UNITED STATES

Form 10-K/A

Commission File No. 0-23538

MOTORCAR PARTS OF AMERICA, INC.

Registrant’s telephone number, including area code: (310) 212-7910

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o Noþ

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes o No þ

The aggregate market value, calculated on the basis of the price at which the stock was last sold on the Internet Billboard, of Common Stock held by non-affiliates of the Registrant as of September 30, 2003 was approximately $29,403,734.

There were 8,183,955 shares of Common Stock outstanding at June 7, 2005.

DOCUMENTS INCORPORATED BY REFERENCE: None

TABLE OF CONTENTS

Explanatory Note: This amendment amends our Report on Form 10-K for the year ended March 31, 2004 and includes our audited, restated financial statements for fiscal years ended March 31, 2004, 2003 and 2002. As more fully described below and in this amendment, our consolidated financial statements have been restated to (i) effect a change in accounting policy with respect to accounting for sales to customers on a net-of-core-value basis and the recognition of the related core revenues and costs, (ii) correct our policy with respect to the accrual for stock adjustments and other returns, including the future returns of finished goods and cores, with an additional correction of an error which resulted in the double-counting of a core charge associated with product returns, and (iii) effect a change in our method for valuing cores.

Net-of-core-value Basis – Previously, upon a sale, we included the core value in our gross revenues and cost of sales. In using the net method of reporting sales, the core value has been eliminated in reporting both sales and cost of goods sold. The core refers to the portion of the used alternator or starter that is typically returned by the aftermarket customer and is a key component of the remanufacturing process. We now account for revenues and cost of sales on a net-of-core-value basis.

Stock Adjustment and Other Returns – Previously, to reflect the return, we recorded in cost of goods sold the difference between the unit plus core selling price and the standard cost of a finished good, which was an error in the application of GAAP. In making this accrual, we now reduce sales for the estimated gross selling price of future returns and record an associated reduction to cost of goods sold. In addition, we determined that certain allowances for future returns of finished goods and cores from our customers had not previously been recorded correctly. We now have included these allowances as contra-accounts receivable. We also discovered an error in our accounting system that resulted in double counting of the core charge in returns, causing an equal understatement of gross profit.

Inventory Valuation Adjustment – The Company values cores at the lower of cost or market. Previously, in the month of March, we would determine that market value equated to the highest core broker price plus a factor representing the fluctuation of core values during the year. Because March generally represents the high point in the core broker market, we have corrected our method of valuation and now only use the high core broker price without the factor. We continue to value our cores in September at high core broker price plus a factor to allow for the temporary decrease in market value during the off-season. In our restated financial statements, we also eliminated our general valuation reserve amounts that were based on the useful life expectancy of automobiles.

Recording revenue on a net-of-core value basis results in a material decrease in net revenues and cost of sales but have no impact on gross margin, operating profit, net income or cash flow from operations. The net effect of the

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stock adjustment and other returns, and inventory valuation adjustment was a reduction to gross margin and operating profit of $1,100,000 for the fiscal year ended March 31, 2004, and an increase to gross margin and operating profit of $151,000 and $228,000 for the fiscal years ended March 31, 2003, and 2002, respectively. Working capital decreased by $4,608,000 and $1,964,000 and shareholders’ equity decreased by $3,214,000 and $2,543,000 as of March 31, 2004 and 2003, respectively. All references to the Company’s Form 10-K herein refer to the Company’s Form 10-K for the fiscal year ended March 31, 2004, as amended by the Form 10-K/A filed on July 29, 2004 and this Form 10-K/A (Amendment No. 2).

The review of our accounting policies, and the resulting restatement of our financial statements, was precipitated in part by comments that we received from the Securities and Exchange Commission’s Division of Corporation Finance in connection with the SEC’s review of the financial information contained in our prior periodic report filings. We may make additional changes, including adjusting certain items in the restated financial statements, if requested to do so by the SEC based on the results of the SEC’s review.

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MOTORCAR PARTS OF AMERICA, INC.

Unless the context otherwise requires, all references in this Annual Report on Form 10-K to “the Company,” “we,” “us,” and “our” refer to Motorcar Parts of America, Inc. and its subsidiaries. This Form 10-K may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties. The Company’s actual results may differ significantly from the results discussed in any forward-looking statements. Discussions containing such forward-looking statements may be found in the material set forth under “Item 1. Business,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as within this Form 10-K generally.

     We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our SEC filings are available free of charge to the public over the Internet at the SEC’s website at http://www.sec.gov. Our SEC filings are also available on our website http://www.motorcarparts.com. You may also read and copy any document we file with the SEC at its public reference rooms in Washington, D.C., New York, NY and Chicago, IL. Please call the SEC at (800) SEC-0330 for further information on the public reference rooms.

     This amendment should be read in conjunction with our previously filed Report on Form 10-K, as amended by the Form 10-K/A filed on July 29, 2004.

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PART II

Item 6. Selected Financial Data

     The following selected historical consolidated financial information as of and for each of the years ended March 31, 2004, March 31, 2003, March 31, 2002, March 31, 2001 and March 31, 2000, has been derived from and should be read in conjunction with our consolidated financial statements and related notes thereto.

     Our consolidated financial statements have been restated to (i) effect a change in accounting policy with respect to accounting for sales to customers on a net-of-core-value basis and the recognition of the related core revenues and costs, (ii) correct our policy with respect to the accrual for stock adjustments and other returns, including the future returns of finished goods and cores, with an additional correction of an error which resulted in the double-counting of a core charge associated with product returns, and (iii) effect a change in our method for valuing cores.

     Historically, we included in revenues and cost of sales the core charge associated with the cores shipped to customers as part of a finished product. We have determined that revenues and cost of sales should be accounted for

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on a net-of-core-value basis in accordance with Statement of Financial Accounting Standards 48, “Revenue Recognition When Right of Return Exists” (“SFAS 48”).

     We have also determined that the accrual for stock adjustments and other returns was incorrectly recorded in previous financial statements. Previously, we recorded in cost of goods sold the gross profit of the anticipated stock adjustments and other returns, which was an error in the application of GAAP. SFAS 48 indicates that both the revenue and cost of goods sold related to returns must be eliminated, rather than just eliminating the gross profit. We also discovered an error in our accounting system that resulted in double counting of the core charge in returns, causing an equal understatement of gross profit.

     We evaluated our inventory valuation policies and processes in order to conform to the lower-of-cost-or-market approach set forth in Accounting Research Bulletin 43. The Company values cores at the lower of cost or market. Previously, in the month of March, we would determine that market value equated to the highest core broker price plus a factor representing the fluctuation of core values during the year. Because March generally represents the high point in the core broker market, we have corrected our method of valuation and now only use the high core broker price without the factor. We continue to value our cores in September at high core broker price plus a factor to allow for the temporary decrease in market value during the off-season. We also eliminated our general valuation reserve amounts that were based on the useful life expectancy of automobiles.

