UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington, DC
20549






FORM
10-Q




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





For the quarterly
period ended October
31, 2008





o TRANSITION 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) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was require to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.  Yes x   No
o




Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of “accelerated filer and large
accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):





Large accelerated
filer o      Accelerated
filer o     Non-accelerated
filer o    Smaller reporting companyþ





Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).


Yes o No  x




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




Check 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 December 15, 2008, the registrant’s outstanding common stock consisted of
51,902,250 shares.
















Table
of Contents









PART I – FINANCIAL INFORMATION
              3ITEM 1.  FINANCIAL STATEMENTS
              3ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS
              4ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
              8ITEM 4. CONTROLS AND PROCEDURES
              8PART II – OTHER INFORMATION
              9ITEM 1.  LEGAL PROCEEDINGS
              9ITEM 1A. RISK FACTORS
              9ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES
      AND USE OF PROCCEDS
              9ITEM 3.  DEFAULTS UPON SENIOR
      SECURITIES
              9ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF
      SECURITY HOLDERS
              9ITEM 5.  OTHER INFORMATION
              9ITEM 6.  EXHIBITS
              9





2






PART I – FINANCIAL INFORMATION






Safe
Harbor Statement






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 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.






ITEM
1.  FINANCIAL STATEMENTS






The unaudited
consolidated financial statements of China Wind Energy Inc. (the “Company”,
“China Wind”, “we”, “our”, “us”) follow.  All currency references in
this report are in US dollars unless otherwise noted.




China Wind Energy
Inc.


(A
Development Stage Company)


(Expressed in US
dollars)


(unaudited)








October 31,
2008









IndexConsolidated
      Balance Sheets (unaudited)
              F-1Consolidated
      Statements of Operations (unaudited)
              F-2Consolidated
      Statements of Cash Flows (unaudited)
              F-3Notes to the
      Consolidated Financial Statements (unaudited)
              F-4









3







China
      Wind Energy Inc. And Subsidiaries(A
      Development Stage Company)Consolidated
      Balance SheetsOctober
      31,
            
            July
      31,2008
            
            2008(Unaudited)AssetsCurrent
      AssetsCash and cash equivalents
            
            $
            368,492
            
            $
            80,348Accounts receivable,
      net
            
            
            32,397
            
            
            28,970Advances to suppliers
      (Note 5)
            
            
            493,066
            
            
            416,210Inventories,
      net (Note 6)
            
            
            674,828
            
            
            563,851Prepaid
      expenses
            
            
            180,827
            
            
            182,236Total
      current assets
            
            
            1,749,610
            
            
            1,271,615Prepayment and
      deposit (Note 7)
            
            
            819,123
            
            
            1,064,710Due from
      related parties (Note 8)
            
            
            984,704
            
            
            1,020,049Property and
      equipment, net (Note 9)
            
            
            7,401,596
            
            
            7,225,540Goodwill
            
            
            8,110,960
            
            
            8,110,960Intangible
      assets, net (Note 10)
            
            
            12,089,571
            
            
            12,166,785Deferred
      charges
            
            
            6,944
            
            
            6,288Total
      Assets
            
            $
            31,162,508
            
            $
            30,865,947Liabilities
      & Shareholders' EquityCurrent
      LiabilitiesAccounts
      payable and accrued liabilities
            
            $
            522,185
            
            $
            338,429Customer
      deposit
            
            
            91,448
            
            
            11,676Other
      payables
            
            
            198,634
            
            
            116,636Short term
      loans (Note 11)
            
            
            795,907
            
            
            120,582Due to related
      parties (Note 12)
            
            
            56,045
            
            
            56,363Wages
      payable
            
            
            43,204
            
            
            26,986Other advance
      receipts (Note 13)
            
            
            7,601,450
            
            
            7,603,673Total
      current liabilities
            
            
            9,308,873
            
            
            8,274,345Minority
      Interests
            
            
            2,490,080
            
            
            2,607,965Stockholders'
      EquityCommon stock; 400,000,000 and 10,000
      sharesauthorized, respectively;
      0.0001 and 0.13 par value, respectively; 51,902,250 and 1 shares issued
      and outstanding, respectively
            
            
            5,191
            
            
            5,191Additional
      paid-in capital
            
            
            20,335,701
            
            
            20,335,701Subscription
      receivable
            
            
            -
            
            
            -Accumulated
      other comprehensive income
            
            
            42,993
            
            
            44,369Accumulated
      deficit during development stage
            
            
            (1,020,330
            )
            
            (401,624Total
      Stockholders' Equity
            
            
            19,363,555
            
            
            19,983,637Total
      Liabilities & Stockholders' Equity
            
            $
            31,162,508
            
            $
            30,865,947






F-1


China
      Wind Energy Inc. And Subsidiaries(A
      Development Stage Company)Consolidated
      Statements of Operations(Unaudited)ThreeMonthsEnded
                October
      31,2008
              
              
              Three
      MonthsEnded
                October
      31,2007
              
              
              Nov.
      27, 2006(Inception)
      toOctober
      31,2008Revenue
              
              $
              -
              
              
              $
              -
              
              
              $
              148,383Cost
      of goods sold
              
              
              -
              
              
              
              -
              
              
              
              (204,873
              )Gross
      profit
              
              
              -
              
              
              
              -
              
              
              
              (56,490
              )Operating
      expensesSelling
      expenses
              
              
              22,835
              
              
              
              -
              
              
              
              26,620General
      and administrative
              
              
              320,384
              
              
              
              24,824
              
              
              
              763,370Research
      and development
              
              
              259,813
              
              
              
              -
              
              
              
              259,813Provision
      (Reversal) on allowance of obsolescence
              
              
              111,194
              
              
              
              -
              
              
              
              6,928Total
      operating expenses
              
              
              714,226
              
              
              
              24,824
              
              
              
              1,056,731Loss
      from operations
              
              
              (714,226
              )
              
              
              (24,824
              )
              
              
              (1,113,221
              )Other
      income (expenses)Interest
      income
              
              
              265
              
              
              
              -
              
              
              
              459Interest
      expense
              
              
              (14,329
              )
              
              
              -
              
              
              
              (23,067
              )Loss
      on disposal of assets
              
              
              (9,263
              )
              
              
              -
              
              
              
              (9,263
              )Gain(Loss)
      on physical count of inventories
              
              
              -
              
              
              
              -
              
              
              
              (26,831
              )Total
      other income (expenses)
              
              
              (23,327
              )
              
              
              -
              
              
              
              (58,702
              )Loss
      before and income taxes and minority interests
              
              
              (737,553
              )
              
              
              (24,824
              )
              
              
              (1,171,923
              )Income
      taxes
              
              
              -
              
              
              
