8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934 

Date of report (Date of earliest event reported): November 13, 2007

CHINA WIND SYSTEMS, INC.

(Exact name of registrant as specified in Charter)

Delaware	33-16335	74-2235008
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(IRS Employee Identification No.)

No. 9 Yanyu Middle Road

Qianzhou Village, Huishan District, Wuxi City

Jiangsu Province, People’s Republic of China

(Address of Principal Executive Offices)

(86) 51083397559

(Registrant’s Telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Forward Looking Statements

This Form 8-K/A and other reports filed by us from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, our management as well as estimates and assumptions made by our management. When used in the filings the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the negative of these terms and similar expressions as they relate to us or our management identify forward looking statements. Such statements reflect the current view of our management with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this report entitled “Risk Factors”) as they relate to our industry, our operations and results of operations, and any businesses that we may acquire. Should one or more of the events described in these risk factors materialize, or should our underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the U.S. federal securities laws, we do not intend to update any of the forward-looking statements to conform them to actual results. The following discussion should be read in conjunction with our pro forma financial statements and the related notes that will be filed herein.

Introductory Note

This Form 8-K/A is filed to amend and restate our current report on Form 8-K filed with the Securities and Exchange Commission on November 13, 2007. The principal changes reported in this amended and restated Form 8-K include:

· An amended and restated Securities Purchase Agreement dated January 31, 2008 by and among the registrant and investors;

· Disclosure of changes to the form of warrants issuable upon conversion of the notes that were issued pursuant to the Securities Purchase Agreement;

· Revised description of our business operations;

· Inclusion of our financial statements for the three and nine month period ended September 30, 2007 and the related management’s discussion and analysis; and

· Updated supplementary financial information.

Item 1.01 Entry into a Material Definitive Agreement.

As more fully described in Item 2.01 below, on November 13, 2007, China Wind Systems, Inc. (formerly named “Malex Inc.”) (the “Registrant”) executed a Share Exchange Agreement (“Exchange Agreement”) by and among Fulland Limited, a Cayman Islands limited liability company (“Fulland”), and the stockholders of 100% of Fulland’s common stock (the “Fulland Shareholders”), on the one hand, and the Registrant and the holder of a majority of the Registrant’s issued and outstanding common stock (“Majority Stockholder”), on the other hand. A copy of the Exchange Agreement was included as Exhibit 2.1 to the current report on Form 8-K filed on November 13, 2007.

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Fulland owns 100% of Green Power Environment Technology (Shanghai) Co., Ltd. (“Green Power”), which is a wholly foreign-owned enterprise (“WFOE”) under the laws of the Peoples’ Republic of China (“PRC” or “China”). Green Power has entered into a series of contractual arrangements with Wuxi Huayang Dye Machine Co., Ltd. (“Huayang Dye Machine”) and Wuxi Huayang Electrical Power Equipment Co., Ltd. (“Huayang Electrical Power Equipment”, and together with Huayang Dye Machines, sometimes collectively referred to as the “Huayang Companies”), both of which are limited liability companies headquartered in, and organized under the laws of, the PRC. The contractual arrangements are discussed below in Item 2.01 under the section titled “Description of Business.” Throughout this Form 8-K, Fulland, Green Power and the Huayang Companies are sometimes collectively referred to as the “Huayang Group.”

At the closing of the transaction under the Exchange Agreement (the “Closing”), which occurred on November 13, 2007 (the “Closing Date”), the Registrant issued 36,577,704 shares of the Registrant’s common stock (the “Reporting Company Shares”) to the Fulland Shareholders in exchange for 100% of the common stock of Fulland (the “Share Exchange Transaction”). Concurrently, Synergy Business Consulting, LLC, a Delaware limited liability company and the Majority Stockholder, cancelled 8,006,490 shares of our common stock held by them. Immediately after the Closing, we had a total of 36,987,214 shares of common stock outstanding, with the Fulland Shareholders (and their assignees) owning approximately 99% of our outstanding common stock, and the balance held by those who held our common stock prior to the Closing. Concurrent with the Closing, we sold our 3% convertible subordinated notes in the aggregate principal amount of $5,525,000 (the “Financing”). The description of other material terms and conditions of the Exchange Agreement and the Financing are set forth below under Item 2.01 and such description is incorporated herein by reference.

Item 2.01 Acquisition or Disposition of Assets

On the Closing Date, we consummated the Share Exchange Transaction, referenced in Item 1.01 of this Form 8-K. As a result, we acquired 100% of the capital stock of Fulland and consequently, control of the business and operations of the Huayang Group. Prior to the Share Exchange Transaction, we were a public reporting blind pool company in the development stage. From and after the Closing Date of the Exchange Agreement, our primary operations consist of the business and operations of the Huayang Group, which are conducted by both of the Huayang Companies in China. Accordingly, we are disclosing information about the Huayang Group’s business, financial condition, and management in this Form 8-K.

The parties’ completion of the transactions contemplated under the Exchange Agreement was subject to the satisfaction of certain contingencies, including the sale of $5,525,000 in the aggregate of our 3% convertible subordinated notes to certain accredited investors in the Financing.

Our board of directors (the “Board”) and the Majority Stockholder, as well as the directors and the shareholders of Fulland, have each approved the Exchange Agreement and the Financing, including the transactions contemplated thereunder. Following the Closing Date, Fulland became our wholly owned subsidiary.

Except for the Exchange Agreement and the transactions contemplated under that agreement, neither the Registrant nor its officers and directors serving prior to the consummation of the Share Exchange Transaction, had any material relationship with Fulland or any of the Fulland Shareholders.