     Recording revenue on a net-of-core-value basis results in a material decrease in net revenues and cost of sales but has no impact on gross margin, operating profit, net income or cash flow from operations. The net effect of the stock adjustment and other returns, and inventory valuation adjustment was a reduction to gross margin and operating profit of $1,100,000 for the fiscal year ended March 31, 2004, and an increase to gross margin and operating profit of $151,000 and $228,000 for the fiscal years ended March 31, 2003, and 2002, respectively. All references to the Company’s Form 10-K herein refer to the Company’s Form 10-K for the fiscal year ended March 31, 2004, as amended by the Form 10-K/A filed on July 29, 2004 and this Form 10-K/A (Amendment No. 2).

     For more complete information concerning this restatement, see Note B of the Notes to Consolidated Financial Statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Disclosure Regarding Private Securities Litigation Reform Act of 1995

     This report contains certain forward-looking statements with respect to our future performance that involve risks and uncertainties. Various factors could cause actual results to differ materially from those projected in such statements. These factors include, but are not limited to: concentration of sales to certain customers, changes in our relationship with any of our customers, including the increasing customer pressure for lower prices and more favorable payment and other terms, potential future changes in our accounting policies that may be made as the SEC’s review of our previously filed public reports proceeds, our failure to meet the financial covenants or the other obligations set forth in our bank credit agreement and the bank’s refusal to waive any such defaults, increases in interest rates, changes in the financial condition of any of our major customers, the potential for changes in consumer spending, consumer preferences and general economic conditions, increased competition in the automotive parts remanufacturing industry, unforeseen increases in operating costs and other factors discussed herein and in our other filings with the Securities and Exchange Commission.

Management Overview

     Both the retail and traditional markets in our rotating electrical category are continuing to grow in size; however, both markets continue to experience consolidation. We make it a priority to focus our efforts on those customers we believe will be successful in the industry and will provide a strong distribution base for our future. We operate in a very competitive environment, where our customers expect us to provide quality products, in a timely manner at a low cost. To meet these expectations while maintaining or improving gross margins, we have focused on regular changes and improvements to make our manufacturing processes more efficient, and our movement to lean manufacturing cells, increased production in Malaysia and establishment of a production facility in northern Mexico, utilization of advanced inventory tracking technology and development of in-store testing equipment.

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Our sales are increasingly concentrated among a very few customers, and these key customers regularly seek more favorable pricing, delivery and payment terms as a condition to the continuation of existing business or expansion of a particular customer’s business. To partially offset some of these customer demands, we have sought to position ourselves as a preferred supplier by working closely with our key customers to satisfy their particular needs and entering into longer-term preferred supplier agreements.

     To grow our revenue base, we have been seeking to broaden our retail distribution network and have begun to target sales to the traditional warehouse and professional installer markets. We continue to expand our product offerings to respond to changes in the marketplace, including those related to the increasing complexity of automotive electronics.

     Our expanded relationship with AutoZone and our new relationship with one of the largest automobile manufacturers in the world, as more fully described in this report, is expected to have an ongoing and meaningful impact on our operations, financial results and capital requirements. We have expanded our operations and built-up our inventory to meet the requirements of these new or expanded relationships, and we have incurred certain transition costs associated with this build-up.

     A significant amount of management’s time has been focused on responding to the SEC’s questions and comments with respect to our previously reported financial reports, and we have incurred significant general and administrative expenses in connection with this response and the associated restatement of our financial statements. These efforts are ongoing.

General

     The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere herein.

Critical Accounting Policies

     As previously noted, this amendment to our Form 10-K for the year ended March 31, 2004 is being filed to restate our financial statements to reflect a correction to certain of our accounting policies. The discussion of our accounting policies and management’s discussion and analysis of financial results set forth below incorporates these changes.

     It is possible that additional changes to our reported results will be made as the SEC’s review of our public filings proceeds.

     Revenue Recognition. We recognize revenue when our performance is complete, and all of the following criteria established by Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition have been met:

     For products shipped free-on-board (“FOB”) shipping point, revenue is recognized on the date of shipment. For products shipped FOB destination, revenues are recognized two days after the date of shipment based on our experience regarding the length of transit duration. We include shipping and handling charges in the gross invoice price to customers and classify the total amount as revenue in accordance with Emerging Issues Task Force (“EITF”) 00-10, “Accounting for Shipping and Handling Fees and Costs.” Shipping and handling costs are recorded in cost of sales.

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     The price of a finished product sold to customers is generally comprised of separately invoiced amounts for the core included in the product (“core value”) and for the value added by remanufacturing (“unit value”). Only the unit value is recorded as revenue in accordance with our net-of-core-value revenue recognition policy. This revenue is recorded based on our then current price list, net of applicable discounts and allowances. Based on our experience, contractual arrangements with customers and inventory management practices, we anticipate that substantially all of the cores shipped to customers will ultimately be returned. At year-end, we recognize additional sales and cost of goods sold when customers return fewer cores than they have been purchased. This year-end revenue and cost recognition at fiscal year-end 2004, 2003, and 2002, increased our revenues by $3,120,000, $3,850,000, and $3,700,000 and increased our gross margin by approximately $2,278,000 $2,464,000 and $2,072,000, respectively.

     In fiscal 2004, we began to offer products on a pay-on-scan (POS) basis. For POS inventory, revenue is recognized when the customer has notified us that it has sold a specifically identified product to another person or entity. Our customer bears the risk of loss of any POS product from any cause whatsoever from the time possession is taken until a third party customer purchases the product. Net sales from POS inventory were $5,561,000 for the fiscal year ended March 31, 2004.

     We record sales incentives, concessions and allowances as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered in accordance with EITF 01-9, “Accounting for Consideration Given by a Vendor to a Customer.” Sales incentive amounts are recorded based on the value of the incentive provided.

     Reserve for Stock Adjustments and Other Returns. Under the terms of certain agreements with our customers and industry practice, our customers from time to time may be allowed stock adjustments when their inventory quantity of certain product lines exceeds the anticipated quantity of sales to end-user customers. Stock adjustment returns are not recorded unless and until they are authorized by the Company and they do not occur at any specific time during the year. We provide for a monthly allowance to address the anticipated impact of stock adjustments. Our estimate of the impact on revenues and cost of goods sold of future inventory overstocks is made at the time revenue is recognized for individual sales and is based on the following factors:

     In addition to stock adjustment returns, we also allow our customers to return goods to us that their end-user customers have returned to them. This general right of return is allowed regardless of whether the returned item is defective. We seek to limit the aggregate of customer returns, including slow moving and other inventory, to 20% of unit sales. We provide for such returns of inventory in accordance with Statement of Financial Accounting Standards 48, “Revenue Recognition When Right of Return Exists.” We reduce revenue and cost of sales for the unit value based on a historical return analysis and information obtained from customers about current stock levels.

