China Wind Energy (CWEY) 10-Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

o QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2010

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________To ______________________

Commission file number: 000-53480

CHINA WIND ENERGY INC.

(Exact name of registrant as specified in its charter)

Nevada	N/A
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
No.2 Haibin Road, Binxi Developing Area Heilongjiang Province People’s Republic of China 150000	+86 451 87009618
(Address of principal executive offices) (Zip Code)	(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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   þ    No   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

.

Large accelerated filer. o	Accelerated filer.    o
Non-accelerated filer. o(Do not check if a smaller reporting company)	Smaller reporting company.   þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   o   No   þ    

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.o Yes o  No

APPLICABLE ONLY TO CORPORATE ISSUERS

As of March 15, 2010, the registrant’s outstanding common stock consisted of 51,902,250 shares.

Table of Contents

PART I FINANCIAL INFORMATION	F-1
ITEM 1.FINANCIAL STATEMENTS	F-1
Consolidated Balance Sheets (unaudited)	F-1
Consolidated Statements of Operations (unaudited)	F-2
Consolidated Statements of Cash Flows (unaudited)	F-3
Notes to the Consolidated Financial Statements (unaudited)	F-4
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5
ITEM 4. CONTROLS AND PROCEDURES	5
ITEM 4(T). CONTROLS AND PROCEDURES	5
PART II – OTHER INFORMATION	6
ITEM 1.  LEGAL PROCEEDINGS	6
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCCEDS	6
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES	6
ITEM 4.  (REMOVED AND RESERVED)	6
ITEM 5.  OTHER INFORMATION	6
ITEM 6.  EXHIBITS	6

1

PART I –FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENS

China Wind Energy Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Balance Sheets

(Unaudited)

	January 31, 2010			July 31, 2009
Assets
Current Assets
Cash and cash equivalents	$	76,109		$	65,233
Accounts receivable, net of allowance for doubtful account of $- and $-, respectively		9,910			891,776
Inventories, net of allowance for obsolescence of $1,021,934 and $1,021,028, respectively		932,150			648,043
Prepaid expenses		169,849			125,899
Total current assets		1,188,018			1,730,951
Prepayment and deposit		13,054			10,945
Due from related parties		299,149			298,884
Property and equipment, net of accumulated depreciation of $810,237 and $549,659, respectively		9,150,173			9,214,594
Construction in progress		840,545			797,016
Goodwill		8,110,960			8,110,960
Intangible assets, net of accumulated amortization of $83,347 and $66,902, respectively		1,815,135			1,839,116
Total Assets	$	21,417,034		$	22,002,466
Liabilities & Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities	$	2,028,581		$	1,962,075
Customer deposit		14,557			131,333
Other payables		9,336			18,056
Short term loans		2,362,279			2,111,505
Due to related parties		76,161			76,108
Wages payable		72,572			66,081
Total current liabilities		4,563,486			4,365,158
Stockholders' Equity
Common stock; 400,000,000 shares authorized; 0.0001 par value; 51,902,250 shares issued and outstanding, respectively		5,191			5,191
Additional paid-in capital		20,335,701			20,335,701
Accumulated other comprehensive income		55,897			50,301
Accumulated deficit during development stage		(5,128,224	)		(4,478,842	)
Total China Wind Energy Stockholders' Equity		15,268,565			15,912,351
Non-controlling interest		1,584,983			1,724,957
Total Stockholders' Equity		16,853,548			17,637,308
Total Liabilities & Stockholders' Equity	$	21,417,034		$	22,002,466