              -
              
              
              
              -Minority
      interests
              
              
              118,848
              
              
              
              -
              
              
              
              151,594Net
      loss
              
              
              (618,705
              )
              
              
              (24,824
              )
              
              
              (1,020,329
              )Other
      comprehensive income (loss)Foreign
      currency translation
              
              
              (1,376
              )
              
              
              205
              
              
              
              42,993Comprehensive
      income (loss)
              
              $
              (620,081
              )
              
              $
              (24,619
              )
              
              $
              (977,336
              )Net
      Loss Per Share, Basic and Diluted
              
              $
              (0.01
              )
              
              $
              (24,824
              )Weighted
      Average Shares Outstanding,Basic
      and Diluted
              
              
              51,902,250
              
              
              
              1






F-2





China
      Wind Energy Inc. And Subsidiaries(A
      Development Stage Company)Consolidated
      Statements of Cash Flows(Unaudited)Three
      MonthsEnded
                October
      31,2008
              
              
              Three
      MonthsEnded
                October
      31,2007
              
              
              Nov.
      27, 2006(Inception)
      toOctober
      31,2008Cash
      Flows From Operating ActivitiesNet
      Loss
              
              $
              (618,705
              )
              
              $
              (24,824
              )
              
              $
              (1,020,329
              )Adjustments to reconcile net income to net cash provided by operating
      activities:Minority interest
              
              
              (118,848
              )
              
              
              -
              
              
              
              (151,594
              )Depreciation
              
              
              21,539
              
              
              
              32
              
              
              
              36,022Amortization
              
              
              77,000
              
              
              
              -
              
              
              
              128,319Loss
      on disposal of assets
              
              
              9,263
              
              
              
              -
              
              
              
              9,263Loss(Gain) on physical count of inventories
              
              
              -
              
              
              
              -
              
              
              
              26,831Provision(Reversal) on allowance of obsolescence
              
              
              111,194
              
              
              
              -
              
              
              
              81,070Common
      stock issued for services
              
              
              -
              
              
              
              -
              
              
              
              17,850Changes in operating assets and liabilities:Accounts receivable, net
              
              
              (3,427
              )
              
              
              -
              
              
              
              (3,853
              )Advances to suppliers
              
              
              (76,856
              )
              
              
              -
              
              
              
              (129,946
              )Inventories
              
              
              (222,171
              )
              
              
              -
              
              
              
              (123,724
              )Prepaid Expenses
              
              
              1,409
              
              
              
              -
              
              
              
              3,158Prepayment and deposit
              
              
              245,587
              
              
              
              -
              
              
              
              65,133Accounts payable and accrued liabilities
              
              
              183,756
              
              
              
              (10,282
              )
              
              
              251,714Customer deposit
              
              
              79,772
              
              
              
              -
              
              
              
              43,070Other payables
              
              
              81,998
              
              
              
              -
              
              
              
              87,234Wages payable
              
              
              16,218
              
              
              
              -
              
              
              
              43,204Deferred charges
              
              
              (656
              )
              
              
              -
              
              
              
              (656
              )Net cash provided by operating activities
              
              
              (212,927
              )
              
              
              (35,074
              )
              
              
              (637,234
              )Cash
      Flows From Investing ActivitiesPurchases of property and equipment
              
              
              (216,395
              )
              
              
              (1,077
              )
              
              
              (690,431
              )Proceeds from disposal of assets
              
              
              7,313
              
              
              
              -
              
              
              
              7,313Cash
      acquired on acquisition
              
              
              -
              
              
              
              -
              
              
              
              314,713Proceeds from repayment of related parties loan
              
              
              35,345
              
              
              
              -
              
              
              
              305,306Net cash used in investing activities
              
              
              (173,737
              )
              
              
              (1,077
              )
              
              
              (63,099
              )Cash
      Flows From Financing ActivitiesProceeds from short term loans
              
              
              675,325
              
              
              
              -
              
              
              
              725,030Loan
      from (repayment to) shareholder
              
              
              -
              
              
              
              (20,000
              )
              
              
              -Repayment of short term loans
              
              
              -
              
              
              
              -
              
              
              
              44,999Proceeds from issuance of common stock
              
              
              -
              
              
              
              100,000
              
              
              
              100,001Net cash provided by (used in) financing activities
              
              
              675,325
              
              
              
              80,000
              
              
              
              870,030Effect of exchange rate changes on cash
              
              
              (517
              )
              
              
              261
              
              
              
              198,795Net increase in cash and cash equivalents
              
              
              288,144
              
              
              
              44,110
              
              
              
              368,492Cash
      and cash equivalents, beginning of period
              
              
              80,348
              
              
              
              1,278
              
              
              
              -Cash
      and cash equivalents, end of period
              
              $
              368,492
              
              
              $
              45,388
              
              
              $
              368,492Supplemental
      disclosure information:Interest expense paid
              
              $
              -
              
              
              $
              -
              
              
              $
              8,738Income
      taxes paid
              
              $
              -
              
              
              $
              -
              
              
              $
              -






F-3






China
Wind Energy Inc. And Subsidiaries


Notes
to Consolidated Financial Statements


(Unaudited)








1.
            ORGANIZATION
      AND BUSINESS BACKGROUND





The Company was
incorporated in Nevada on May 8, 2006, under the name Pooch Pal Beverages Inc.,
and changed its name to K-Care Nutritional Products Inc. On November 29,
2007, the Company changed its name to China Wind Energy Inc.





On November 20,
2007, a former President of the Company entered into a Stock Purchase Agreement
with Jian Ren, a resident and citizen of the Hong Kong SAR of the People’s
Republic of China (the “Purchaser”), pursuant to which the Purchaser agreed
to purchase 5,950,000 shares of the Company’s common stock, $0.0001 par
value, from the former President of the Company for $50,000. These shares
represented 81% of the issued and outstanding common stock of the Company.
The Stock Purchase Agreement closed on November 27, 2007.





Also, on November
20, 2007, the Company entered into an Acquisition Agreement with the Purchaser,
who is the owner of all of the share capital of China Wind Energy Limited,
a corporation organized and existing under the laws of the Hong Kong SAR of
the People’s Republic of China, pursuant to which the Purchaser agreed to
transfer all of his share capital in China Wind Energy Limited to the Company
for $1. Upon closing of the Acquisition Agreement on November 27, 2007,
China Wind Energy Limited became a wholly owned subsidiary of the Company.
China Wind Energy Limited has one wholly owned subsidiary, Harbin XingYe
Wind Energy Technology Limited (“XingYe”), a company established under the
Law of the People’s Republic of China (“PRC”).





