sentaida Group were approximately $2.5$4 million and accounted for 3%27% of the relatedloan receivables-related party receivables as of JuneSeptember 30, 2008, which were short-term debt without interest or any other charges.

Qingdao Delinte Investment Co.,Logistic Company Limited, ("Delinte")or Delinte Logistic, is a subsidiary of Sentaida Group, which owns 93% of Delinte's shares. Amounts due fromGroup. The short-term debt payable to Delinte were $1.7Logistic was approximately $0.2 million as of June 30, 2008, accounted for 2% of the related party receivables, which were short-term borrowings for Delinte's working capital's turnover without interest or any other charges.charges, which accounted for 1% of the related party loan payable as of September 30, 2008.

Dongsen Tires Company Limited, ("Dongsen")or Dongsen, is related withto the Company through one top management member (Mr. Junfeng Liang). Mr. Liang, who also takes a part in Dongsen’s decision making. Approximately $11.4$17.7 million was borrowed from Dongsen for our working capital turnover in the sixnine months ended JuneSeptember 30, 2008.2008, which accounted for 88% of the related party loan payable. This short-term borrowing has no interestis non-interest bearing.

As of JuneSeptember 30, 2008, about $1.7$1.8 million was owed to Ms. Xiuqin Li, our CEO'sCEO’s wife. The borrowing was short-term borrowing for working capital turnover. Approximately $0.4 million owed to Delinte Logistic Company Limited ("Delinte Logistic"), a subsidiary of Sentaida Group, which were expenses paid by Delinte Logistic on behalf on the Company and will be reimbursed by the Company.

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Cash and Restricted cash

Restricted cash consists of collateral for letters of credit, notes payable and deposits in foreign currency; usually the deposit terms are within 90 days, although some are up to six months. The restricted cash was approximately $12.5 million as of JuneSeptember 30, 2008.

3. Property and Equipment

Depreciation expenses wereexpense was approximately $0.4$0.6 million and $0.3$0.5 million for the sixnine months ended JuneSeptember 30, 2008 and 2007, respectively. Depreciation expenses wereexpense was included in selling, general and administrative expense in the consolidated statements of operations.

A commercial real property with a cost of $2.8$2.9 million was bought under a personal mortgage of three employees of Sentaida Rubber Co., Ltd. The advance payment of about $1.4$1.5 million was paid by the Company and another $1.4 million of mortgage is amortized every month under the name of the three employees ofby Sentaida Rubber. There are agreements among the three employees, the Company and Sentaida Rubber, which clearly indicate that the three employees are just nominal owners of the property and nominal bearers of the mortgage and the Companycompany is the real owner of the property. All the rights and obligations related to the property are assumed by the Company and the property is used by the Company without other consideration in return. The Company made the advance payment but Sentaida Rubber is currently making the mortgage payments, which will be reimbursed by the Company later. The interest on the mortgage is floating and it is based on 130% of the annual prime rate of Construction Bank of China. Therefore, the mortgage'smortgage’s remaining balance was based on the year 2008's2008’s prime rate, 7.83% plus 30%, which is equivalent to the annual effective rate of 10.179%.

The required unpaid principal on this mortgage are:

SENTAIDA TIRE COMPANY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Notes Receivable

Notes receivable were approximately $3.8$3.2 million as of JuneSeptember 30, 2008 from Qingdao Sentaida'sSentaida’s customers. These notes are due within six months withand no interest or additional amounts are required to be received.

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Other receivablesReceivables

Other receivables were approximately $13.3$13.2 million as of JuneSeptember 30, 2008. Among them, approximately $13.1 million was derived from F.T.Z. Sentaida. Approximately $8.3$8 million was borrowed by twoone of the Company'sCompany’s strategic business partners without interest. Approximately $3.7 million was owedowned by two of the Company'sCompany’s suppliers, among which, $3.5 million was short-term borrowing by the two suppliers and will be paid back by offsetting the Company'sCompany’s accounts payable, and $0.2 million is freight charges and miscellaneous port charges that the Company paid on behalf of the two suppliers and will be reimbursed later.

6. Prepayments

Prepayments to the Company’s suppliers were approximately $6.0$4.2 million as of JuneSeptember 30, 2008, among which there was approximately $1.8 million of prepayment made to F.T.Z. Sentaida's suppliers, and approximately $4.2 million made to Qingdao Sentaida's suppliers.2008. 