The accompanying notes are an integral part of these financial statements

F-1

China Wind Energy Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended January 31, 2010			Three Months Ended January 31, 2009			Six Months Ended January 31, 2010			Six Months Ended January 31, 2009			November 27, 2006 (Inception) to January 31, 2010
Revenue	$	32		$	-		$	184,470			-		$	415,161
Cost of goods sold		-			-		（173,713		)		-			(932,658	)
Gross profit (Loss)		32			-			10,757			-			(517,497	)
Operating expenses
Selling expenses		6,923			23,217			15,268			46,052			120,404
Research and development		-			132,419			-			392,232			-
Provision (Reversal) on   allowance of obsolescence		-			121,785			-			232,979			-
General and administrative		354,958			347,807			649,863			668,191			3,674,244
Total operating expenses		361,881			625,228			665,131			1,339,454			3,794,648
Loss from operations		(361,849	)		(625,228	)		(654,374	)		(1,339,454	)		(4,312,145	)
Other income (expenses)
Interest income		128			36			199			301			1,199
Interest expense		(70,801	)		(39,544	)		(136,404	)		(53,873	)		(384,283	)
Loss on disposal of assets		-			2			-			(9,261	)		(1,651,934	)
Government subsidy income		-			87,738			-			87,738			161,205
Total other income (expenses)		(70,673	)		48,232			(136,205	)		24,905			(1,873,813	)
Net loss		(432,522	)		(576,996	)		(790,579	)		(1,314,549	)		(6,185,958	)
Less: Net loss attributable to non-controlling interest		(77,248	)		(90,161	)		(141,197	)		(209,009	)		(1,057,734	)
Net loss attributable to China Wind Energy Inc.		(355,274	)		(486,835	)		(649,382	)		(1,105,540	)		(5,128,224	)
Other comprehensive income (loss)
Foreign currency translation		(121	)		689			5,596			(687	)		55,897
Comprehensive loss		(355,395	)		(486,146	)		(643,786	)		(1,106,227	)		(5,072,327	)
Comprehensive loss attibutabe to Non – controlling interest		(77,248	)		(90,161	)		(141,197	)		(209,009	)		(1,057,734	)
Comprehensive loss attributable to China Wind Energy Inc.		(278,147	)		(395,985	)		(502,589	)		(897,218	)		(4,014,593	)
Net Loss Per Share, Basic and Diluted		(0.01	)		(0.01	)		(0.01	)		(0.02	)
Weighted Average Shares Outstanding, Basic and Diluted		51,902,250			51,902,250			51,902,250			51,902,250

The accompanying notes are an integral part of these financial statements

F-2

China Wind Energy Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended January 31, 2010			Six Months Ended January 31, 2009			November 27, 2006 (Inception) to January 31, 2010
Cash Flows From Operating Activities
Net Loss	$	(790,579	)	$	(1,314,549	)	$	(6,185,958	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		260,540			41,703			750,365
Amortization		24,191			155,020			123,844
Loss on disposal of assets		-			9,261			1,651,934
Loss (Gain) on physical count of inventories		-			-			26,831
Provision (Reversal) on allowance of obsolescence		-			232,979			-
Common stock issued for services		-			-			17,850
Changes in operating assets and liabilities:
Accounts receivable, net		-			8,191			19,188
Prepaid expenses		(43,841	)		17,169			222,463
Advances to suppliers		-			9,593			-
Inventories		(283,533	)		(102,266	)		(419,977	)
Prepayment and deposit		(2,100	)		166,830			555,650
Accounts payable and accrued liabilities		64,812			243,384			269,070
Customer deposit		(116,892	)		79,347			(33,965	)
Other payables		(8,736	)		67,169			(26,213	)
Wages payable		6,433			22,083			72,451
Deferred charges		-			(898	)		-
Net cash used in operating activities		(889,705	)		(364,984	)		(2,956,467	)
Cash Flows from Investing Activities
Purchases of property and equipment		(188,038	)		(684,449	)		(1,461,812	)
Cash paid for construction in progress		(42,822	)		-			(441,380	)
Proceeds from sale of land use right		882,657			-			955,942
Proceeds from sale of fixed assets		-			7,311			99,278
Cash paid to acquire intangibles		-			-			(1,407	)
Cash acquired on acquisition		-			-			314,713
Collection of loans made to related parties		-			185,689			993,502
Net cash provided by (used in) investing activities		651,797			(491,449	)		458,836
Cash Flows From Financing Activities
Proceeds from related party loans		-			17,284			69,319
Proceeds from short term loans		326,506			1,004,748			2,834,441
Repyament of short term loans		(77,604	)		-			(626,045	)
Proceeds from issuance of common stock		-			-			100,001
Net cash provided by financing activities		248,902			1,022,032			2,377,716
Effect of exchange rate changes on cash		(118	)		73,066			196,024
Net increase in cash and cash equivalents		10,876			238,665			76,109
Cash and cash equivalents, beginning of period		65,233			80,348			-
Cash and cash equivalents, end of period	$	76,109		$	319,013		$	76,109
Supplemental disclosure information:
Interest expense paid	$	43,781		$	-		$	81,584
Income taxes paid	$	-		$	-		$	-