The acquisition was
accounted for as a reverse merger, since the Purchaser owned a majority of the
outstanding shares of the Company’s common stock immediately following the
Acquisition. China Wind Energy Limited is deemed to be the acquirer in the
merger. Consequently, the assets and liabilities and the historical operations
that are reflected in the financial statements prior to the Acquisition are
those of China Wind Energy Limited and are recorded at the historical cost
basis of China Wind Energy Limited, whereas, the consolidated financial
statements after completion of the Acquisition will include the assets and
liabilities of the Company and China Wind Energy Limited, the historical
operations of China Wind Energy Limited, and the Company’s operations from
the closing date of the Acquisition.




On May 16, 2008,
the Company entered into a Share Exchange Agreement with Power Profit Technology
Development Limited, a company incorporated under the laws of Hong Kong,
People’s Republic of China (“Power Profit”), and Wan Yi Tse, the holder of 100%
of the issued and outstanding registered share capital of Power
Profit.






Pursuant to the
share exchange agreement, on May 26, 2008, the Company completed the acquisition
of 100% of the equity interests of Power Profit and 82.14% of the equity
interests of its subsidiary, Harbin Sanye Wind Energy Technology Co., Ltd.
(formerly Harbin Lian Chuang Co., Ltd)(“Harbin Sanye”). Harbin Sanye is a
company incorporated under the laws of the People’s Republic of
China, engaged in the business of manufacturing harvesters and blades for
wind generators. Together, Power Profit and Harbin Sanye became the subsidiaries
of the Company, Power Profit became the Company’s wholly owned subsidiary and
Harbin Sanye became the Company’s majority owned subsidiary.




On September 16,
2008, Harbin Sanye Wind Energy Technology Co., Ltd. changed its name to Harbin
SQ Wind Power Ltd (“Harbin SQ”).





The Company has not
yet generated significant revenues from planned principal operations and is
considered a Development Stage Company, as defined by Statement of
Financial Accounting Standards (“SFAS”) No.7 “Accounting and Reporting for
Development Stage Enterprises”.




2.
            GOING
      CONCERN





As reflected in the
accompanying combined financial statements, the Company has accumulated a
deficit of $1,020,330 at October 31, 2008 that includes a loss of $618,705 for
the three months ended October 31, 2008.  The Company also had a working
capital deficiency of $7,559,263 as of October 31, 2008.  The Company’s
stockholders have funded the losses and cash shortfalls allowing management to
develop sales and contingency plans. The Company is also arranging for
additional funding. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.





F-4





3.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES








a.
            Basis
      of Presentation





The accompanying
unaudited consolidated financial statements and related notes have been prepared
in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) for interim financial information, and with the rules
and regulations of the United States Securities and Exchange Commission to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by U.S. GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the financial position, results of operations and cash flows for the interim
periods have been included. These consolidated financial statements should
be read in conjunction with the consolidated financial statements of the Company
for the year ended July 31, 2008 and notes thereto contained in the Report on
Form 10-K of the Company as filed with the United States Securities and Exchange
Commission (the “SEC”). Interim results are not necessarily indicative of the
results for the full year.





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.





b.
            Use
      of Estimates





In preparing these
financial statements, management makes estimates and assumptions that affect the
reported amounts of assets and liabilities in the balance sheets and revenues
and expenses during the year reported. Actual results may differ from these
estimates.





c.
            Fair
      values of financial instruments





The carrying amount
reported in the balance sheet for cash, accounts receivable, inventory, accounts
payable and accrued expenses approximate fair value because of the immediate or
short-term maturity of these financial instruments.





d.
            Cash
      and Cash Equivalents





Cash and cash
equivalents include cash on hand, demand deposits with banks and liquid
investments with an original maturity of three months or less.





e.
            Accounts
      Receivable





Accounts receivable
are stated at the amount management expects to collect from outstanding
balances.  Management provides for probable uncollected amounts
through a charge to earnings and a credit to an allowance for bad debts based on
its assessment of the current status of individual accounts.  Balances
that are still outstanding after management has used reasonable collection
efforts are written off through a charge to the allowance for bad debts and a
credit to accounts receivable.





f.
            Inventories





Inventories are
stated at the lower of cost, as determined on a weighted average basis, or
market.  Costs of inventories include purchase and related costs
incurred in bringing the products to their present location and condition.
Market value is determined by reference to selling prices after the balance
sheet date or to management’s estimates based on prevailing market conditions.
The management writes down the inventories to market value if market value is
below cost. The management also regularly evaluates the composition of its
inventories to identify slow-moving and obsolete inventories to determine if a
valuation allowance is required.






F-5





g.
            Property
      and Equipment





Property and
equipment are initially recognized recorded at cost.  Gains or losses
on disposals are reflected as gain or loss in the period of
disposal.  The cost of improvements that extend the life of plant and
equipment are capitalized.  These capitalized costs may include
structural improvements, equipment and fixtures. All ordinary repairs and
maintenance costs are expensed as incurred.





Depreciation for
financial reporting purposes is provided using the straight-line method over the
estimated useful lives of the assets:





Machinery and
      equipment
            14
      yearsTransportation
      equipment
            12
      yearsOffice
      equipment
            10
      years





h.
            Impairment
      of Long-Lived Assets





The Company
accounts for impairment of plant and equipment and amortizable intangible assets
in accordance with SFAS No. 144, “Accounting for Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of”, which requires the Group to evaluate a
long-lived asset for recoverability when there is event or circumstance that
indicate the carrying value of the asset may not be recoverable. An impairment
loss is recognized when the carrying amount of a long-lived asset or asset group
is not recoverable (when carrying amount exceeds the gross, undiscounted cash
flows from use and disposition) and is measured as the excess of the carrying
amount over the asset’s (or asset group’s) fair value.





i.
            Intangible
      Assets





The Company’s
intangible assets are stated at cost less accumulated amortization and are
comprised of land user rights.  Land user rights are related to land
the Company occupies in Heilongjiang Province, PRC and are being amortized on a
straight-line basis over a period of 40 years.





j.
            Goodwill





Goodwill represents
costs in excess of fair values assigned to the underlying net assets of acquired
businesses. Goodwill deemed to have indefinite lives is not amortized, but is
tested for impairment annually and at any time when events suggest impairment
may have occurred. To assess goodwill for impairment, the Company determines the
fair value of its reporting units, which are primarily determined using
management’s assumptions about future cash flows based on long-range strategic
plans. This approach incorporates many assumptions including future growth
rates, discount factors and tax rates. In the event the carrying value of a
reporting unit exceeded its fair value, an impairment loss would be recognized
to the extent the carrying amount of the reporting unit’s goodwill exceeded its
implied fair value. No goodwill impairment was recorded for the three months
ended October 31, 2008 and 2007.




k.
            Comprehensive
      income




SFAS No.130,
“Reporting Comprehensive Income”, requires disclosure of all components of
comprehensive income and loss on an annual and interim basis. Comprehensive
income and loss is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources.  The comprehensive income arose from the effect of
foreign currency translation adjustments.