Throughout this report, when we use phrases such as “we,” “our,” “company,” “us,” we are referring to the Registrant, Fulland, Green Power, Huayang Dye Machine and Huayang Electrical Power Equipment as a combined entity.

FINANCING

On November 13, 2007, we sold our 3% convertible subordinated notes in the principal amount of $5,525,000 (the "Notes") to three accredited investors (“the Investors”) including Barron Partners LP, a Delaware limited partnership (“Barron”). The Notes were sold pursuant to a securities purchase agreement (the “Purchase Agreement”) dated and executed by the parties on November 13, 2007. The terms of the Purchase Agreement are set forth in Exhibit 10.3 of the Form 8-K filed with the SEC on November 13, 2007.

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On January 31, 2008, we entered into an amended and restated securities purchase agreement (“Restated Purchase Agreement”), which amends and restates the Purchase Agreement. A copy of the Restated Purchase Agreement is included as Exhibit 99.2 to this current report on Form 8-K. Below is a description of these amendments.

Restated Securities Purchase Agreement

By entering into the Restated Purchase Agreement, the parties made the following material modifications to the Purchase Agreement:

· Liquidated damages for failure to list on NASDAQ, AMEX, or the NYSE if we meet the listing requirements of any of these exchanges, will be payable in our Series A Convertible Preferred Stock (“Series A Preferred Stock”) or cash at the election of the Investors rather than at our election;

· Clarification was made with respect to deliveries under the Purchase Agreement, specifically, that we are obligated to deliver the Make-Good Note to the escrow agent, and deliver a total of 24,787,135 shares of our Series A Preferred Stock into escrow promptly after filing of our certificate of designation defining the rights, preferences and privileges of the holders of Series A Preferred Stock and the conversion of the Make-Good Note (10,000,000 shares of which are held to back up our representation that we have no tax liabilities, and the remaining 14,787,135 shares of which are make-good shares held in escrow pending our 2007 and 2008 financial results).

In addition to the foregoing, the definition of “Exempt Issuance” was amended to include securities underlying options and warrants issued pursuant to a plan adopted by a majority of independent directors of the board.

Warrants

The parties to the Purchase Agreement also agreed to revise the terms of the Series A (the $0.58 warrants), Series B (the $0.83 warrants) and Series C warrants (the $0.92 warrants) issuable under the Purchase Agreement. The warrants have a term of five years, and expire on November 13, 2012. The warrants provide a cashless exercise feature; however, the holders of the warrants may not make a cashless exercise during the twelve months commencing on November 13, 2007 in the case of the $0.58 warrants, and during the eighteen (18) period commencing on November 13, 2007 in the case of the $0.83 warrants and $0.92 warrants, and after these respective periods only if the underlying shares are not covered by an effective registration statement.

The revised warrants provide that (a) the exercise price of the warrants may be reduced by up to 90% and (b) up to an additional 14,787,135 shares of Series A Preferred Stock is deliverable to the investors, if the Company’s per share pre-tax income per share of common stock, on a fully-diluted basis, is less than $0.08316 per share in fiscal 2007 and $0.13131 per share in fiscal 2008. We note that the warrant exercise price adjustment and delivery of escrow shares could potentially occur on two occasions: once in the event of a pre-tax income shortfall in 2007, and once in the event of a pre-tax income shortfall in 2008.

Pre tax-income is defined as income before income taxes determined in accordance with United States generally accepted accounting principles (“GAAP”) plus (a) any charges which are reflected under GAAP in our financial statements which relate to the transaction contemplated by the purchase agreement, the registration rights agreement and the other notes and agreements relating to the financing, minus (b) the amount, if any, by which all non-recurring losses or expenses exceed all non-recurring items or income or gain. Pre-tax income shall not be adjusted if all non-recurring items of income or gain exceed all non-recurring losses or expenses. Items shall be deemed to be non-recurring only if they qualify as non-recurring pursuant to GAAP. For determining pre-tax income per share, all shares which are outstanding or which may be issuable upon exercise or conversion of options, warrants and other convertible securities are deemed to be outstanding, regardless of whether the shares would be counted for purposes of computing diluted earnings per shares under GAAP. An adjustment in the warrant exercise price does not affect the number of shares issuable upon exercise of the warrants.

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As a result of the Restated Purchase Agreement, the exercise price of the warrants may be reduced up to 90% instead of 50% as provided in the original November 13 Purchase Agreement. Accordingly, the following is an updated table that sets forth the exercise price of the warrants if our pre-tax income is 20% below the threshold for each of 2007 and 2008 (a “20% shortfall”), 50% below the threshold for both years (a “50% shortfall”), and 90% or more below the threshold for both years (a “90% shortfall”), assuming in each case there are no other events that affect the exercise price:

		$0.58 warrant		$0.83 warrant		$0.92 warrant
Unadjusted	$	0.580	$	0.830	$	0.920
20% shortfall	$	0.371	$	0.531	$	0.589
50% shortfall	$	0.145	$	0.208	$	0.230
90% shortfall	$	0.006		0.008		0.009

The above table illustrates the hypothetical total adjustment to the warrant exercise price that would occur, assuming the same percentage shortfall were to occur in both years (2007 and 2008); however, any actual adjustment in the exercise price will depend upon the pre-tax income per share for each year.