The accompanying notes are an integral part of these financial statements

F-3

China Wind Energy Inc. And Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements of China Wind Energy Inc. and Subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America and rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in China Wind Energy’s annual report on Form 10-K for the year ended July 31, 2009 filed with the SEC on October 29, 2009.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the 2009 annual report on Form 10-K have been omitted.

Basis of Presentation

The consolidated financial statements include all the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates. The Company regularly evaluates estimates and assumptions related to obsolete inventory, useful life and recoverability of long lived assets, and goodwill. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Foreign currency translation

The reporting currency is the U.S. dollar.  The functional currency of the Company is the local currency, the Chinese Renminbi (“RMB”). The financial statements of the Company are translated into United States dollars in accordance with ASC 830, “Foreign Currency Translation”, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for the equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.

Reclassifications

Certain January 31, 2009 amounts have been reclassified to conform to the current period presentation.

F-4

Recently adopted accounting pronouncements

In June 2009, the FASB issued new standards setting forth a single source of authoritative GAAP for all non-governmental entities (“Codification”). The Codification, which commenced July 1, 2009, changes the referencing and organization of accounting guidance. The Codification is effective for the Company beginning the quarter ended September 30, 2009. The Codification does not change GAAP and only affects how specific references to GAAP literature are disclosed in the notes to the Company’s consolidated financial statements.

During the first quarter of 2009, in accordance with U.S. GAAP, the Company adopted new accounting guidance on business combinations. This guidance requires an entity to measure the business acquired at fair value and to recognize goodwill attributable to any non-controlling interests (previously referred to as minority interests) rather than just the portion attributable to the acquirer.  The standards also result in fewer exceptions to the principle of measuring assets acquired and liabilities assumed in a business combination at fair value.  In addition, the standards require payments to third parties for consulting, legal, audit and similar services associated with an acquisition to be recognized as expenses when incurred rather than capitalized as part of the business combination.  Its adoption did not have a material impact on our consolidated financial statements.

During the first quarter of fiscal 2010, in accordance with U.S. GAAP, the Company adopted the standard on consolidation as it relates to noncontrolling interests. The standard changed the accounting and reporting for minority interests, which were recharacterized as noncontrolling interests and classified as a component of equity. The standard requires retrospective adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of the standard will be applied prospectively. The adoption of the guidance did not have a material impact on the Company’s financial statements.

In May 2009, the FASB issued ASC 855, Subsequent Events. This standard is intended to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this standard sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. FASB ASC 855 is effective for fiscal years and interim periods ended after June 15, 2009. The Company adopted this standard effective June 15, 2009, and has evaluated any subsequent events through March 17, 2010.

2. GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company has accumulated deficits of $5,128,224 at January 31, 2010 that includes a loss of $432,522 for the three months ended January 31, 2010.  The Company also had a working capital deficiency of $3,375,468 as of January 31, 2010. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial statements have been prepared on a going basis and do not include any adjustments that might result from outcome of this uncertainty.

At January 31, 2010, the Company has suffered losses from development stage activities to date. Although additional sources of equity or debt financing, there is no assurance these activities will be successful.