F-6





l.
            Revenue
      recognition





The Company
generates revenues from the sales of harvesters.  Sales are recognized
when the following four revenue criteria are met: persuasive evidence of an
arrangement exists, delivery has occurred, the selling price is fixed or
determinable, and collectability is reasonably assured.  Sales are
presented net of value added tax (VAT). No return allowance is made as products
returns are insignificant based on historical experience.




m.
            Research
      and development costs




Research and
development costs are expensed to operations as incurred.





n.
            Income
      taxes





The Company
accounts for income taxes in accordance with SFAS No. 109, "Accounting for
Income Taxes."  SFAS No. 109 requires an asset and liability approach
for financial accounting and reporting for income taxes and allows recognition
and measurement of deferred tax assets based upon the likelihood of realization
of tax benefits in future years.  Under the asset and liability
approach, deferred taxes are provided for the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.  A
valuation allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Group is able to realize
their benefits, or that future deductibility is uncertain.





o.
            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
Statement of Financial Accounts Standards (“SFAS”) No. 52, “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. At October 31, 2008, the
cumulative translation adjustment of $42,993 was classified as an item of other
comprehensive income in the stockholders’ equity section of the balance sheet.
For the three months ended October 31, 2008 and 2007, other comprehensive income
(loss) was $(1,376) and $205, respectively.





The exchange rates
used to translate amounts in RMB into U.S. Dollars for the purposes of preparing
the financial statements were as follows:  As of October 31, 2008, the
Company used the period-end rates of exchange for assets and liabilities of $1
to RMB6.841. For the three months ended October 31, 2008 and 2007, the
Company used the period’s average rate of exchange to convert revenues, costs,
and expenses of $1 to RMB6.8376 and $1 to RMB7.5101, respectively. The Company
used historical rates for equity.





p.
            Related
      parties





A party is
considered to be related to the Company if the party directly or indirectly or
through one or more intermediaries, controls, is controlled by, or is under
common control with the Company.  Related parties also include
principal owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and other parties
with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own
separate interests. A party which can


significantly
influence the management or operating policies of the transacting parties or if
it has an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests is also a related party.






F-7





q.
            Earnings
      per share





The Company
accounts for income (loss) per share in accordance with SFAS No. 128, “Earnings
per Share.” Basic income per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the periods
presented. Diluted income per share reflects the potential dilution that could
occur if outstanding stock options were exercised utilizing the treasury stock
method. The calculation of the weighted average number of shares outstanding and
earnings per share are as follows:





Three
      Months
            
            
            Three
      MonthsEnded
            
            
            EndedOctober
      31,
            
            
            October
      31,2008
            
            
            2007Numerator for
      basic and diluted earnings per shareNet income
      (loss)
            
            $
            (618,705
            )
            
            $
            (24,824
            )Denominator
      for basic earnings per share -weighted average shares
      outstanding
            
            
            51,902,250
            
            
            
            1Adjustment
      for dilutive effect
            
            
            -
            
            
            
            -Denominator
      for diluted earnings per share-adjusted weighted average shares
      outstanding
            
            
            51,902,250
            
            
            
            1Net income
      (loss) per common shareBasic
            
            $
            (0.01
            )
            
            $
            (24,824
            )Diluted
            
            $
            (0.01
            )
            
            $
            (24,824
            )





r.
            Recently
      adopted accounting principles





In September 2006,
the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, "Fair
Value Measurements".  SFAS No. 157 defines fair value, establishes a
framework and gives guidance regarding the methods used for measuring fair
value, and expands disclosures about fair value measurements.  In
February 2008, the FASB issued FASB Staff Position 157-1, "Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13" ("FSP 157-1") and FASB Staff Position 157-2,
"Effective Date of FASB Statement No. 157" ("FSP 157-2").  FSP 157-1
amends SFAS No. 157 to remove certain leasing transactions from its
scope.  FSP 157-2 delays the effective date of SFAS No. 157 for all
non-financial assets and non-financial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually), until fiscal years beginning after November 15,
2008.  SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years.  The Company adopted SFAS No. 157 effective January 1,
2008 for all financial assets and liabilities as required.  The
adoption of SFAS No. 157 was not material to the Company's financial statements
or results of operations.





In February 2007,
the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities — Including an Amendment of FASB Statement No. 115”, which
is effective for fiscal years beginning after November 15, 2007.  SFAS
No. 159 is an elective standard which permits an entity to choose to measure
many financial instruments and certain other items at fair value at specified
election dates.  Subsequent unrealized gains and losses on items for
which the fair value option has been elected will be reported in
earnings.  The Company has not elected the fair value option for any
assets or liabilities under SFAS No. 159.





s.
            Recent
      accounting pronouncements





On December 4,
2007, the FASB issued SFAS No. 160, “Noncontrolling interest in Consolidated
Financial Statements”.  SFAS No. 160 requires all entities to report
noncontrolling (minority) interests in subsidiaries as equity in the
consolidated financial statements.  The statement establishes a single
method of accounting for changes in a parent’s ownership interest in a
subsidiary that do not result in deconsolidation and expands disclosures in the
consolidated financial statements.  SFAS No. 160 is effective for
fiscal years beginning after December 15, 2008 and interim periods within those
fiscal years.  We have not yet determined the impact of the adoption
of SFAS No. 160 on our consolidated financial statements and footnote
disclosures.





On December 4,
2007, the FASB issued SFAS No.141R, “Business Combinations”.  SFAS No.
141R requires the acquiring entity in a business combination to recognize all
the assets acquired and liabilities assumed, establishes the acquisition date
fair value as the measurement objective for all assets acquired and liabilities
assumed, and requires the acquirer to expand disclosures about the nature and
financial effect of the business combination.  SFAS No. 141R is
effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008.  We have not yet determined the impact of the
adoption of SFAS No. 141R on our consolidated financial statements and footnote
disclosures.





In March 2008,
the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities”.  The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows.  It is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early
application encouraged.  The Company is currently evaluating the
impact of adopting SFAS No. 161 on its consolidated financial
statements.