7. Investment

The Company invested $49,480$49,866 in Greatwall Fund. AsFund and $50,100 in call deposit as of JuneSeptember 30, 2008, the2008. The market value for these short-term investments together was approximately $82,214 as of September 30, 2008 and it is included in the investment was $38,113.accompanying balance sheet.

8. Loan payable-related partyPayable- Related Party

Loan payable to related party was approximately $14.8$20.0 million as of JuneSeptember 30, 2008 (Please see details under section of related party transaction of note 1).

9. Short-TermShort Term Borrowings

F.T.Z. Sentaida'sSentaida’s total amount of credit line as of JuneSeptember 30, 2008 was approximately $141.9$138.8 million. The outstanding import bill advance, export bill purchase, documents against payment and documents against acceptance were approximately $76.7$71 million in total. Corresponding financial charges are based on the interest rate defined in each individual contract between F.T.Z. Sentaida 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 approximately 2%3%. 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 obligations of credit are guaranteed by Qingdao Sentaida, Sentaida Group, Ltd, Sentaida Rubber Co. Ltd., and Kaiyang Import and Export Company Limited whichwho is one of the Company'sCompany’s strategic business partners. Some of the obligations also bear the personal guaranty byguarantee of stockholders of Sentaida Group, such as Mr. Qinlong, ourMr.Qinlong, the Company’s Chairman of the Board and CEO. The 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 contain other customary covenants. The Company has not violated any of the covenants in the reporting periods.periods

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Notes Payable

Notes payable were approximately $17.5$18.5 million as of JuneSeptember 30, 2008. Most of the notes payable were issued to F.T.Z. Sentaida'sSentaida’s suppliers and were due within six months with no interest charge. Restricted cash for notes payable as of JuneSeptember 30, 2008 was about $7.9$12.5 million.

SENTAIDA TIRE COMPANY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Accounts Payable

Accounts payable werewas approximately $23.2$28.2 million as of JuneSeptember 30, 2008. Substantially all these amounts were payable to F.T.Z. Sentaida'sSentaida and Qingdao Sentaida'sSentaida’s normal business suppliers and usually were due within six months without interest or any other charges. The accounts payable to Reginal Rubber Trading were about $7.8 million, about $3.5 million to Zhaoyuan Liao Rubber Products Co, Ltd.Co., Ltd were about $2.7$6.2 million, about $3.3 million to Louis Dreyfus, about $2.0 million to South China and Tires Co., Ltd., and about $1.2Reginal Rubber Trading, approximately $3.1 million to Shandong Yongtai Chemical Company Limited.Ltd., about $2.4 million to PT. Karya Multiniaga Mand and about $2.1 million to South China Rubber and Tire Co., Ltd. Accounts payable to the topthese five companies accounted for approximately 75%61% of consolidated accounts payable.

12. Income taxOther Payable and Accruals 

Other payable

The and accruals were approximately $4.8 million as of September 30, 2008. In September, the Company accountsborrowed approximately $2.9 million from Qingdao Yuheng Tire Co., Ltd for its income taxes by using the assetworking capital turnover with no interest and liability methodadditional charges.

13. Income Tax Payable

As of accounting for deferred income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes, at the applicable enacted tax rates. ThereSeptember 30, 2008, there are no differences between the bookcarrying value and tax bases of the Company'sCompany’s assets and liabilities and there were no loss carryovers, therefore, there were no deferred tax assets or liabilities as of June 30, 2008.liabilities.

According to the Corporate Income Tax Law of the People'sPeople’s Republic of China ("(“the new CIT Law"Law”), the new applicable income tax rate of our Chinese subsidiaries iswas 25%, which is effective from January 1, 2008. The Companycompany makes tax provision and tax payment quarterly, and the tax settlement for the whole year is made before the end of April of the following year.

Tax Income tax payable was about $2.3 million as of JuneSeptember 30, 2008 was approximately $2.5 million.2008. 