     Inventory Reserve. We take a systematic and reasonable approach to establishing reserves for excess and obsolete inventory. On a monthly basis, management reviews inventory to identify excess quantities and maturing product lines. We then review the last 12 months of sales activity or usage for each affected part number to evaluate the demand for these products. Based on this activity, we estimate the number of months of inventory on hand. The reserve is based upon our knowledge of the industry, communication with core brokers and suppliers, scrap values and discussions with our customers and is computed based upon historical usage and a product’s life cycle. In general we establish reserves at rates ranging from 10% (when more than one year of inventory is on hand) to up to 80% (if more than three years of inventory is on hand) of the cost of that particular item of inventory.

     The reserve account for excess and obsolete inventory decreased during 2004 by $512,000 from $3,149,000 at March 31, 2003 to $2,637,000 at March 31, 2004. The decrease in fiscal 2004 was principally due to the scrapping of import alternator cores and the sale of obsolete domestic starters. In fiscal 2003, this reserve account increased by $277,000 from $2,872,000 at March 31, 2002 to $3,149,000 at March 31, 2003.

     Core Valuation. We record core inventory at the lower of cost or market. We lower the carrying value of cores in two ways:

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     These adjustments to core inventory values result in a corresponding charge to cost of goods sold.

     Accounting for Over/Under Returns of Cores. Based on our experience, contractual arrangements with customers and inventory management practices, on an annual basis we receive and purchase a used but remanufacturable core from customers for almost every remanufactured alternator or starter we sell to customers. However, both the sales and receipts of cores throughout the year are seasonal with the receipt of used cores lagging sales. Our customers typically purchase more cores than they return during the months of April through September (the first six months of the fiscal year) and return more cores than they purchase during the months of October through March (the last six months of the fiscal year). In accordance with our net-of-core-value revenue recognition policy, when we ship a product, we record an inventory unreturned deposit for the standard cost of the core we expect to be returned. Through March 31, 2004, at the end of each fiscal year, we recorded the core charge as revenue and eliminated any remaining inventory unreturned deposit for under-return of cores during the cycle. The amount of core charges recognized in the financial statements as revenue for years 2004, 2003, and 2002 to reflect the under-return of cores was $3,120,000, $3,850,000, and $3,700,000, respectively, and the related cost of goods sold recognized at year-end was $842,000, $1,386,000 and $1,628,000, respectively.

     Accounting for Deferred Taxes. The valuation allowance for deferred tax assets was based upon management’s estimate of current and future taxable income using the accounting guidance in SFAS 109, “Accounting for Income Taxes.” Based on SFAS 109, the seasonality of our earnings stream and numerous other factors discussed below, management considered it appropriate to defer recognition of tax benefits to the fourth quarters of fiscal 2003 and 2002 when we recognized a tax benefit of $4,331,000 and $4,005,000, respectively. For fiscal 2004, management determined that there was no valuation allowance necessary for deferred tax assets.

     In preparing our fiscal 2002 financial statements, we considered the weight of the available evidence to determine whether it was “more likely than not” that a portion of the deferred tax asset would not be realized. In particular, management identified two positive factors impacting realization of the deferred tax assets that did not exist in fiscal 2001 – our improved profitability in fiscal 2002 and the resulting increased confidence in management’s ability to rely on future earnings to forecast the utilization of more of the deferred tax benefits. Due to ongoing concerns about pending income tax audits and financing contingencies, however, management still concluded it was “more likely than not” that a portion of the deferred tax asset would not be realized. Accordingly, for fiscal 2002, we calculated the amount of the valuation allowance based on projected future taxable income beyond the next two fiscal years (thus the amount of the net deferred tax asset was based on projected fiscal 2003 and 2004 income) and the resulting income tax benefit was recorded in the fourth quarter of fiscal 2002.

     In the fourth quarter of fiscal 2003, the IRS approved our treatment of the amount to be deducted relating to a fiscal 2000 change in accounting for inventory and allowed us to deduct the entire amount in one year (2003) instead of the four years originally anticipated. In addition, the IRS concluded its audits. Furthermore, we resolved our financing contingency and signed an agreement with a new bank. These positive factors, as well as another year’s history of operating profits, lead us to conclude that a valuation allowance was no longer required. Thus, the balance in the allowance was eliminated in the fourth quarter of fiscal 2003.

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     No valuation allowance is reflected in the fiscal 2004 financial statements, based on our evaluation of the deferred tax assets using the accounting guidance in SFAS 109.

Results of Operations

     The following table summarizes our key operating data for the periods indicated:

     Following is our restated historical results of operation, reflected as a percentage of net sales:

Fiscal 2004 compared to Fiscal 2003

     Net sales for fiscal year ended March 31, 2004 were $80,548,000, a decrease of $3,421,000 or 4.1% from the prior years’ sales of $83,969,000. This decrease principally reflects: (1) a decrease of $3,221,000 representing sales made during fiscal 2003 to a customer we lost in February 2003; (2) the loss of $5,499,000 in sales made to two distribution centers (and their supported retail stores) that we supplied during fiscal 2003 but no longer supply (as noted in the following paragraph we subsequently gained incremental business in excess of what we had previously lost from this customer); (3) the mild summer in 2003 that resulted in reduced sales of a particular product line that often fails during the hot summer by approximately $1,360,000; (4) a decrease of $1,242,000 representing the increase in the allowances for future returns of finished goods and cores from our customers from fiscal year ended 2003 to 2004; and (5) an increase of $625,000 in amortized marketing allowances and one-time incentive credits for items such as testing equipment.

     Offsetting the decrease in sales were increases in sales of $2,617,000 to one of our primary customers. Sales to another customer increased for those distribution centers we continued to supply, even though we stopped supplying two of their distribution centers during fiscal 2004, by $4,798,000. In addition, due to programs implemented with our customers and engineering and quality control initiatives, returns and allowances, which reduce revenues, improved to 18.2% of sales for fiscal 2004 as compared to 19.3% of sales for fiscal 2003. This equates to approximately a $1,100,000 increase in revenues for the period. We are unable to estimate whether this improvement in warranty returns and allowances can be sustained.