In April 2008, the
FASB issued Staff Position FAS 142-3, “Determination of the Useful Life of
Intangible Assets” (“FSP FAS 142-3”) which amends the factors an entity should
consider in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FAS No. 142, “Goodwill and
Other Intangible Assets” (“FAS No. 142”).  FSP FAS 142-3 applies to
intangible assets that are acquired individually or with a group of assets and
intangible assets acquired in both business combinations and asset
acquisitions.  It removes a provision under FAS No. 142, requiring an
entity to consider whether a contractual renewal or extension clause can be
accomplished without substantial cost or material modifications of the existing
terms and conditions associated with the asset.  Instead, FSP FAS
142-3 requires that an entity consider its own experience in renewing similar
arrangements.  An entity would consider market participant assumptions
regarding renewal if no such relevant experience exists.  FSP FAS
142-3 is effective for year ends beginning after December 15, 2008 with early
adoption prohibited.  We have not yet determined the effect, if any,
of the adoption of this statement on our financial condition or results of
operations.





In June 2008,
the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP
EITF 03-6-1”).  FSP EITF 03-6-1 concludes that unvested share-based
payment awards that contain rights to receive non-forfeitable dividends or
dividend equivalents are participating securities, and thus, should be included
in the two-class method of computing earnings per share (“EPS”).  FSP
EITF 03-6-1 is effective for fiscal years beginning after December 15,
2008, and interim periods within those years.  Early application of
EITF 03-6-1 is prohibited.  It also requires that all prior-period EPS
data be adjusted retrospectively.  We have not yet determined the
effect, if any, of the adoption of this statement on our financial condition or
results of operations.




F-8





4.
            CONCENTRATION
      OF CREDIT RISK





Financial
instruments that potentially subject the Company to significant concentration of
credit risk consist primarily of cash and cash equivalents. As of October 31,
2008, a portion of the Company's cash was held by major financial institutions
located in the PRC, none of which are insured. However, the Company has not
experienced losses on these accounts and management believes that the Company is
not exposed to significant risks on such accounts.








5.
            ADVANCES TO
      SUPPLIERS




Advances to
suppliers are mainly for deposit in advance for purchase of raw materials. The
term of each advance ranges from 30 days to 180 days.





6.
            INVENTORIES





Inventories consist
of the following:





October
      31,2008
            
            
            July
      31,2008Raw
      material
            
            $
            439,053
            
            
            $
            357,696Work-in-progress
            
            
            657,251
            
            
            
            635,457Finished
      goods
            
            
            114,286
            
            
            
            114,320Others
            
            
            139,066
            
            
            
            20,2291,349,656
            
            
            
            1,127,702Less:
      Allowance for obsolescence
            
            
            (674,828
            )
            
            
            (563,851
            )Inventory,
      net
            
            $
            674,828
            
            
            $
            563,851








7.
            PREPAYMENT
      AND DEPOSIT





Prepayment and
deposit are payments made to contractors engaged in construction in
progress.  After the Company ensures the fulfillment of the contracts
by verifying required quality, the accumulated payment will be transferred to
construction in progress in property and equipment.




F-9





8.   
      DUE FROM RELATED PARTIES







Due from related
parties consist of the following:





October
      31,
            
            
            July
      31,Name
      and Description of Related Parties
            
            2008
            
            
            2008Sun, Shouquan
      - CEO; Stockholder
            
            $
            776,173
            
            
            $
            811,764Sun, Shouan
      - Sun, Shouquan's brother; Stockholder
            
            
            18,434
            
            
            
            18,366Wang, Guangyu
      - Stockholder
            
            
            1,782
            
            
            
            1,782Zhang, Luming
      - Stockholder
            
            
            52,805
            
            
            
            52,586Harbin New
      World Real Estate Co., Ltd. -A company
      controlled by Sun, Shouquan
            
            
            135,510
            
            
            
            135,551Total
            
            $
            984,704
            
            
            $
            1,020,049





"Due from related
parties" represents loans receivable that are unsecured, non-interest bearing
and have no fixed terms of repayment, and therefore are not considered current
assets.





The balance owed by
the President and CEO, and the real estate company under his control, totaled
$911,683 as of October 31, 2008.  The loans were made by Harbin SQ
before the acquisition of Harbin SQ by the Company and there has been no
material modification or renewal of the loan after the date of acquisition. The
Company has changed its related policy and procedures in line with the
prohibition on personal loans to executives contained in Section 402 of the
Sarbanes-Oxley Act of 2002





Since April 30,
2008 to October 31, 2008, the Company’s President and CEO has repaid $1,001,574
of the original loan ($305,593 since the acquisition of Harbin SQ by the
Company).  The Company plans to settle all outstanding balance of this
loan as soon as possible and no later than December 31, 2008.








9.
            PROPERTY
      AND EQUIPMENT





Property and
equipment consist of the following:





October
      31,
            
            
            July
      31,2008
            
            
            2008Machinery and
      equipment
            
            $
            131,158
            
            
            $
            130,357Transportation
      equipment
            
            
            472,775
            
            
            
            467,538Office
      equipment
            
            
            485,641
            
            
            
            468,051Construction
      in progress
            
            
            6,412,897
            
            
            
            6,243,0977,502,471
            
            
            
            7,309,043Less:
      Accumulated depreciation
            
            
            (100,875
            )
            
            
            (83,503
            )Property and
      equipments, net
            
            $
            7,401,596
            
            
            $
            7,225,540





The depreciation
was $21,539 and $32 for the three months ended October 31, 2008 and 2007,
respectively. They are broken down as follows:





Three
      Months
            
            
            Three
      MonthsEnded
            
            
            EndedOctober
      31,
            
            
            October
      31,2008
            
            
            2007Cost of
      sales
            
            $
            810
            
            
            $
            -Operating
      expenses
            
            
            20,729
            
            
            
            32Total
            
            $
            21,539
            
            
            $
            32







F-10





10.
            INTANGIBLE
      ASSETS





Intangible assets
consist of the following:





October
      31,
            
            
            July
      31,2008
            
            
            2008Land User
      Rights
            
            $
            12,319,559
            
            
            $
            12,319,806Less:
      Accumulated amortization
            
            
            (229,988
            )
            
            
            (153,021
            )Intangible
      assets, net
            
            $
            12,089,571
            
            
            $
            12,166,785





The amortization
was $77,000 and $0 for the three months ended October 31, 2008 and 2007,
respectively.





11.
            SHORT
      TERM LOAN





Short term loans
were made by individuals to cover the Company’s temporary cash shortages. The
short term loans are unsecured and have no fixed terms of repayment. The average
interest rate is 15%~20%. Interest expenses for short term loans are $14,329 and
$0 for the three months ended October 31, 2008 and 2007,
respectively.