Also as a result of the Restated Purchase Agreement, (i) in the event that any of the warrants are exercised without cash (provided certain conditions are met), the warrants holders may elect to receive Series A Preferred Stock in lieu of common stock, and (ii) the anti-dilution feature in the warrants was revised from a weighted-average formula to a full ratchet (i.e., in the event we issue our common stock or securities convertible into common stock at an average price per share below the exercise price of any of the warrants in a dilutive issuance, the exercise price of the warrant will be reduced to match the lower price per share of the dilutive issuance). Prior to the Restated Purchase Agreement, adjustment to the exercise price of the warrants was to be made in accordance with a weighted average formula (taking into account effect of the dilutive issuance on all of our outstanding securities as a whole). As a result of the Restated Purchase Agreement, anti-dilution adjustments to the exercise price of the warrants could potentially be larger, resulting in a lower exercise price, in the event of a dilutive issuance.

In sum, the Restated Purchase Agreement resulted in the following revisions to the terms of the warrants:

· The maximum adjustment to the exercise price, in the event of an earnings shortfall was changed, from up to a 50% reduction in the exercise price, to up to a 90% reduction in the exercise price;

· Warrant holders may elect to received Series A Preferred Stock instead of common stock if they exercise pursuant to the warrants’ cashless exercise provisions; and

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· The weighted-average anti-dilution provision in the warrants was changed to a “full-ratchet” anti-dilution provision.

Description of Other Terms of the Financing Under the Restated Purchase Agreement

Under the Restated Purchase Agreement, the Notes are convertible into either:

(a) an aggregate of (i) 14,787,135 shares of our Series A Preferred Stock, par value $.001 per share, with each share of Series A Preferred Stock being initially convertible into one (1) share of the Company’s common stock, par value $.001 per share (“Common Stock”), subject to adjustment, and (ii) common stock purchase warrants to purchase 11,176,504 shares of Common Stock at $0.58 per share, 5,588,252 shares of Common Stock at $0.83 per share, and 2,065,000 shares of Common Stock at $0.92 per share; or

(b) an aggregate of (i) 14,787,135 shares of the Common Stock, subject to adjustment, and (ii) warrants to purchase 11,176,504 shares of Common Stock at $0.58 per share, 5,588,252 shares of Common Stock at $0.83 per share, and 2,065,000 shares of common stock at $0.92 per share; or

    (c) if the Company does not file a restated certificate of incorporation and certificate of designation in order to define the rights, preferences and privileges of the Series A Preferred Stock, 33,616,891 shares of Common Stock.

Common stock will only be issued to the extent that the Notes are converted prior to their automatic conversion to preferred stock and warrants.

The Notes provide for interest at 3% per annum. However, upon the conversion of the Notes, we will issue the stock and warrants based on the principal amount of the Notes, and upon conversion, no interest will be due and payable. Payment of the Notes is subordinated to payment of senior indebtedness, which is defined as indebtedness and obligations to banks, insurance companies and other institutional lenders.

If the percentage shortfall for 2007 is equal to or greater than fifty percent (50%), then we will be obligated to deliver 14,787,135 shares of Series A Preferred Stock held in escrow to the Investors in the ratio of their initial purchase of the Notes.

If the percentage shortfall for 2007 is less than fifty percent (50%), then an adjustment percentage for 2007 shall be determined. The adjustment percentage shall mean the percentage that the percentage shortfall bears to fifty percent (50%). The Company shall deliver to the Investors in the ratio of their initial purchase of the Notes such number of shares of Series A Preferred Stock (held in escrow) as is determined by multiplying the adjustment percentage by 14,787,135 shares, and retain the balance. For example, if the percentage shortfall is 20%, the adjustment percentage would be 40%, and 40% of the 14,787,135 shares of Series A Preferred Stock, or 5,914,854 shares, would be delivered to the Investors, with the balance retained by the escrow agent.

If the percentage shortfall for 2008 is equal to or greater than fifty percent (50%), then we will be obligated to deliver all of the shares of Series A Preferred Stock then held in escrow to the Investors in the ratio of their initial purchase of the Notes.

If the percentage shortfall for 2008 is less than fifty percent (50%), then an adjustment percentage for 2008 shall be determined. The adjustment percentage shall mean the percentage that the percentage shortfall bears to fifty percent (50%). The maximum number of shares to be delivered shall be determined by multiplying the adjustment percentage by 14,787,135 shares. The number of shares to be delivered to the Investors shall be the lesser of the number of shares of Series A Preferred Stock then held in escrow or the number of shares determined by the preceding sentence. We agreed to deliver to the Investors the number of shares of Series A Preferred Stock as determined above in the ratio of their initial purchase of the Notes.

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We also have the right to redeem the warrants for $0.01 per share if the trading price of our common stock is not below the greater of (a) $1.16 or 200% of the exercise price for the $0.69 warrants, or (b) $1.66 or 200% of the exercise price for the $.80 warrants, or (c) $1.84 or 200% of the exercise price, on each trading day for the 20 trading days ending on the date prior to the date on which the warrants are called for redemption provided that the trading volume on each day in the computation period is at least 1,000 shares.

In order for us to exercise the right to redeem the warrants, a registration statement covering the sale of the common shares underlying the warrants must be current and effective. In the event that, at any time subsequent to the date on which the warrants are called for redemption, the shares of common stock underlying the warrants are not subject to a current and effective registration statement, our right to redeem the warrants shall terminate with respect to all warrants that have not been exercised or converted prior to that date.

The Notes, the certificate of designation and the warrants provide that these securities may not be exercised or converted if such conversion or exercise would result in the holder and its affiliates having beneficial ownership of more than 4.9% of our outstanding common stock. Beneficial ownership is determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder. This limitation may not be waived.