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     As a percentage of net sales, cost of goods sold decreased in fiscal 2004 to 72.6%, which represents a decrease of 6.5% when compared to 79.1% for fiscal 2003. Our improved gross margin is primarily due to: (1) lowered production costs associated with a number of manufacturing efficiencies we have adopted, which we estimate saved approximately $3,400,000 when compared to fiscal 2003; (2) raw material cost savings of $1,394,000 from price concessions we realized from our suppliers in excess of the amount realized in fiscal 2003 and (3) cost savings of $337,000 that we realized by increasing production in our Malaysian facilities.

     General and administrative expense for fiscal 2004 was $9,616,000, which represents an increase of $700,000 or 7.9%, from the prior year’s expense of $8,916,000. This increase reflects the following factors: (1) an increase in the amount of legal fees we incurred, from $560,000 in fiscal 2003 to $966,000 in fiscal 2004, pursuant to an indemnification agreement with Richard Marks, a former officer, in connection with the SEC’s and the U.S. Attorney’s investigations; (2) a $240,000 increase in expenses relating to the implementation of an automated inventory tracking system and increased staffing in our information technology department; (3) $155,000 in increased travel expenses incurred in connection with greater trade show participation, visiting customers and suppliers; and (4) an increase of $25,000 in other miscellaneous expenses. These increases were offset by a decrease in bank fees of $126,000 recognized in fiscal 2003 associated with the financing that we obtained in December 2002.

     Sales and marketing expenses increased by $906,000, or 84.6%, to $1,977,000 in fiscal 2004 from $1,071,000 in fiscal 2003. This increase is principally attributable to costs incurred in connection with various marketing initiatives to strengthen our overall presence in the marketplace and increase our sales to the traditional warehouse market (including preparation of primary and collateral sales and marketing materials, costs incurred in connection with our name change, our participation in various trade shows in which we had not participated in recent years, development of materials relating to our new brand introduction, “Quality-Built,” and the hiring of a new senior sales executive).

     Research and development expenses remained consistent at $565,000 in fiscal 2004 compared to $564,000 spent in fiscal 2003. Research and development activities primarily relate to design and development of new products and test systems.

     Provision for doubtful accounts was $13,000 in fiscal 2004, compared to a recovery of $104,000 in fiscal 2003 that had previously been expensed. Because we have a small number of key customers, we are able to effectively manage our bad debt.

     Interest expense for fiscal 2004 was $968,000. This was a decrease of $1,012,000 or 51.1% from fiscal 2003 interest expense of $1,980,000. This decrease is the result of lower interest rates and lower outstanding loan balances. Our outstanding loan balance was $3,000,000 as of March 31, 2004 as compared to $9,932,000 as of March 31, 2003, a reduction of $6,932,000 over the twelve-month period. The decrease was partially offset by an increase of $318,000 in the amount of discounts we accepted in connection with the receivable discount programs we have with two of our customers. This increase is largely attributable to an increase of $15,506,000 in the amount of receivables that we discounted under these programs. In addition, in fiscal 2003, only one of our customers participated in the receivable discount program, compared to two in fiscal 2004. Interest expense was comprised principally of interest on our line of credit, capital leases (and related notes payable) and our receivable discount programs.

     Interest income for fiscal 2004 was $37,000. This is a decrease of $599,000 or 94.2% when compared to interest income of $636,000 for fiscal 2003. This decrease is principally related to the $606,000 of interest income we received from federal and California taxing authorities as a result of a favorable determination following an examination of our 1996 through 2001 income tax returns.

     Although our fiscal 2004 pre-tax income increased by 55.3%, when compared to our results for fiscal 2003, our net income for fiscal 2004 declined by 45.8%, when compared to our fiscal 2003 net income. In fiscal 2004, we recognized book tax expense of $3,123,000. By contrast, in fiscal 2003, we recognized a tax benefit of $4,967,000 due to the elimination of the deferred income tax valuation allowance of $4,331,000 and federal income tax refunds of $821,000 and $694,000 from the Job Creation and Work Assistance Act of 2002 related to the five-year carry-back provision and the successful conclusion of a tax examination of our income tax returns covering fiscal years

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1996 to 2001. For tax purposes, as of March 31, 2004, we have federal and state net operating loss carry forwards of $15,401,000 and $8,984,000, respectively, which expire in varying amounts through 2023.

Fiscal 2003 compared to Fiscal 2002

     Net sales for fiscal year ended March 31, 2003 were $83,969,000, a decrease of $3,090,000 or 3.5% from the prior years’ sales of $87,059,000. This decrease in net sales is principally related to the loss of two customers that resulted in a reduction in net sales of approximately $3,670,000. The decrease in sales to these customers was partially offset by an increase in sales to our continuing customers of approximately $3,380,000. Our net sales for fiscal 2003 were also reduced by an increase in the marketing allowances we provide our customers from approximately $1,500,000 in fiscal 2002 to approximately $4,300,000 in fiscal 2003. Approximately $1,651,000 of this increase is attributable to those allowances granted to a customer as part of a five-year contract that we executed with that customer in March 2003. (In connection with this agreement, we also agreed to assume responsibility for up to $1,500,000 of the cost of testing equipment that this customer may install in its stores. Any such cost that is incurred by us will be recognized over a five-year period as an additional marketing allowance.) The balance of the increase in marketing allowances is attributable to the increasing pressure we are receiving from our customers for more favorable pricing terms. Returns and allowances, which also reduce sales, remained relatively flat at 19.3% of sales for fiscal 2003 as compared to 19.7% in fiscal 2002.

     As a percentage of net sales, cost of goods sold increased in fiscal 2003 to 79.1%, which represents an increase of 3.0% when compared to fiscal 2002. This increase was largely attributable to reductions in the carrying values of our inventory that were made throughout the year to reflect our current estimate of the market value and was partially offset by the lower production costs that we are realizing from our manufacturing efficiencies. These adjustments to inventory in fiscal 2003 totaled $4,780,000 compared to $2,346,000 in fiscal 2002. The net effect of the method in which we reserve for stock adjustments for fiscal 2003 was a decrease to cost of goods sold of $241,000 compared to $1,020,000 for fiscal 2002.

     General and administrative expense for fiscal 2003 was $8,916,000, which represents an increase of $1,713,000 or 23.8%, from the prior year’s expense of $7,203,000. This increase is principally attributable to increased legal fees, compensation and benefits, and banking fees. Our total legal fees increased from $299,000 in fiscal 2002 to $1,347,000 in fiscal 2003. Of this amount, approximately $560,000 and $156,000 represent legal fees we incurred pursuant to our indemnification agreements with Richard Marks and Peter Bromberg, respectively, in connection with the SEC’s and the U.S. Attorney’s Office’s investigation of these two former officers. In addition, we incurred $230,000 in additional legal fees for attorneys we hired to represent us, Mel Marks, one of our Board members, and other employees who were interviewed in connection with these investigations.