12.
            DUE
      TO RELATED PARTIES





Due to related
parties consist of the following:


October
      31,
            
            
            July
      31,Name and Description of Related
      Parties
            
            2008
            
            
            2008Ren, Jian
      -  Prior CEO
            
            $
            51,542
            
            
            $
            51,859Zhang, Luhui
      - Stockholder
            
            
            4,503
            
            
            
            4,504Man, Ha -China Wind
      Energy Ltd's prior stockholder
            
            
            -
            
            
            
            -Total
            
            $
            56,045
            
            
            $
            56,363





"Due to related
parties" represents loans payable that are unsecured, non-interest bearing and
have no fixed terms of repayment, and are therefore, deemed payable on
demand.




F-11





13.
            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 user rights in Harbin City. The
total contract price is approximately $10,090,000. On July 31, 2008 the cost of
the land user rights to the Company was $598,342. The Company is obligated to
clear the original buildings on the land before transfer of the land user rights
can be completed.





As of October 31,
2008, the Company had received net proceeds of $7,601,450 from this sale. Since
the legal process for title transfer has not been completed, the proceeds were
recorded as other advance receipts.  After the completion of title
transfer by getting government approval, the Company will receive the remaining
balance of the contract price and record the sale of the land user
rights.





14.
            CHINA
      CONTRIBUTION PLAN




Full time employees
of the Company participate in a government-mandated multi-employer defined
contribution plan pursuant to which certain retirement, medical and other
welfare benefits are provided to employees. Chinese labor regulations require
the Company’s subsidiaries to pay to the local labor bureau a monthly
contribution at a stated contribution rate based on the monthly basic
compensation of qualified employees. The relevant local labor bureau is
responsible for meeting all retirement benefit obligations; the Company has no
further commitments beyond its monthly contribution.




The Company made
the provisions based on the number of qualified employees and the rate and base
regulated by the government. However, the Company did not make full monthly
contribution to these funds.  In the event that any current or former
employee files a complaint with the PRC government, the Company may be subject
to administrative fines. As the Company believes that these fines would not be
material, no accrual for such fines has been made in this regard.





15.
            STATUTORY
      RESERVES





Pursuant to the
laws applicable to the PRC, PRC entities must make appropriations from after-tax
profit to the non-distributable “statutory surplus reserve fund”. Subject to
certain cumulative limits, the “statutory surplus reserve fund” requires annual
appropriations of 10% of after-tax profit until the aggregated appropriations
reach 50% of the registered capital (as determined under accounting principles
generally accepted in the PRC ("PRC GAAP") at each year-end). For foreign
invested enterprises and joint ventures in the PRC, annual appropriations should
be made to the “reserve fund”. For foreign invested enterprises, the annual
appropriation for the “reserve fund” cannot be less than 10% of after-tax
profits until the aggregated appropriations reach 50% of the registered capital
(as determined under PRC GAAP at each year-end). The Company did not make any
appropriations to the reserve funds mentioned above due to lack of profit after
tax since commencement of operations.







16.
            INCOME
      TAX





The Company is
subject to taxes in the United States at 34% and certain subsidiaries are
subject to taxes in the People’s Republic of China at 25%.





For the three
months ended October 31, 2008 and 2007, the Company has recorded $0 income tax
expense and the Company has no United States corporate income tax liability as
of October 31, 2008.







17.
            SEGMENT
      INFORMATION




The Company operates
in one industry segment – research, development, manufacturing, marketing and
sales of harvesters and blades for wind turbines.  Substantially all
of the Company’s identifiable assets and operations for all periods presented
were located in the PRC.




F-12






18.
            CONTINGENCIES,
      RISKS AND UNCERTAINTIES





Litigation





Harbin SQ was named
as a defendant in a lawsuit in which the plaintiffs alleged illegal transfer and
misleading promotion of Harbin SQ’s shares to the public through security
brokers. The plaintiffs, 51current stockholders representing 1,018,000
outstanding shares, acquired the Harbin SQ’s shares through security brokers
from Harbin SQ’s initial stockholders and were seeking 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 the judgment of the Court of Bin
County, Heilongjiang Province. The plaintiffs have the option to appeal the
decision.





Country
Risk





The Company has
significant investments in the PRC. The operating results of the Company may be
adversely affected by changes in the political and social conditions in the PRC
and by changes in Chinese government policies with respect to laws and
regulations, anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things. The Company can
give no assurance that those changes in political and other conditions will not
result in have a material adverse effect upon the Company’s business and
financial condition.





Source of
Supply





The Company
purchases components for its products from a number of
suppliers.  However, on occasion, a customer’s specifications may
require us to purchase components from a specific supplier.  The
Company does not have any long term contracts with any of its suppliers, and the
Company believes that alternative suppliers are available.  Although
the Company has not been subject to shortages for any of its components, since
it does not have long-term contracts, the Company may be subject to cutbacks and
price increases which it may not be able to pass on to its customers in the
event that the demand for components generally exceeds the capacity of its
suppliers.




Loan to
Officer




Prior to the
acquisition by the Company, Harbin SQ forwarded a loan to Shouquan Sun, the
Company’s President and CEO.  This loan was not fully repaid at the
time of acquisition and $911,683 was outstanding as of October 31,
2008.  Section 402 of the Sarbanese-Oxley Act of 2002 prohibits loans
or the extension of credit to officers and directors of a publicly traded
company or any of its subsidiaries.  The Company is currently in
contravention of these provisions and faces possible regulatory action by the
SEC.




The Company’s
management believes that the following will mitigate against potential action by
the SEC:




·
            The loan was
      provided to Mr. Sun by Harbin SQ prior to its acquisition by the
      Company;




·
            no monies
      have been forwarded to Mr. Sun since he became an officer and director of
      the Company;




·
            from April
      30, 2008 to October 31, 2008 a total of $1,001,574 of the outstanding
      balance of the loan has been repaid by the Company’s President;
      and




·
            the Company and its President
      have agreed that the entire outstanding balance of the loan will be repaid
      as soon as possible and no later than December 31,
      2008.







F-13




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






Overview




We
were incorporated in Nevada on May 8, 2006.  Prior to November 20,
2007 we were a shell company with only nominal assets and
operations.  On November 20, 2007 we completed a reverse merger
transaction with China Wind Energy Ltd., a Hong Kong company (“China Wind HK”).
The closing of this reverse merger transaction resulted in:





a)
            the
      acquisition of China Wind HK and its wholly owned subsidiary XingYe Wind
      Energy Technology Limited (“XingYe”), with both becoming our wholly
      owned subsidiaries;




b)
            Jian Ren
      becoming the holder of 81% of our issued and outstanding common
      stock;




c)
            the
      appointment of Jian Ren as our President, Chief Executive Officer, Chief
      Financial Officer, Principal Accounting Officer, Secretary, Treasurer and
      sole director, to replace our former sole officer and director;
      and




d)
            the changing
      our fiscal year end from October 31 to July 31 in order to adjust to the
      fiscal year end of our subsidiary, China Wind
  HK.