The shares of common stock issuable upon conversion of the Notes or the Series A Preferred Stock and upon exercise of the warrants are to be registered in accordance with the registration rights agreement executed in connection with the Purchase Agreement. The registration rights agreement provides that we will cause a registration statement to be filed within 60 days of the closing, and that such registration statement must be declared effective within 150 days after the initial filing of the registration statement. If we fail to file the registration statement or cause it to become effective within these deadlines (or fail to maintain effectiveness), we will owe liquidated damages to the note investors in the amount of 4,860 shares of our Series A Preferred Stock per day (approximately 1% of the investment amount per month), up to an aggregate maximum of 1,770,000 shares of Series A Preferred Stock (approximately 12% of the investment amount). We are not required to pay any liquidated damages in the event that the failure of the registration statement to be declared effective on the applicable due date is because of (a) the failure of any investor to provide information relating to the investor and its proposed method of sale or any other information concerning the investor that is required to be included in the registration statement or (b) any delays resulting from questions raised by the SEC or any other regulatory agency, market or exchange concerning any investor or the affiliates of any investor. We are also not required to pay liquidated damages with respect to any portion of registrable securities which was not registered because of a reduction in shares registered in response to SEC comments. Our obligation to register an investor’s shares ceases when the investor holds less than 10% of such Investor's originally registrable securities.

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Series A Preferred Stock

Under the terms of the Financing, we agreed to file a certificate of amendment and certificate of designation with the Delaware Secretary of State which will among other things, designate and set forth the rights, preferences and privileges of our Series A Preferred Stock. Upon such filing, we will have 60 million shares of Series A Preferred Stock authorized, with a par value of $0.001 per share. No dividends may be declared of paid to the holders of our common stock while the Series A Preferred Stock is outstanding. The holders of Series A Preferred Stock would be entitled to vote alongside the holder of common stock, on an as-converted basis. The holders of Series A Preferred Stock will have a liquidation preference of $0.374 per share, upon any liquidation, dissolution or winding up of the Registrant. Each share of Series A Preferred Stock will be convertible  into shares of common stock at an initial conversion price of $0.374 per share (the conversion ratio is determined by taking $0.374 by the conversion price, initially one-to-one), which conversion price will be adjusted downward in the event that we issue shares of our common stock (or common stock equivalents) at an price per share below $0.374 (i.e. a “dilutive issuance”). In the event of a dilutive issuance, the conversion price of the Series A Preferred Stock will be reduced to equal the price per share in the dilutive issuance. Our Series A Preferred Stock will automatically convert to common stock at the applicable conversion ratio if there is a consolidation or merger in which we are not the surviving corporation, or a sale of our assets to a company where our stockholders are no longer the controlling stockholders of the entity acquiring the assets.

DESCRIPTION OF BUSINESS

China Wind Systems, Inc. (formerly Malex Inc.)

We were originally incorporated on June 24, 1987 in the State of Delaware. Prior to the Closing of the Exchange Agreement, we were a public reporting blind pool company with nominal assets. In an effort to preserve and enhance stockholder value, we then sought to identify, evaluate and consider various companies and compatible or alternative business opportunities pursuant to which we would acquire a target company with an operating business and continue the acquired company’s business as a publicly-held entity. After evaluation of various alternatives by our Board and management, our Board approved and we entered into the Exchange Agreement with Fulland and the Fulland Shareholders on November 13, 2007. From and after the Closing Date, Fulland became our wholly owned subsidiary. We filed a current report on Form 8-K on November 13, 2007 to report the closing of the transactions under the Exchange Agreement.

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On December 18, 2007, we changed our name from Malex Inc. to “China Wind Systems, Inc.” by means of a short form merger with our wholly owned subsidiary in Delaware formed for this purpose.

Fulland Limited

Fulland is a limited liability company incorporated under the laws of the Cayman Islands on May 9, 2007, which was formed by the owners of the Huayang Companies as a special purpose vehicle for purposes of raising capital, in accordance with requirements of the PRC State Administration of Foreign Exchange (“SAFE”). Specifically, on May 31, 2007, SAFE issued an official notice known as Hi Zhong Fa [2007] No. 106 (“Circular 106”), which requires the owners of any Chinese company to obtain SAFE’s approval before establishing any offshore holding company structure for foreign financing as well as subsequent acquisition matters in China. Accordingly, the owners of the Huayang Companies, Mr. Jianhua Wu and Ms. Lihua Tang, submitted their application to SAFE in early September 2007. On October 11, 2007, SAFE approved their application, permitting these Chinese citizens to establish an offshore company, Fulland, as a special purpose vehicle for any foreign ownership and capital raising activities by the Huayang Group. After SAFE’s approval, Mr. Wu and Ms. Tang became the majority owners of Fulland on October 11, 2007.

At the Closing of the Share Exchange Transaction on November 13, 2007, Fulland became our wholly-owned subsidiary. Fulland, in turn, is the sole owner of Green Power, which has entered into a series of contractual arrangements with the Huayang Companies. Other than all of the issued and outstanding shares of Green Power, Fulland has no other assets or operations.

Green Power Environment Technology (Shanghai) Co., Ltd.

Green Power, a wholly foreign owned enterprise under the laws of the PRC, was established on September 29, 2007. All of the issued and outstanding shares of Green Power are held by Fulland. The principal purpose of Green Power is to manage, hold and own rights in the business of Huayang Dye Machine and Huayang Electrical Power Equipment (collectively sometimes referred to together as the “Huayang Companies”). Other than activities relating to its contractual arrangements with the Huayang Companies, Green Power has no other separate operations of its own.