     In addition, we increased the compensation we paid to Selwyn Joffe by approximately $120,000 to reflect the expanded duties he assumed prior to his appointment as our CEO in February 2003 and increased by $115,000 the compensation we paid to Mel Marks, one of our directors and our single largest shareholder. We also recorded $267,500 of additional expenses associated with the departure of Anthony Souza, our former CEO. General and administrative expenses also increased as a result of (1) increased directors’ fees of $60,000 resulting from the addition of new members to our Board; (2) investment banking fees of nearly $110,000 which were incurred in connection with an evaluation of our strategic options; (3) insurance and benefit cost increases of nearly $275,000; and (4) bank fees and charges of approximately $130,000 paid to both our current and former lenders in connection with the replacement of our lending facility. These increases were partially offset by a decrease of approximately $300,000 in salaries and bonuses paid to key executives, largely attributable to a decline in our pre-tax profits.

     Sales and marketing expenses decreased $96,000 or 8.2% in fiscal 2003 to $1,071,000 from $1,167,000 in fiscal 2002. This decrease was largely the result of declines in net personnel costs (including outside-commissions paid) of approximately $41,000, advertising costs of approximately $35,000 and supplies of approximately $20,000.

     Research and development expenses increased by $12,000 or 2.2% in fiscal 2003 to $564,000 over the $552,000 spent in fiscal 2002. This increase is principally attributable to increases in our supply costs, workers’ compensation payments and travel expenses, which were partially offset by declines in hourly and temporary wage costs and repair costs.

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     In fiscal 2003 we were able to recover $104,000 of bad debts, which had previously been expensed, due to aggressive collection actions with respect to a former customer and the favorable resolution of certain shipping and pricing discrepancy issues.

     Interest expense for fiscal 2003 was $1,980,000. This was a decrease of $1,602,000 or 44.7% from fiscal 2002 interest expense of $3,582,000. Of this total decrease, $360,000 reflects the interest expense we recorded in fiscal 2002 as the result of our re-pricing of 400,000 warrants issued to Wells Fargo Bank in May 2001. The balance is principally the result of lower interest rates, a reduction in the principal balance outstanding and recognition of approximately $208,000 of unamortized bank fees that were waived because we were able to replace our bank lender by December 31, 2002.

     Interest income for fiscal 2003 was $636,000. This is an increase of $610,000 when compared to interest income for fiscal 2002. This increase is due to the interest paid to us by both the federal and California taxing authorities as a result of a favorable determination following an examination of the Company’s 1996 through 2001 income tax returns.

     Although our fiscal 2003 pre-tax income decreased by 27.3%, when compared to our results for fiscal 2002, our net income for fiscal 2003 declined by only 9.4%, when compared to our fiscal 2002 net income. In fiscal 2003, we recognized a tax benefit of $4,967,000 due to the elimination of the deferred income tax valuation allowance of $4,331,000 and a federal income tax refunds of $821,000 and $694,000 from the Job Creation and Work Assistance Act of 2002 related to the five-year carry-back provision and the successful conclusion of a tax examination of our income tax returns covering fiscal years 1996 to 2001. In fiscal 2002, we recognized a tax benefit of $3,915,000 due primarily to the reduction of the deferred income tax valuation allowance by $5,971,000. For tax purposes, at March 31, 2003, we had federal and state net operating loss carry forwards of $15,264,000 and $8,951,000, respectively, which expire in varying amounts through 2023.

Liquidity and Capital Resources

     We have financed our operations through cash flows from operating activities, the receivable discount programs we have established with two of our customers, and when necessary, the use of our bank credit facility Although we cannot provide assurance, we believe our cash and short term investments on hand, cash flows from operations and the availability under our bank credit facility will be sufficient to satisfy our currently expected working capital, commitment and capital expenditure obligations over the next year.

     Our bank has informed us that they will not allow us to draw down any amounts under our line of credit until we are current with our SEC filings. In light of the cash we generate from operations, we do not believe this decision will have an adverse impact on our overall liquidity.

Working Capital and Net Cash Flow

     At March 31, 2004, we had working capital of $35,818,000, a ratio of current assets to current liabilities of 2.79:1, and cash and cash equivalents of $7,630,000, which compares to working capital of $25,590,000, a ratio of current assets to current liabilities of 2.18:1, and cash and cash equivalents of $1,307,000 at March 31, 2003. Working capital increased primarily due to cash generated from operations and a $6,932,000 reduction of the outstanding bank line of credit.

     Our net cash provided by operating activities was $15,152,000 for the year ended March 31, 2004, compared to $21,026,000 for the year ended March 31, 2003, and $2,822,000 for the year ended March 31, 2002. The decrease from 2003 to 2004 was primarily due to a $4,907,000 decrease in our net income and an $8,175,000 decrease resulting from changes in our current assets and liabilities, offset by a change of $7,197,000 in the provision for deferred income taxes from fiscal 2003 to fiscal 2004.

     Net inventory at March 31, 2004 was $25,595,000, an increase of $1,021,000 from March 31, 2003. The increase in inventory primarily relates to an increase in finished goods inventory of approximately $3,371,000 as a result of our decision to build up inventories in anticipation of the incremental business we were recently awarded by our

13

largest customer. Based on this new business we had $2,346,000 of pay-on-scan inventory at our customer’s locations. Our allowance for excess and obsolete inventory decreased from $3,149,000 at March 31 2003 to $2,637,000 at March 31 2004, causing an increase of $512,000 to the net inventory balance. These increases were offset by our improved inventory management, in which we were able to reduce our raw materials inventory by $5,110,000 during this period.

     Net accounts receivable increased by $626,000 during fiscal 2004. The increase was primarily due to a $1,469,000 increase in trade receivables and a reduction in the stock adjustment allowance and allowance for doubtful accounts of $326,000 and $73,000, respectively, during fiscal 2004. This increase was offset by a $1,242,000 increase in the estimated sales returns account during fiscal 2004.

     Accounts payable at March 31, 2004 were $13,456,000 compared to $8,082,000 at March 31, 2003. The $5,374,000 increase in accounts payable primarily relates to obtaining extended payment terms with our vendors during fiscal 2004.

     Deferred income tax provision of $2,984,000 also positively impacted our cash flow. Deferred income taxes were the result of federal and state net operating loss carry forwards to fiscal 2004. At March 31, 2004, we had federal and state net operating loss carry forwards of $15,401,000 and $8,984,000, respectively, which expire in varying amounts through 2023.

     We used net cash in investing activities for each of the years ended March 31, 2004, 2003 and 2002. Investing activities are primarily related to capital expenditures and the purchase and sale of investments. We expect to use cash in investing activities for the foreseeable future.