On
December 5, 2007 we filed a certificate of change to effect a 5 for 1 forward
split of our common stock. This forward split increased the number of issued and
outstanding shares of our common stock and the number of authorized shares of
our common stock on a basis of five new shares for every one existing share, and
resulted in an increase in the number of issued and outstanding shares of our
common stock from 7,377,450 to 36,887,250, and an increase in the number of
authorized shares of our common stock from 80,000,000 to
400,000,000.




On
May 16, 2008 we entered into a share exchange agreement with Power Profit
Technology Development Limited, a Hong Kong company (“Power Profit”), and Wan Yi
Tse, the holder of 100% of the issued and outstanding share capital of Power
Profit.  The closing of this share exchange agreement on May 26, 2008
resulted in:





a)
            the
      acquisition of 100% of the equity interest in Power
  Profit;




b)
            the
      acquisition of 82.14% of the equity interest in Power Profit’s majority
      owned subsidiary, Harbin SQ Wind Power Ltd. (formerly Harbin Sanye Wind
      Energy Technology Co., Ltd.) (“Harbin
SQ”);




c)
            Wan Yi Tse’s
      designees becoming the holders of 29% of our issued and outstanding common
      stock;




d)
            Power Profit
      becoming our wholly owned subsidiary and Harbin SQ becoming our
      majority-owned subsidiary;




e)
            the
      termination of an agreement for the provision of management services by
      XingYe, our wholly owned subsidiary, to Harbin SQ, our majority owned
      subsidiary; and




f)
            the
      appointment of Shouquan Sun as our President, Chief Executive Officer,
      Chief Financial Officer, Principal Accounting Officer, Secretary,
      Treasurer and sole director to replace Jian
Ren.





Harbin SQ, our
majority-owned subsidiary, focuses primarily on the production of turbine blades
and combine harvesters.  It produces our primary product, which is a
blade for wind turbine generators that permits variable pitch and speed
control.  This blade product differs from other blades of the 600KW
and 750KW type produced in China, as it allows variable speed and pitch
adjustments to occur to achieve higher efficiency.  We currently have
5 individual patents on our wind turbine blades.




4





Forward-Looking
Statements





This report
contains forward-looking statements that involve risks and uncertainties. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology including,
"could" "may", "will", "should", "expect", "plan", "anticipate", "believe",
"estimate", "predict", "potential" and the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially.





While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested in this Quarterly Report.





Liquidity and Capital
Resources





As
of October 31, 2008 we had cash of $368,492, total current assets of $1,749,610,
total current liabilities of $9,308,873 and a working capital deficit of
$7,559,263.  From our inception on November 27, 2006 to October 31,
2008 we accumulated a deficit of $1,020,330.  We are dependent on
funds raised through equity or debt financing, investing activities, and revenue
generated through the sales of our products to fund our
operations.  We anticipate that we will incur substantial losses over
the next year and our ability to generate any revenues in the next 12 months
continues to be uncertain.





As
of October 31, 2008 we had total assets of $31,162,508 and total liabilities of
$9,308,873.  Our total assets were primarily made up of land usage
rights, goodwill, property and equipment.


On
November 6, 2007 we entered into a contract with Heilongjiang Nongken Taixin
Real Estate Development Ltd., Co. (“Heilongjiang”) to sell our land usage rights
in Harbin City, China.  The total price of the contract is
approximately $10,090,000.  As of October 31, 2008 we had received
$7,601,450in
advance payments from Heilongjiang for this sale.  These advance
payments are listed as a liability on our balance sheets since we have only
received partial payment for the transfer of the land usage rights to
Heilongjiang, and we have not yet completed the transfer.  Because we
have not yet completed the transfer, the land usage rights are listed as an
intangible asset on our balance sheets.  Once we receive full payment
from Heilongjiang for the sale of these land usage rights, we will complete the
transfer to Heilongjiang and no longer account for these rights as an
asset.





We
used net cash of $212,927 in operating activities for the quarter ended October
31, 2008, compared to $35,074 during the same period in 2007 and $637,234 from
our inception on November 27, 2006 to October 31, 2008.  The large
increase in operating expenses for the period ended October 31, 2008 resulted
from an increase in our operations and the acquisition of Harbin SQ, our
majority owned subsidiary.





We
used net cash of $173,737 in investing activities for the quarter ended October
31, 2008, compared to $1,077 during the same period in 2007, and $63,099 from
our inception on November 27, 2006 to October 31, 2008.  The cash used
in investing activities during the period ended October 31, 2008 was used to
purchase property and equipment for our manufacturing facility.





We
received net cash of $675,325 from financing activities for the quarter ended
October 31, 2008, compared to $80,000 during the same period in 2007 and
$870,030 from our inception on November 27, 2006 to October 31,
2008.  The cash received from financing activities during the period
ended October 31, 2008 resulted from the proceeds of short term
loans.  During the period ended October 31, 2008 our cash position
increased by $288,144.





As
of October 31, 2008 Shouquan Sun, our President, Chief Executive Officer, Chief
Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole
director, owed us $911,683.  This loan was provided to Mr. Sun by
Harbin SQ prior to our acquisition of Harbin SQ.  No funds have been
forwarded to Mr. Sun since our acquisition of Harbin SQ.  From April
30, 2008 to October 31, 2008, Mr. Sun repaid a total of $1,001,574 on the
loan.  We have received $305,593 of that repayment since our
acquisition of Harbin SQ. Mr. Sun has promised to repay the outstanding balance
as soon as possible and, in any event, no later than December 31,
2008.





Our monthly cash
requirement for the period ended October 31, 2008 was $70,976.  Given
our present cash position, we have sufficient cash on hand to fund our
operations for approximately the next 5 months.






5





We
expect that our total expenses will increase over the next year as we increase
our business operations through Harbin SQ, our majority owned
subsidiary.  We have not been able to reach the break-even point since
our inception and have had to rely on outside capital resources.  Over
the next 12 months, we plan to begin manufacturing, marketing and selling our
wind turbine blades.  However, we do not anticipate that we will
generate sufficient revenues to fund our proposed operations.


We
expect to require approximately $1,355,000 in financing over the next 12 months
(beginning January 2009), as follows:





Description
            Estimated
      expenses
              ($)Research and
      development of new technologies
            450,000Marketing
            300,000Salaries
            250,000Equipment
      maintenance
            50,000Development
      of distribution chain
            75,000Utilities
            30,000Professional
      fees
            120,000General and
      administrative expenses
            80,000Total
            1,355,000





At
present, our cash requirements for the next 12 months outweigh the funds
available to maintain or develop our operations.  Of the $1,355,000
that we require for the next 12 months, we had $368,492 in cash as of October
31, 2008.  In order to improve our liquidity, we intend to pursue
additional equity financing from private investors or possibly a registered
public offering.  We do not currently have any arrangements in place
to complete any private placement financings and there is no assurance that we
will be successful in completing any private placement financings.  If
we are unable to achieve the necessary additional financing, then we plan to
reduce the amounts that we spend on our research and development activities, as
well as our general and administrative expenses, so that we do not
exceed the capital resources available to us.