PRC law currently has limits on foreign ownership of certain companies. To comply with these foreign ownership restrictions, we operate our businesses in China through Huayang Dye Machine and Huayang Electrical Power Equipment, both of which are limited liability companies headquartered in China and organized under the laws of China. Each of the Huayang Companies has the licenses and approvals necessary to operate our businesses in China. We have contractual arrangements with the Huayang Companies and their respective shareholders pursuant to which we provide these companies with technology consulting and other general business operation services. Through these contractual arrangements, we also have the ability to substantially influence these companies’ daily operations and financial affairs, appoint their senior executives and approve all matters requiring shareholder approval. As a result of these contractual arrangements, which enable us to control the Huayang Companies, we are considered the primary beneficiary of the Huayang Companies. Accordingly, we consolidate the results, assets and liabilities of the Huayang Companies in our financial statements.

RELATIONSHIPS WITH THE HUAYANG COMPANIES AND THEIR SHAREHOLDERS

Our relationships with the Huayang Companies and their shareholders are governed by a series of contractual arrangements between Green Power, the Huayang Group’s wholly foreign owned enterprise in the PRC, and each of the Huayang Companies, which are the operating companies of the Huayang Group in the PRC. Under PRC laws, each of Green Power, Huayang Dye Machine and Huayang Electrical Power Equipment is an independent legal person and none of them is exposed to liabilities incurred by the other parties. The contractual arrangements constitute valid and binding obligations of the parties of such agreements. Each of the contractual arrangements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of the PRC. Other than pursuant to the contractual arrangements between Green Power and the Huayang Companies described below, the Huayang Companies cannot transfer any funds generated from their operations. On October 12, 2007, we entered into the following contractual arrangements with the Huayang Companies:

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Consulting Services Agreement. Pursuant to the exclusive consulting services agreements between Green Power and the Huayang Companies, Green Power has the exclusive right to provide to the Huayang Companies general business operation services, including advice and strategic planning, as well as consulting services related to the technological research and development of dye and finishing machines, electrical equipment and related products (the “Services”). Under this agreement, Green Power owns the intellectual property rights developed or discovered through research and development, in the course of providing the Services, or derived from the provision of the Services. The Huayang Companies pay a quarterly consulting service fees in Renminbi (“RMB”) to Green Power that is equal to all of the Huayang Companies’ profits for such quarter.

Operating Agreement. Pursuant to the operating agreement among Green Power, the Huayang Companies and all shareholders of the Huayang Companies (collectively the “Huayang Company Shareholders”), Green Power provides guidance and instructions on the Huayang Companies’ daily operations, financial management and employment issues. The Huayang Company Shareholders must designate the candidates recommended by Green Power as their representatives on the boards of directors of each of the Huayang Companies. Green Power has the right to appoint senior executives of the Huayang Companies. In addition, Green Power agrees to guarantee the Huayang Companies’ performance under any agreements or arrangements relating to the Huayang Companies’ business arrangements with any third party. The Huayang Companies, in return, agrees to pledge their accounts receivable and all of their assets to Green Power. Moreover, the Huayang Companies agrees that without the prior consent of Green Power, the Huayang Companies will not engage in any transactions that could materially affect their respective assets, liabilities, rights or operations, including, without limitation, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of their assets or intellectual property rights in favor of a third party or transfer of any agreements relating to their business operation to any third party. The term of this agreement is ten (10) years from October 12, 2007 and may be extended only upon Green Power’s written confirmation prior to the expiration of the this agreement, with the extended term to be mutually agreed upon by the parties.

Equity Pledge Agreement. Under the equity pledge agreement between the Huayang Company Shareholders and Green Power, the Huayang Company Shareholders pledged all of their equity interests in the Huayang Companies to Green Power to guarantee the Huayang Companies’ performance of their obligations under the consulting services agreement. If the Huayang Companies or the Huayang Company Shareholders breaches their respective contractual obligations, Green Power, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. The Huayang Company Shareholders also agreed that upon occurrence of any event of default, Green Power shall be granted an exclusive, irrevocable power of attorney to take actions in the place and stead of the Huayang Company Shareholders to carry out the security provisions of the equity pledge agreement and take any action and execute any instrument that Green Power may deem necessary or advisable to accomplish the purposes of the equity pledge agreement. The Huayang Company Shareholders agreed not to dispose of the pledged equity interests or take any actions that would prejudice Green Power’s interest. The equity pledge agreement will expire two (2) years after the Huayang Companies’ obligations under the consulting services agreements have been fulfilled.

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Option Agreement.Under the option agreement between the Huayang Company Shareholders and Green Power, the Huayang Company Shareholders irrevocably granted Green Power or its designated person an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in the Huayang Companies for the cost of the initial contributions to the registered capital or the minimum amount of consideration permitted by applicable PRC law. Green Power or its designated person has sole discretion to decide when to exercise the option, whether in part or in full. The term of this agreement is ten (10) years from October 12, 2007 and may be extended prior to its expiration by written agreement of the parties.

Proxy Agreement. Pursuant to the proxy agreement between the Huayang Company Shareholders and Green Power, the Huayang Company Shareholders agreed to irrevocably grant a person to be designated by Green Power with the right to exercise the Huayang Company Shareholders’ voting rights and their other rights, including the attendance at and the voting of the Huayang Company Shareholders’ shares at shareholders’ meetings (or by written consent in lieu of such meetings) in accordance with applicable laws and its Articles of Association, including but not limited to the rights to sell or transfer all or any of their equity interests of the Huayang Companies, and appoint and vote for the directors and Chairman as the authorized representative of the Huayang Company Shareholders. The proxy agreement may be terminated by joint consent of the parties or upon 30-day written notice from Green Power.