     We used cash in financing activities for each of the years ended March 31, 2004, 2003 and 2002. Financing activities are primarily related to proceeds from our line of credit, repayments of our line of credit and payments on capital lease obligations. Our financing activity uses for the year ended March 31, 2004 consisted primarily of repayments under our line of credit totaling $15,000,000, repurchase of warrants, stock options and treasury shares of $1,008,000 and payments on our capital lease obligations of $945,000, offset by borrowings under our line of credit of $8,068,000 and proceeds from options exercised of $500,000. For future expected line of credit and capital lease payments, see the contractual obligation table included below.

Capital Resources

Line of Credit

     Under the terms of our December 2002 loan agreement, which we replaced in May 2004, we could borrow up to the lesser of (i) $25,000,000 or (ii) our borrowing base, which consisted of 75% of our qualified accounts receivable plus up to $10,000,000 of qualifying inventory. At March 31, 2004, our borrowing base was $19,080,000, and we had borrowed $3,000,000 of this amount and reserved an additional $3,100,000 in connection with the issuance of standby letters of credit for worker’s compensation insurance. The interest on the amount outstanding at March 31, 2004 was calculated based upon the 90 day LIBOR rate plus 2% or 3.11% and matured on April 22, 2004.

     In May 2004, we entered into a new loan agreement that replaced the facility we established in December 2002. Under this new agreement, we can borrow up to $15,000,000 without reference to a borrowing base. The interest rate on this credit facility fluctuates and is based upon the (i) bank’s reference rate or (ii) LIBOR, as adjusted to take into account any bank reserve requirements, plus a margin of 2.00%. At May 15, 2005, we had no borrowings outstanding under the facility. This new loan agreement expires on October 2, 2006.

     The new loan agreement includes various financial conditions, including minimum levels of tangible net worth, cash flow, fixed charge coverage ratio and a number of restrictive covenants, including prohibitions against additional indebtedness, payment of dividends, pledge of assets and capital expenditures as well as loans to officers and/or affiliates. In addition, it is an event of default under the loan agreement if Selwyn Joffe is no longer our CEO. Pursuant to the new loan agreement, we have agreed to pay a fee of 3/8% per year on any difference between the $15,000,000 commitment and the outstanding amount of credit we actually use, determined by the average of the daily amount of credit outstanding during the specified period.

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     The Company was in compliance with its bank covenants at March 31, 2004. Subsequently, the Company was in default for failure to achieve EBITDA of not less than $14,000,000 for the four fiscal quarters ended December 31, 2004. On February 18, 2005 the bank waived the Company’s breach of this EBITDA covenant. See Note I to our consolidated financial statements included in this Form 10-K.

     However, our bank has informed us that they will not allow us to draw down any amounts under our line of credit until we are current with our SEC filings.

Receivable Discount Program

     Receivable discount programs we have established with two of our customers have positively impacted our liquidity. Under this program, we have the option to sell a customer’s receivables to the bank at an agreed upon discount set at the time the receivables are sold. The discount has ranged from .12% to 2.06% during fiscal 2004, and has allowed us to accelerate collection of two of our customer’s receivables aggregating $48,679,000 by an average of 149 days.

     This agreement is an important factor behind the $6,323,000 increase in cash at March 31, 2004. In the current fiscal year, we established a similar arrangement for one of our other key customers. While this arrangement has reduced our working capital needs, there can be no assurance that it will continue in the future. In addition, the cost of this program will increase as interest rates increase.

Multi-year Vendor Agreements

     Under the terms of the agreement discussed in Note S to our consolidated financial statements included in this Form 10-K, we have agreed to purchase approximately $24 million of inventory from AutoZone through the issuance of monthly credits, over a 24-month period, against receivables generated by sales to AutoZone. We have also agreed that, with respect to merchandise covered by our pay-on-scan arrangement, AutoZone will not be obligated to purchase the goods we ship to it until that merchandise is purchased by one of its customers. While these arrangements will defer recognition of income from sales to AutoZone, we do not believe they will ultimately have an adverse impact our liquidity. In addition, although we have increased our inventory levels and our employee base to accommodate the incremental business we receive from AutoZone, we believe that this incremental business will improve our overall liquidity and cash flow from operations.

     In fiscal 2005, we entered into a five-year agreement with one of the largest automobile manufacturers in the world to supply this manufacturer with a new line of remanufactured alternators and starter for the North American marketplace. As with the AutoZone arrangement, we have expanded our operations and built-up our inventory to meet requirements, and we have incurred certain transition costs associated with this build-up. Our cash flow has been adversely impacted as we take the operational stops necessary to respond to this opportunity. We believe, however, that this new business will improve our overall liquidity over time.

     Our customers continue to aggressively seek extended payment terms, pay-on-scan inventory arrangements, price concessions and other terms that could adversely affect our liquidity. In this regard we are working with our bank and other financial institutions to increase our liquidity and financial capabilities. There can no assurance that these initiatives will be successful.

Capital Expenditures and Commitments

     Our capital expenditures were $322,000 for the year ended March 31, 2004. The majority of these expenditures related to maintenance capital expenditures. We expect to spend approximately $2,500,000 for capital expenditures in 2005. Approximately $1,300,000 of these expected expenditures are planned for building the Mexico production facility, with the remainder to be spent to handle increased capacity to meet our new five-year agreement with one of the largest automobile manufacturers in the world and maintenance capital expenditures. The amount and timing of capital expenditures may vary depending on the build-out schedule for the Mexico production facility.

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Contractual Obligations

     The following summarizes our contractual obligations and other commitments at March 31, 2004, and the effect such obligations could have on our cash flow in future periods:

     Capital Lease Obligations represent amounts due under leases of various types of machinery and computer equipment that are accounted for as capital leases.

     Operating Lease Obligations represent amounts due for rent under our leases for office and warehouse facilities in California, Tennessee, North Carolina, Malaysia and Singapore.

     Other Long-Term Obligations represents commitments we have with certain customers to provide a marketing allowance in consideration for supply agreements to provide products over a defined period.

     Management believes that cash flow from operations, availability under our credit agreement and our participation in the receivable discount program we have established with two of our customers will be sufficient to meet our working capital needs during fiscal 2005.

Off-Balance Sheet Arrangements

     We do not have any off-balance sheet financing arrangements or liabilities. In addition, we do not have any majority-owned subsidiaries or any interests in, or relationships with, any material special-purpose entities that are not included in the consolidated financial statements.

Related Party Transactions

     Our related party transactions primarily consist of employment and director agreements, and stock purchase agreements. For a further discussion of these agreements, we refer you to Note R of Notes to Consolidated Financial Statements.

