714284--3/26/2007--SORL_Auto_Parts

related topics

{customer, product, revenue}

{product, market, service}

{property, intellectual, protect}

{cost, regulation, environmental}

{acquisition, growth, future}

{personnel, key, retain}

{condition, economic, financial}

{competitive, industry, competition}

{interest, director, officer}

Our ability to effectively implement our business strategy depends upon, among other factors, the successful recruitment and retention of additional highly skilled and experienced management and other key personnel and we cannot assure that we will be able to hire or retain such employees. Certain of our officers and directors have existing responsibilities to other businesses in addition to our company and as a result, conflicts of interest between us and the other activities of those persons may occur from time to time. We are and will continue to be under downward pricing pressures on our products from our customers and competitors which may adversely affect our growth, profit margins and net income. Our contracts with our customers are generally short-term and do not require the purchase of a minimum amount, which may result in periods of time during which we have limited orders for our products. We consistently face short lead times for delivery of products to customers. Failure to meet delivery deadlines in our production agreements could result in the loss of customers and damage to our reputation and goodwill. Because of the short lead times in our production agreements, we may not be able to accurately or effectively plan our production or supply needs. Our operations depend highly on Messrs. Xiao Ping Zhang, our Chief Executive Officer, and Xiao Feng Zhang, our Chief Operating Officer, and a small number of other executives and the loss of any such executive could adversely affect our ability to conduct our business. We may not be able to effectively respond to rapid growth in demand for our products and of our manufacturing operations which could adversely affect our customer relations and our growth prospects. We extend relatively long payment terms for accounts receivable which can adversely affect our cash flow. We may not be able to finance the development of new products which could negatively impact our competitiveness. We receive a significant portion of our revenues from a small number of customers which may make it difficult to negotiate attractive prices for our products and exposes us to risks of substantial losses if we lose certain of these customers. Our business depends on our ability to protect and enforce our intellectual property effectively which may be difficult particularly in China. It may be difficult to find or integrate acquisitions which could have an adverse effect on our expansion plans. With the automobile parts markets being highly competitive and many of our competitors having greater resources than we do, we may not be able to compete successfully. A disruption at our sole manufacturing site would significantly interrupt our production capabilities, which could have drastic consequences to us, including threatening our financial viability. If we are unable to expand our manufacturing capacity as planned, we may be unable to satisfy demand for our products. The cyclical nature of commercial vehicle production and sales could result in a reduction in automotive sales, which could adversely affect our financial liquidity. Increasing costs for manufactured components and raw materials may adversely affect our profitability. Longer product life of parts may reduce aftermarket demand for some of our products. We may be subject to product liability and warranty and recall claims, which may increase the costs of doing business and adversely affect our financial condition and liquidity. We are subject to environmental and safety regulations, which may increase our compliance costs. Non-performance by our suppliers may adversely affect our operations by delaying delivery or causing delivery failures, which may negatively affect demand, sales and profitability. Our commercial viability depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. If a third party claims that we infringe its patents, any of the following may occur:

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714284--3/26/2007--SORL_Auto_Parts_Inc