THE HUAYANG COMPANIES

As discussed above, we have two reportable business segments: (1) the manufacture and sale of textile dyeing and finishing machines through Huayang Dye Machine, and (2) the manufacture and sale of auxiliary equipment for the coking and power plants, and related engineering consulting services through Huayang Electrical Power Equipment. We believe that we have built a reputation for top quality, reliable products and high standards of customer service in both of our business segments.

Wuxi Huayang Dye Machine Co., Ltd.

Wuxi Huayang Dye Machine Co., Ltd. (“Huayang Dye Machine”) was established as a limited liability company in Wuxi City on September 8, 1995, under the name “Xishan Huayang Dye Machine Manufacturing Co., Ltd.”, with registered capital of 1,200,000 Renminbi (“RMB”) (approximately US$150,000). On November 5, 1997, pursuant to an application to, and approval from, the Jiangsu Province Bureau of Industrial and Commercial Administration, the company changed its name to “Xishan Huayang Machinery Manufacturing Co., Ltd.” The company changed to its present name, Wuxi Huayang Dye Machine Co., Ltd., on April 6, 2001, pursuant to an approval from the Jiangsu Province Bureau of Industrial and Commercial Administration. In November 2004, pursuant to a change in its bylaws and the approval of the Wuxi City municipal government, the operational term for Huayang Dye Machine was extended from December 31, 2004 to December 31, 2015, which may be further extended as necessary.

Overview of China’s Dye Machine Market and Industry

China is one of the world’s leading textile producers today, and the country’s textile industry, a traditional pillar in the Chinese national economy, is projected to grow by more than 15 percent in terms of output value, profits and exports year-on-year in 2007, according to the National Development and Reform Commission (NDRC). Chinese textile enterprises recorded a total output value of 2.46 trillion RMB (US$307.7 billion) in 2006, a rise of 21.3% from a year earlier.

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China has, however, traditionally imported many of the machines and equipment used in the textile industry. From 2002 to 2004, for example, China imported more than US$12 billion worth of textile machinery. According to the PRC General Administration of the Customs, the import of textile machinery and equipment in the January-to-September period of 2006 totaled about US$2.92 billion, up 12.82% compared with same period in 2005. Imports of non-woven machinery - including dye machinery - totaled approximately US$525 million. Driven by the demand for high-end machinery and equipment resulting from a campaign to improve the textile industry, and due to the revaluation of RMB, the import of textile machinery rose significantly over the same period of 2005.

Nevertheless, sales of textile machinery and equipment produced locally in the PRC have increased over the past two years. A survey conducted by the China Textile Machinery Association on 748 textile machinery and equipment manufacturers shows that by the end of September 2006, the industry’s gross value of industrial output amounted to about RMB 38.12 billion RMB, up 26.46% compared to the same period in 2005. The industry sold 96.80 % of the machinery and equipment manufactured, 0.39% higher than the same period of 2005, and profit rose 20.67%, totaling RMB 1.92 billion. Jiangsu Province, where Huayang Dye Machine is based, is the top manufacturing region (covering 30.55% of total sales), followed by Zhejiang Province (covering 21.79 %) and Shandong Province (covering 15.42%).

Operations of Huayang Dye Machine

Huayang Dye Machine designs, manufactures and distributes a line of proprietary high and low temperature dye and finishing machinery. We believe that we are a leading manufacturer of textile dyeing machines, as the Huayang brand is nationally recognized. The company was founded by Mr. Jianhua Wu in 1995, when China first began to see its textile goods gaining traction internationally but at the same time lacked capable textile equipment manufacturers domestically.

We currently have the capacity to manufacture and assemble approximately 550 textile dyeing machines annually. Our state-of-the-art and highly automated production line enables us to manufacture our products more efficiently, with lower labor and energy costs compared to traditional manufacturing methods. As part of our manufacturing process, we make corrosion-resistant stainless steel pumps and pressure vessels, which are not only critical components for our products but have other industrial applications. The PRC Central Government has granted us a license to manufacture our pumps and pressure vessels, which are deemed to meet or exceed national quality standards.

For our efforts, we have been approved by the Wuxi Regional Tax Bureau for waiver of a portion of our income tax for five years, beginning in 2005. Our accolades include the “Advanced Enterprise for Progress in Science and Technology Award” from Wuxi City in 1999, and the “Star of Brilliance Medal” from the Wuxi City Bureau of Industrial and Commercial Administration in the same year. In 2002, we were recognized as an “Advanced Enterprise for Technical Reform Input” by Qianzhou, a municipality of Wuxi City.

Huayang Dye Machine presently has 120 personnel in five departments - research and development, design, production, sales and technical support.

Products of Huayang Dye Machine

Our products are generally compact in design compared with alternatives on the market, and feature a high degree of both automation and mechanical-electrical integration. Our dye machines are widely used in dyeing yarns such as pure cotton, cotton-polyester, terylene, polyester wool, poly-acrylic fiber, nylon, cotton ramie, and wool yarn. We currently offer the following types of textile dye machines:

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Description of Our Dye Machine	Model Number	Type of Fabric
Double overflow high temperature high pressure dye machine	SME1000B	knitted fabric
Medium overflow high temperature sample dye machine	SME1000B-50 SME1000B-100	knitted fabric
Jet-type high pressure high speed dye machine	SME236	woven fabric
High temperature high speed soft dye machine	SME1000A-1 SME1000A-II	knitted fabric
De-weighting dye machine	SME-236B	micro-fiber
Beam dye machine	GR201	dyed yarn
Injection pipe dye machine	SME236C-II	woven fabric
High speed high temperature computer program control sample dye machine	SME236C-30 SME236C-60	woven fabric
Normal temperature and normal pressure double overflow type dye machine	CYL-38	acrylic fiber, cotton

We also offer a selection of finishing equipment, including: (i) a high pressure rotary refining/compacting/creping washing machine for stretching and softening of fabric, (ii) a push-type high temperature, high pressure dye jigger used in connection with fabric dyeing, and (iii) a beam reeling-and-reeling-off machine for dyeing heavy cotton and linen fabric.