13.14. Appropriated Retained Earnings

The Company'sCompany’s income is distributable to its owners after transfer to statutory reserves as required under relevant PRC laws and regulations and the Company'sCompany’s Articles of Incorporation. As stipulated by the relevant laws and regulations in the PRC, the Company is required to maintain a statutory surplus reserve fund, which is non-distributable. Appropriations to such reserve are 10% to 15% of net profit after taxation as per the statutory financial statements of the Company.

The statutory surplus reserve fund can be used to make up prior year losses, if any, for business expansion, or for dividend distribution, and also can be applied in conversion into capital by means of capitalization issue. Except for offset of the Company'sCompany’s loss, the balance of the appropriated retained earningsstatutory surplus reserve fund should not be less than 25% of the paid-in capital after the use of the appropriation of retained earnings.reserve fund. The appropriation may cease to apply if the balance of the fund has reached 50% of the Company'scompany’s registered capital.

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The appropriation of retained earningsto such reserve is made at the year endyear-end based on the net income for the year. Accordingly, the Company did not make any appropriation of retained earningsto the reserve in the accompanying quarterly financial statements.

14.

15. Common Stock

F.T.Z. Sentaida and Qingdao Sentaida do not have authorized shares and never issued any kind of stock. The two companies only have paid-in capital, which equals the registered capital. For Zhongsen Holdings, it has 50,000 authorized shares, which were never issued and it has no paid-in capital either. In addition, Zhongsen International has 10,000 authorized shares, which have not been issued yet. It does not have paid-inpaid- in capital.

Zhongsen International acquired 100% of equity interests of F.T.Z. Sentaida and Qingdao Sentaida in 2007 at a cost equal to total paid-in capital of F.T.Z. Sentaida and Qingdao Sentaida. The reporting entity changed to Zhongsen International. When consolidating the financial statements of Zhongsen International and its subsidiaries, $3,048,765 of the paid-in capital of F.T.Z. Sentaida and Qingdao Sentaida $3,048,765, was eliminated.

In the reverse acquisition closed on February 5, 2008, Zhongsen International'sInternational’s total outstanding 10,000 shares acquired by RUBD in exchange for 25,090,000 shares, representing 96.5%, of RUBD'sRUBD’s common stock (26,000,000 outstanding shares in total) with par value at $0.001 per share.

16. Freight Charges

Freight charges, which include freight and miscellaneous charges such as port fees, goods handling charges, customs duty and goods loading and unloading charges, etc. were approximately $1.9$2.4 million and $4.4 million for the nine months ended September 30, 2008 and 2007, respectively.

17. Selling Expenses

Selling expenses were approximately $2.4 million and $2.3 million for the sixnine months ended June 30, 2008 and 2007, respectively.

16.     Selling Expenses

Selling expenses were approximately $1.3 million and $1.5 million for the six months ended JuneSeptember 30, 2008 and 2007, respectively. Salary and wages, depreciation, traveling expenses, auto & fuel expenses and insurance premiums accounted for most of the selling expenses.

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18. Interest Expense

Interest expense for discounting notes, short-term debt for working capital turnover, trading finance, and miscellaneous financial charges, such as fee for issuing letter of credit and bank charges etc, are all included in interest expense.expenses. Total interest expense for trade finance, discounting notes and short-term borrowing was about $3.4$5.7 million and $1.8$2.5 million for the sixnine months ended JuneSeptember 30, 2008 and 2007, respectively. Miscellaneous bank charges were about $0.5$0.7 million and 0.3$0.5 million for the same period in 2008 and 2007, respectively.

SENTAIDA TIRE COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2008, interest income was about $1.9 million, which offset the increased interest expense. 

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19. Subsequent Events

Sentaida International Inc. is aan USA based subsidiary of Sentaida Group, and mainly operates in Los Angeles and St. Louis. It accounted for approximately 97%94% of the Company'sCompany’s related party sales and 47%45% of related party receivables.the accounts receivable-related party. The planCompany planed to acquire Sentaida International Inc. was postponed from the second quarter of 2008 toat the end of 2008. Ifthe year. However, due to the increasingly harder economic condition in the United States, Sentaida International Inc.’s revenue and net profit reduced dramatically during last nine months, therefore the Company has decided to suspend the acquisition is completed, the Company's related party receivables will decrease dramatically. The method of the acquisition is still under discussion process between the Company and Sentaida Group.plan.

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