Recent Accounting Pronouncements

     In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities,” which addresses consolidation by business enterprises of variable interest entities. Consolidation by a primary beneficiary of the assets, liabilities and results of activities of variable interest entities will provide more complete information about the resources, obligations, risks and opportunities of the consolidated company. The interpretation also requires disclosures about variable interest entities that the company is not required consolidate but in which it has a significant variable interest.

     The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. We adopted the requirements of this Interpretation with respect to all variable interest entities created on or before January 31, 2003 as of June 30, 2003. The adoption of this Interpretation did not have a material effect on the accompanying consolidated financial statements.

     In December 2003, the FASB issued FIN 46R, “Consolidation of Variable Interest Entities” with respect to variable interest entities created before January 2003, which among other issues, revised the implementation date to

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the first fiscal year or interim period ending after March 15, 2004, with the exception of Special Purpose Entities (“SPE”). The consolidation requirements apply to all SPE’s in the first fiscal year or interim period ending after December 15, 2003. The Company currently has no SPEs. The adoption of this statement did not have a material impact on its consolidated financial statements.

     In April 2003, FASB issued SFAS 149, “Amendment of Statement 133 on Derivative instruments and Hedging Activities.” SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 149 is effective for contracts and hedging relationships entered into or modified after June 30, 2003. The Company does not have any derivative instruments nor does it engage in hedging activities. The adoption of SFAS 149 did not have a material effect on the accompanying consolidated financial statements.

     In May 2003, the FASB issued SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS 150 generally requires that instruments that have characteristics of both a liability and equity be classified as a liability. SFAS 150 specifies that three categories of freestanding financial instruments (mandatorily redeemable instruments, obligations to repurchase an entity’s equity shares by transferring assets and certain obligations to issue a variable number of equity shares) be classified as liabilities or, in certain instances, as assets. SFAS 150 is generally effective for all financial instruments entered into or modified after May 31, 2003. The Company does not have any financial instruments with characteristics of both liabilities and equity.

Item 7A Quantitative and Qualitative Disclosures About Market Risk

     Quantitative Disclosures. We are subject to interest rate risk on our existing debt and any future financing requirements. Our variable rate debt relates to borrowings under the Credit Facility (see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”).

     The following table presents the weighted-average interest rates expected on our debt instruments in effect at March 31, 2004.

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Principal (Notional) Amount by Expected Maturity Date
(As of March 31, 2004)

     Qualitative Disclosures. Our primary exposure relates to (1) interest rate risk on our long-term and short-term borrowings, (2) our ability to pay or refinance our borrowings at maturity and (3) the impact of interest rate movements on the cost of the receivable discount program we have established with two of our customers. While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we evaluate our financial position on an on-going basis. An increase in interest rates of 1% would have the effect of reducing our results from operations by approximately $50,000, based on interest-bearing debt and capitalized lease obligations at March 31, 2004 of $4,656,000. In addition, for each $100,000,000 of accounts receivable we discount over a period of 180 days, a 1% increase in interest rates would decrease our operating results by $500,000.

     We are exposed to foreign currency exchange risk inherent in our sales commitments, anticipated sales, anticipated purchases and assets and liabilities denominated in currencies other than the U.S. dollar. We transact business in two foreign currencies which affect our operations; the Malaysian Ringit, which has been fixed in relation to the U.S. dollar, and the Singapore dollar. During the past three years, we have experienced a $8,000 gain, $5,000 gain, and a $34,000 loss, in fiscal years 2004, 2003 and 2002 respectively, relative to our transactions involving these two foreign currencies. Our total foreign assets were $647,000 as of March 31, 2004. A change of 10% in exchange rates would result in an immaterial change in the amount reported in our financial statements.

Item 8. Financial Statements and Supplementary Data

     The information required by this item is set forth in the Consolidated Financial Statements, commencing on page F-1 included herein.

Item 9A. Controls and Procedures

     In connection with the Annual Report on Form 10-K for the year ended March 31, 2004 that we filed on June 29, 2004, we completed an evaluation under the supervision and with the participation of our chief executive officer and chief financial officer of the effectiveness of our disclosure controls and procedures, as of the end of the period covered by that report, pursuant to the Securities and Exchange Act of 1934, as amended. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of the end of the period covered by that report, our disclosure controls and procedures were effective.

     As noted in other portions of this Form 10-K/A, we have been in the process of reviewing a number of our accounting policies, including our revenue recognition policies and our policies for recording our allowance for stock adjustments and other returns, and our inventory valuation policies. This review was precipitated in part by comments we received from the SEC with respect to our prior public filings. During the course of this review, we concluded that our policy of including the core charge in our revenues and cost of sales was inconsistent with

18

generally accepted accounting principles and that our policy of only charging cost of sales for the gross profit impact of stock adjustments and other returns in connection with the accrual for future stock adjustments and returns was in error. We also revised our inventory valuation method utilized during the beginning of the peak season and eliminated a general valuation reserve which was based on the useful life expectancy of automobiles. Accordingly, we decided to restate our financial statements to account for revenues and cost of sales on a net-of-core-value basis, to record the accrual for stock adjustments and other returns by reducing sales for the estimated gross selling price of future returns and making an associated reduction to cost of goods sold, and correct our inventory valuation policies.

     During their audit of our restated financial statements included in this Form 10-K/A, Grant Thornton LLP, our current independent auditing firm and the independent auditors of our financial statements for each of the last five fiscal years, notified management and our Audit Committee that they had identified significant deficiencies involving our internal controls that, in the aggregate, constitute a material weakness in these internal controls. In particular, Grant Thornton noted that our internal control over the application of accounting principles with respect to revenue recognition, the return of products under warranty programs, stock adjustments, the valuation of inventory (including the utilization of broker prices), the computation of valuation allowances, and the accrual for estimated returns of finished goods and used cores was not sufficient. Grant Thornton further noted that, in their view, our financial reporting and accounting personnel did not have the necessary level of expertise of accounting principles. With regard to more complex customer agreements, Grant Thornton indicated that we were heavily dependent on outside consultants in connection with the interpretation and application of accounting literature. Grant Thornton also expressed their view that we did not have adequate controls over the Excel spreadsheets that we use to maintain a large portion of our accounting analysis. Grant Thornton also expressed their view that the foregoing deficiencies were indicative of a control environment that lacks a sufficient level of control consciousness.

     As part of their review of the financial statements for the three months ended June 30, 2004 included in the Form 10-Q we filed for that period, Grant Thornton notified our Audit Committee that Grant Thornton had concluded that the accounting treatment we initially proposed with respect to the AutoZone inventory transaction, after consultation with outside accounting experts, was in error. While Grant Thornton recognized the complexity associated with an analysis of this accounting treatment, they expressed their view that our need to change the proposed accounting treatment to adopt the accounting treatment may indicate a weakness in the operational effectiveness of our control process.