3. SHORT TERM LOANS

Short term loans consist of the following:

	January 31, 2010		July 31, 2009
12-month Bank Loan bearing interest at 5.841% per annum and maturing in February 2010	$	1,467,000	$	1,465,700
Loans from individuals		895,279		645,805
Short term loan	$	2,362,279	$	2,111,505

The Company pledged the building and land located in Binxi city as collateral of the bank loan. In February 2010, the loan became mature and was paid off.

Loans from individuals were made by individuals to cover the Company’s temporary cash shortages. The short term loans are unsecured and due on demand. Not all of the loans are interest-bearing. For interest bearing loans, the interest rate is ranging from 14% to 40% per annum.

Interest expenses for short term loans are $70,801 and $39,544 for the quarter ended January 31, 2010 and 2009, respectively.

4. OTHER ADVANCE RECEIPTS

On November 6, 2007, the Company signed a contract with Heilongjiang Nongkentaixing Real Estate Development Co. Ltd to sell the Company’s land use rights in Harbin City. The total contract price is approximately $10,308,827. The Company is obligated to clear the original buildings on the land before the transfer of the land use rights can be completed.

In October 2008, the title transfer was approved by the government and by July 31, 2009, the company had received net proceeds of $7,694,925. The remaining proceeds net of sales tax for the amount of $882,351 was included as accounts receivable at July 31, 2009. By January 31, 2010, the Company had received the proceeds. Loss on the disposal of land use rights for the amount of $1.7 million was recognized for the year ended July 31, 2009.

5. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through March 17, 2010, which is the date the financial statements were issued, and has concluded that no such events or transactions took place which would require disclosure herein.

F-5

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

Forward-Looking Statements

This report on Form 10-Q contains certain forward-looking statements.  All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs and the risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

Results of Operations

Comparison of the Three Months Ended January 31, 2010 and 2009

Revenue and Net Loss

For the three months ended January 31, 2010, there was $32 sales revenue and a net loss of 432,522. For the three months ended January 31, 2009, there was $Nil sales revenue and a net loss of $576,996. This decreased loss of $144,474 or 25.04% resulted primarily from decreasing of research and development expenses of $132,419.

General and Administrative Expenses

General and administrative expenses for the three months ended January 31, 2010 were $354,958, an increase of $7,151 or 2.06% compared to $347,807 for the comparable period in 2009. The increase was primarily attributable to increase of office expenses.

Research and Development Expenses

Research and development expenses for the three months ended January 31, 2010 were $Nil, a decrease of $132,419 or 100% compared to $132,419 for the comparable period in 2009. The decrease was primarily attributable to lack of research fund.

Interest Expenses

Interest expense for the three months ended January 31, 2010 was $70,801 compared to $39,544 for the comparable period in 2009, an increase of $31,257 or 79.04%. The increase was primarily attributable to increase of short term loan balance from $1,125,330 on January 31, 2009 to $2,362,279 on January 31, 2010.

2

Income Tax Expenses

Income tax for the three months ended January 31, 2010 was $Nil, unchanged from the comparable period in 2009.

Comparison of the Six months Ended January 31, 2010 and 2009

Revenue and Net Loss

For the six months ended January 31, 2010, there was $184,470 sales revenue and a net loss of 790,579. For the six months ended January 31, 2009, there was $Nil sales revenue and a net loss of $1,314,549. This decreased loss of $523,970 or 39.86% resulted primarily from decreasing of research and development expenses of $392,232 and provision on allowance of obsolescence of $232,979.

General and Administrative Expenses

General and administrative expenses for the six months ended January 31, 2010 were $649,863, a decrease of $18,328 or 2.74% compared to $668,191 for the comparable period in 2009. The decrease was primarily attributable to our cost control.

Research and Development Expenses

Research and development expenses for the six months ended January 31, 2010 were $ Nil, a decrease of $392,232 or 100% compared to $392,232 for the comparable period in 2009. The decrease was primarily attributable to lack of research fund.