Growth Strategies and Marketing for the Dye Machine Segment

Growth Strategies

According to China’s National Development and Reform Commission, the main focus of the country’s textile industry has shifted away from competitive advantages based on labor costs, and toward scientific and technological innovation as well as brand creation. And under the auspices of China’s Eleventh Fifth Year Plan, which was implemented in 2006, the next stage for the evolving textile and dye industries in China is the development of green textile products and the promotion of clean production technologies, according to the Bureau of Economic Operation under the National Development and Reform Commission.

To that end, we are continuing our efforts to develop and implement next-generation low energy consumption and high heating efficiency features to our machines. The current emphasis of our efforts is on increasing automation features in our existing products and implementing power line communication technology throughout our production facilities. If we are successful in our efforts, our goal is to both aggressively increase our share of the Chinese market and to enter overseas markets such as the United States and Europe.

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Marketing and Distribution in the Dying Machine Segment

Presently, all of our revenue from the textile dyeing machine segment is derived from sales in China. We presently command the top market shares in Jiangsu and Zhejiang Provinces, both regions with significant textile output, as well as in many of the coastal regions of China. We are also making efforts to push into Guangzhou, Shandong, Sichuan and other inland regions of China.

We market and sell our products through our dedicated sales force, which is based in our facilities in Wuxi. Our marketing programs include industrial conferences, trade fairs, sales training, and advertising. Our sales and marketing groups work closely with our research and development and manufacturing groups to coordinate our product development activities, product launches and ongoing demand and supply planning. We sell our products directly to many of the top textile producers in our markets, including Wujiang City Lianjua Dyeing & Finishing Co., Ltd. (which accounted of 10% of the revenue from our textile dyeing machine segment for 2006) and Zhejiang Guannan Knitting & Dyeing Co., Ltd. (which accounted of 8% of the revenue from our textile dyeing machine segment for 2006). 

Competition in the Textile Industry

Because of the prominent presence of the Chinese textile industry, we face competition both domestically and from abroad. However, due to the high quality of our products, our competitors are primarily foreign-based. Japan, Germany, Italy, Taiwan and Switzerland are presently the top five suppliers of textile machinery to China, covering over 80% of the total import value in 2006. Domestically, our chief competitor is Fong’s National Engineering (Shenzhen) Co., Ltd., a subsidiary of Fong’s Industries Company Ltd., a Hong-Kong based conglomerate and publicly-traded company.

Nevertheless, we believe that we can effectively compete with these companies on the basis of our brand image, the quality and performance of our products, and our after-sales service. We provide one year of maintenance and repair services free of charge for all of our products. Moreover, we provide customers in the Jiangsu and Zhejiang Provinces, our top markets, with responsive on-site support which is generally provided within 24 hours of receiving a request. However, many of our competitors have longer operating histories and significantly greater financial or technological resources than we do and presently enjoy greater brand recognition. For a discussion of certain risks we face from competition, see the section entitled “Risk Factors” beginning on page 22.

Wuxi Huayang Electrical Power Equipment Co., Ltd.

Wuxi Huayang Electrical Power Equipment Co., Ltd. (“Huayang Electrical Power Equipment”) was established as a limited liability company in Wuxi City on April 5, 2005, with registered capital of RMB 15,000,000 (approximately US $1,875,000). The company’s operational term is due to expire on May 19, 2014, but may be extended as necessary. Huayang Electrical Power Equipment is a manufacturer of efficiency-promoting equipment for China’s coking plants and coal-fired power stations, and a provider of related consulting services.

China’s Use of Coal

Today China burns more coal than the United States, the European Union and Japan combined. Coal is used to fuel the country’s fast-growing economy, which for the first time is contributing more than the United States to world economic growth, according to the International Monetary Fund. Coal-fired power plants presently account for more than two thirds of China’s installed power capacity, according to the China Electricity Council, an industry organization founded with the approval of the State Council. Every week to 10 days, another coal-fired power plant opens somewhere in China that is big enough to serve all the households in Dallas or San Diego, according to a report by the New York Times. At the same time, with the prevalence of low level technology, China’s electricity generation industry is characterized by high waste and low efficiency, according to the State Electricity Regulatory Commission.

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Coal is also used in China to produce coke, a solid carbonaceous material derived from burning low-ash, low-sulfur bituminous coal and used as the main fuel material in iron-making blast furnaces. In 2004, China’s coke output reached 224 million tons, or 56 percent of the world’s total, according to the PRC National Bureau of Statistics. By 2006, that number reached over 290 million tons, with 280 million tons for domestic consumption and 14.5 million tons for export.

Such high levels of coal consumption, however, has also made China the leading producer of greenhouse gases (carbon dioxide and sulfur dioxide) in the world, according to the Netherlands Environmental Assessment Agency, a Dutch research institute. To address this issue, the Central Government published China’s first National Action Plan on Climate Change in June 2007. Fully implemented, the National Plan aims to reduce China’s annual emissions of greenhouse gases by 1.5 billion tons of carbon dioxide equivalent by 2010. A target of the National Plan is the country’s use of coal, including the promotion of efficient coal-fired power stations. Through our product offerings, we are positioned to assist China’s coking plants and coal-fired power stations in complying with the mandates of the National Plan.