     As part of our current evaluation of the effectiveness of our disclosure controls and procedures under the supervision and with the participation of our chief executive officer and chief financial officer, we undertook a comprehensive review of our accounting policies and procedures and the relevant accounting literature and pronouncements, including those related to revenue recognition and the accounting for stock adjustments and other returns, and considered Grant Thornton’s views in this regard, the views of outside accounting consultants that we have engaged together with our own observations. Based upon this evaluation, we have concluded that there are material deficiencies in our disclosure controls and procedures, as summarized above.

     To remedy these deficiencies, we have increased the active participation of our Audit Committee in the evaluation of our accounting policies and disclosure controls, strengthened our internal audit function and are in the process of hiring an experienced accounting professional who will focus on remaining current with the relevant accounting literature and official pronouncements and assuring that our disclosure controls and procedures remain up-to-date. We believe that changes to our disclosure controls and procedures will be adequate to provide reasonable assurance that the objectives of these control systems will be met.

     Except as noted in the preceding paragraphs, there have been no changes in our internal control, over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect financial reporting.

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PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

     a. Documents filed as part of this report:

          (1) Index to Consolidated Financial Statements:

          (2) Schedules.

               None.

          (3) Exhibits:

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21

22

     b. Reports on Form 8-K:

     On January 14, 2004, the Company filed a current report on Form 8-K announcing that it had changed its name from Motorcar Parts & Accessories, Inc. to Motorcar Parts of America, Inc.

     On February 18, 2004, the Company filed a current report on Form 8-K announcing its results for the fiscal period that ended on December 31, 2003.

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SIGNATURES

     Pursuant to the requirements of Section 15(d) 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K/A has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated:

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MOTORCAR PARTS OF AMERICA, INC
AND SUBSIDIARIES

March 31, 2004, 2003 and 2002

CONTENTS

25

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Motorcar Parts of America, Inc.

We have audited the accompanying consolidated balance sheets of Motorcar Parts of America, Inc. (formerly Motorcar Parts & Accessories, Inc.) and Subsidiaries as of March 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material aspects, the consolidated financial position of Motorcar Parts of America, Inc. and Subsidiaries as of March 31, 2004 and 2003, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended March 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

We have also audited Schedule II of Motorcar Parts of America, Inc. and Subsidiaries for each of the three years in the period ended March 31, 2004. In our opinion, this schedule, when considered in relation to the basic consolidated financial statements taken as whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note B to the consolidated financial statements, the Company has restated the accompanying financial statements.

Los Angeles, California
June 21, 2004, except for Note B, as to which the date is April 29, 2005

F-1

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
(Formerly MOTORCAR PARTS & ACCESSORIES, INC.)

The accompanying notes to consolidated financial statements are an integral part hereof.

F-2

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
(Formerly MOTORCAR PARTS & ACCESSORIES, INC.)

The accompanying notes to consolidated financial statements are an integral part hereof.

F-3

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
(Formerly MOTORCAR PARTS & ACCESSORIES, INC.)

The accompanying notes to consolidated financial statements are an integral part hereof.

F-4

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
(Formerly MOTORCAR PARTS & ACCESSORIES, INC.)

The accompanying notes to consolidated financial statements are an integral part hereof.

F-5

Note A – Company Background

     Motorcar Parts of America, Inc. and its subsidiaries (the “Company”) remanufacture and distribute alternators and starters for import and domestic cars and light trucks for the automotive after-market industry (replacement parts sold for use on vehicles after initial purchase). These automotive parts are sold to automotive retail chain stores and warehouse distributors throughout the United States and Canada. The Company also sells after-market replacement alternators and starters to a major automotive manufacturer.

     The Company obtains used alternators and starters, commonly known as cores, primarily from its customers (retailers) as trade-ins and by purchasing them from vendors (core brokers). The retailers grant credit to the consumer when the used part is returned to them, and the Company in turn provides a credit to the retailer upon return to the Company. These cores are an essential material needed for the remanufacturing operations. The Company has remanufacturing, warehousing and shipping/receiving operations for alternators and starters in California, Singapore and Malaysia.

     The Company changed its name to Motorcar Parts of America, Inc. on January 8, 2004.

Note B – Restatement of Financial Statements

     The accompanying consolidated financial statements have been restated to correct errors in the Company’s previous accounting policy with respect to accounting for sales to customers and the recognition of the related core revenues and costs. The Company has determined that revenues and cost of goods sold should be accounted for on a net-of-core-value basis in a manner similar to Statement of Financial Accounting Standards 48, “Revenue Recognition When Right of Return Exists” (“SFAS 48”). This change results in a material decrease in the Company’s net revenues and cost of sales, but has no impact on its gross profit, operating profit, net income or cash flow from operations.

     In addition, the Company has determined that the accrual for stock adjustments and other returns was incorrectly recorded in previous financial statements. When recording the estimate for stock adjustments and other returns, the Company previously increased cost of goods sold by the gross profit of the anticipated stock adjustments and other returns. SFAS 48 requires that both the revenue and cost of goods sold related to returns must be eliminated, rather than just eliminating the gross profit.

     We also discovered an error in the calculation of gross profit margins used to record estimated stock adjustment returns. Correction of the error therefore results in a change to previously-reported gross profit.

     We also corrected an error in our inventory valuation policies and processes in order to conform to the lower-of-cost-or-market approach set forth by Accounting Research Bulletin 43. As a result, the Company eliminated its general valuation reserve amounts and changed our method of determining market value of core inventory. At each March 31, the Company now compares the carrying cost of cores to the highest quoted broker prices and reduces all cores that have a carrying value that is greater than the highest quoted core broker price. The Company previously used the highest core broker price plus a factor to adjust the carrying value of cores at each March 31. At each September 30, the Company estimates market price to be the highest core broker price, which takes into account seasonal fluctuations.

     The Company’s review of its accounting policies, and this resulting reissuance, was precipitated in part by comments that the Company received from the Securities and Exchange Commission’s Division of Corporation Finance in connection with the SEC’s review of the Company’s financial information

F-6

Note B – Restatement of Financial Statements (continued)

contained in prior periodic report filings. The Company may make additional changes, or even adjust certain items in this restatement, if requested to do so by the SEC based on the results of its review.

     The above revisions impacted the consolidated balance sheets as of March 31, 2004 and 2003, and the consolidated statements of operations and consolidated statements of cash flows for each of the three years in the period ended March 31, 2004. The impact of these restatements, which have been reflected throughout the consolidated financial statements and accompanying notes, are as follows:

Consolidated Balance Sheets

F-7

Note B – Restatement of Financial Statements (continued)

F-8

Note B – Restatement of Financial Statements (continued)

Consolidated Statements of Operations