Results of
Operations





Revenues





From our inception
on November 27, 2006 to October 31, 2008 we generated gross revenues of $148,383
from the sale of combine harvesters manufactured by us.  The cost of
selling these combine harvesters was $204,873, which resulted in
a  negative gross profit of $56,490.  We did not generate
any revenues during the period ended October 31, 2008 or the same period in
2007.


Expenses
 
 We
incurred total operating expenses of $714,226 for the quarter ended October 31,
2008, compared to $24,824 for the same period in 2007 and $1,059,731 from our
inception on November 27, 2006 to October 31, 2008.  The large
increase in operating expenses for the period ended October 31, 2008 resulted
from an increase in our operations and the acquisition of Harbin SQ, our
majority owned subsidiary.
 
 We
incurred $22,835 in selling expenses, $259,813 in research and development
expenses and $111,194 in provision on allowance of obsolescence of our property
and equipment for the quarter ended October 31, 2008.  We did not
incur any of these expenses during the same period in 2007.  From our
inception on November 27, 2006 to October 31, 2008 we incurred $26,620 in
selling expenses, $259,813 in research and development expenses and $6,928 in
provision on allowance of obsolescence of our property and
equipment.  Our general and administrative expenses increased from
$24,824 during the period ended October 31, 2007 to $320,384 during the period
ended October 31, 2008.
 
 Our general and
administrative expenses consist of bank charges, travel, meals and
entertainment, foreign exchange, office rent and maintenance, salaries,
communication (cellular, internet, fax, and telephone), courier and postage
costs, and office supplies as well as legal, accounting and auditing
fees.
 
 Net
Loss
 
 From our inception
on November 27, 2006 to October 31, 2008 we incurred net a loss of
$1,020,329.  For the quarter ended October 31, 2008 we incurred a net
loss of $618,705, compared to a net loss of $24,824 for the same period in
2007.
 
 Research
and Development
 
 For the quarter
ended October 31, 2008 we incurred $259,813 in research and development
expenses.  These are the only research and development expenses we
have incurred since our inception on November 27, 2006.




6





Inflation





The amounts
presented in the financial statements do not provide for the effect of inflation
on our operations or financial position. The net operating losses shown would be
greater than reported if the effects of inflation were reflected either by
charging operations with amounts that represent replacement costs or by using
other inflation adjustments.





Off-Balance Sheet
Arrangements





As
of October 31, 2008 we had no off balance sheet transactions that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.





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 note 3 of the notes to our financial
statements. 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.





Impairment of Long-Lived
Assets





We
account for impairment of plant and equipment and amortizable intangible assets
in accordance with Statement of Financial Accounts Standards (“SFAS”) No. 144,
“Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which
requires us to evaluate a long-lived asset for recoverability when there is
event or circumstance that indicates the carrying value of the asset may not be
recoverable.  An impairment loss is recognized when the carrying
amount of a long-lived asset or asset group is not recoverable (when the
carrying amount exceeds the gross, undiscounted cash flows from use and
disposition) and is measured as the excess of the carrying amount over the
asset’s (or asset group’s) fair value.





Goodwill





Goodwill represents
costs in excess of fair values assigned to the underlying net assets of acquired
businesses.  We recorded significant goodwill upon the acquisition of
Harbin SQ, our majority owned subsidiary.  Goodwill deemed to have an
indefinite life is not amortized, but is tested for impairment annually and at
any time when events suggest impairment may have occurred.  To assess
goodwill for impairment, we determine the fair value of our reporting units,
which are primarily determined using our management’s assumptions about future
cash flows based on long-range strategic plans.  This approach
incorporates many assumptions including future growth rates, discount factors
and tax rates.  In the event that the carrying value of a reporting
unit exceeded its fair value, an impairment loss would be recognized to the
extent the carrying amount of the reporting unit’s goodwill exceeded its implied
fair value.  No goodwill impairment was recorded for the period ended
October 31, 2008 and for the period from our inception on November 27, 2006 to
October 31, 2008.





Foreign currency
translation





Our reporting
currency is the U.S. dollar.  Our functional currency is the local
currency, the Chinese Renminbi (“RMB”).  Our financial statements are
translated into U.S. dollars in accordance with SFAS No. 52, “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 RMB financial
statements into U.S. dollars are included in determining comprehensive
income.




7




ITEM
3. QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.





ITEM
4. CONTROLS AND PROCEDURES





Evaluation of Disclosure
Controls and Procedures





We
maintain disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) designed to provide reasonable assurance the information required to be
reported in our Exchange Act filings is recorded, processed, summarized and
reported within the time periods specified and pursuant to Securities and
Exchange Commission rules and forms, including controls and procedures designed
to ensure that this 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.





As
of the end of the period covered by this report, our management, with the
participation of our Chief Executive Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of our disclosure controls and
procedures. Based upon this evaluation, our Chief Executive Officer and our
Chief Financial Officer concluded our disclosure controls and procedures were
(1) designed to ensure material information relating to our Company is
accumulated and communicated to our management, including our Principal
Executive Officer and Principal Financial Officer, in a timely manner,
particularly during the period in which this report was being prepared and
(2) effective, in that they provide reasonable assurance that information
we are required to disclose in the reports filed or submitted 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.




Changes in Internal
Controls





During the quarter
ended October 31, 2008 there were no changes in our internal control over
financial reporting that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.









8


PARTII – OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





Our majority owned
subsidiary, Harbin SQ, was named as a defendant in a lawsuit in which the
plaintiffsalleged
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 dismissed in a judgment of
the Court of Bin County, Heilongjiang Province.  The plaintiffs have
the option to appeal the decision, but have not done so as of December 15,
2008.


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





ITEM
1A. RISK FACTORS





Not
applicable.





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





None.





ITEM
3.  DEFAULTS UPON SENIOR SECURITIES





None.





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





None.





ITEM
5.  OTHER INFORMATION





None.





ITEM
6.  EXHIBITS





Exhibit
              Number
            Exhibit
              Description31.1
            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
    200232.1
            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




9




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 SunDate:
      December 15, 2008
            Shouquan
      SunPresident,
      Chief Executive Officer, Chief
      Financial Officer, Principal Accounting Officer,
      Secretary, Treasurer, Director