Interest Expenses

Interest expense for the six months ended January 31, 2010 was $136,404 compared to $53,873 for the comparable period in 2009, an increase of $82,531 or 153.2%. The increase was primarily attributable to increase of short term loan balance from $1,125,330 on January 31, 2009 to $2,362,279 on January 31, 2010.

Income Tax Expenses

Income tax for the six months ended January 31, 2010 was $Nil, unchanged from the comparable period in 2009.

Liquidity and Capital Resources

Cash and Cash Equivalents

Our cash and cash equivalents as at the beginning of the six months ended January 31, 2010 was $65,233 and increased to $76,109 by the end of the period, an increase of $10,876 or 16.67%. The increase was primarily attributable to increase of short term loan. The net change in cash and cash equivalents represented a decrease of $227,789 or 95.44% to $10,876 from $238,665 for the comparable period in 2009. The decrease was primarily attributable to changing of short term loan balance reduced to $250,774 from $1,004,748 for the comparable period in 2009.

Net cash used in operating activities

Net cash outflow from operating activities for the six months ended January 31, 2010 was $889,705, a increase of $531,769 or 145.6% from $364,984 for the comparable period in 2009. The decrease was primarily attributable to reduce of research and development expenses of $392,232.

3

Net cash used in investing activities

Net cash provided by investing activities for the six months ended January 31, 2010 was $651,797, an increase of $1,143,246 compared to $491,449 used in investing activities for the comparable period in 2009. The increase was primarily attributable the increase of the  proceeds from sale of land use right and the reduction of the purchases of property and equipment.

Trends

We are not aware of any trends, events or uncertainties that have or are reasonably likely to have a material impact on our short-term or long-term liquidity.

Inflation

We believe that inflation has not had a material or significant impact on our revenue or our results of operations.

Working Capital

Our working capital deficit was $3,375,468 at January 31, 2010.

We currently generate our cash flow through our operations. We believe that our cash flow generated from operations will be sufficient to sustain operations for at least the next 12 months. There is no identifiable expansion plan as of January 31, 2010, but from time to time, we may identify new business opportunities to improve the profitability and working capital from operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in the Annual Report on Form 10-K filed with SEC on October 29, 2009. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by our management.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates. We regularly evaluate estimates and assumptions related to obsolete inventory, useful life and recoverability of long lived assets, and goodwill. We base our estimates and assumptions on current facts, historical experience and various other factors that we believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

4

Foreign currency translation

The reporting currency is the U.S. dollar.  Our functional currency is the local currency, the Chinese Renminbi (“RMB”). Our financial statements are translated into United States dollars in accordance with ASC 830, “Foreign Currency Translation”, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for the equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

See Item 4 (T) below.

ITEM 4(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2010. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls and disclosed in our Annual Report for the year ended July 31, 2009, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

Changes in Internal Controls

During the quarter covered by this period there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Our majority owned subsidiary, Harbin SQ, was named as a defendant in a lawsuit in which the plaintiffs alleged that illegal transfers and misleading promotion of Harbin SQ’s shares to the public occurred through securities brokers.  The plaintiffs, 51 current stockholders representing 1,018,000 outstanding shares, acquired Harbin SQ’s shares through securities brokers from Harbin SQ’s initial stockholders and sought monetary damages from Harbin SQ, including the costs of acquiring the shares, expenses and imputed interest.

In September 2008 the claims of the plaintiffs were refuted in a judgment of the Court of Bin County, Heilongjiang Province.  On May 25, 2009, several of the plaintiffs appealed the decision to a higher court, but a date for the hearing has not been set.

Our management is not aware of any other legal proceedings that have been threatened against us or any of our subsidiaries.

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

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  (REMOVED AND RESERVED)

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

Exhibit Number	Exhibit Description
31.1	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China Wind Energy Inc.
	(Registrant)
	/s/ Shouquan Sun
Date: March 17, 2010	Shouquan Sun
	President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer, Director

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