Operations of Huayang Electrical Power Equipment

Huayang Electrical Power Equipment designs, manufactures and sells both standard and custom auxiliary equipment used to improve and promote efficient coal use at both coking and power plants. Our products are available in a variety of metals and non-metallic corrosion-resistant materials. We design and assemble our products at our facilities in Wuxi.

Huayang Electrical Power Equipmentpresently has 40 personnel in five departments - research and development, design, production, sales and technical support.

Electrical Power Equipment Products and Services of Huayang Electrical Power Equipment

Huayang Electrical Power Equipmentdesigns, manufactures and distributes the following standard auxiliary equipment for coke plants and coal-fired power stations as follows:

Our Product	Application
Spiral plate heat exchanger	This is a high efficiency heat exchanger suitable for convective heat transfer from liquid to liquid, gas to gas, gas to liquid, and steam condensation to evaporation. Our heat exchanger is primarily used by coking plants to treat ammonia waste water and gas. Coal-fired power stations use the heat exchangers to treat sludge, a byproduct of coal-burning.
Cross-tube gas cooler	The gas cooler is mainly used to cool the raw coal gas produced during the coking process and during coal burning.

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Cloth-type dust collector	This a dust removal system primarily used to collect dust particles that are generated during the coking or coal-burning process.
Desulfurization regeneration tower	The tower is mainly used to produce clean coal gas by removing sulfur from coal gas produced during the coking or coal-burning process.

In addition to standard equipment, we also design and manufacture specialty equipment made to customers’ specifications, which represented approximately 25% of the revenue from our electrical power equipment segment in fiscal 2006. These commercially oriented, value-added products become part of our customers’ processes and typically are manufactured and delivered in a time period of more than 50 days. Specialty products are custom engineered for specific applications, manufactured on demand, and may have limited use in other applications.

Other than product manufacturing, we also provide technology consulting services relating to water-treatment equipment, heat exchangers, coking equipment and wind power generation equipment. Our technology consulting services represented approximately 4% of the revenue from our electrical power equipment segment in fiscal 2006.

Growth Strategies and Marketing for the Electrical Equipment Segment

Growth Strategies; Rolled Rings

Our experience in manufacturing auxiliary electrical equipment has provided us with the ability to explore other opportunities in the power generation industry. Specifically, we have focused our efforts on applying our manufacturing know-how to the development of equipment for “green” - or environmental-friendly - power generation. In 2006, China’s total power generation capacity surpassed 622 gigawatts, an increase of 100 gigawatts from 2005, making China the second-largest power generator and the fastest-growing power generation market in the world. According to the International Energy Agency, China is expected to invest a total of nearly US$2 trillion in electricity generation, transmission, and distribution over the next 30 years to meet rapidly growing electricity demand.  Half of that investment will be in power generation, while the other half will go to transmission and distribution.  Currently, energy from coal and oil comprises approximately 78% of China’s generating capacity, while hydropower provides approximately 21% and nuclear power less than 1.6% of total capacity.  With the dwindling supply of fossil fuels for power generation, and with the negative environmental effects of coal-burning, the Chinese government is encouraging alternative forms of power supply, such as hydropower, wind power and solar power.  China’s Eleventh Five-Year Plan provides an “alternative energy strategy,” which aims to increase the country’s renewable energy supply to 15% of China’s energy needs by 2020.

We initially looked at two alternative power generation technologies: waste-to-energy and wind power. Generating electricity by incinerating solid waste is attractive because the technology is suitable for dense population areas where land is often scarce, and offers a clean method for waste disposal. We entered into a cooperation agreement with Beijing China Sciences General Energy & Environmental Co., Ltd., an affiliate of the Chinese Academy of Sciences, to develop waste-to-energy technology that is both viable and environmentally friendly. Because waste-to-energy technology is still in its nascent stage, we have recently elected to discontinue further efforts toward this technology, and we are now focusing on wind power for growth in our electrical equipment business.

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Wind-power generation is a mature technology that is embraced in China. Current PRC government guideline mandates that 30,000 megawatts of wind power be installed by 2020. The Brussels-based Global Wind Energy Council reported that in 2006, China added nearly 1350 megawatts of wind-generated electricity, doubling its wind capacity.Moreover, the Chinese government has mandated that 70 percent of wind components be sourced domestically by 2010.

Based on our backgrounds in industrial manufacturing, we have singled out rolled rings as our entree into the wind power industry. Rolled rings are essentially hollow cylindrical sections forged from a stainless steel stock piece with varying thickness and height; the rings are called rolled rings in reference to the forging process. Forging is a manufacturing process where metal is pressed, pounded or squeezed under great pressure into high strength parts known as forging. Rolled ring forging turns a hollow round piece of metal under extreme pressure against a rotating roller, thereby squeezing out a single-piece ring without any welding required.

Rings can also be manufactured through machining or casting. We believe that the forging process is preferred, due to the strength and flexibility of the finished product. A ring’s strength dictates its fatigue resistance, and is determined by the orientation of the grain flow of the ring’s metal material. Unlike the machining process, which creates a unidirectional grain flow, or the casting process, which creates no grain flow, the forging process causes alignment and orientation of the grain flow in a direction creating maximum strength, thereby assuring maximum fatigue resistance. The high strength property also reduces sectional thickness and overall weight of the right without compromising the over-all integrity of the finished product. Because of their characteristic high tangential strength and ductility, rolled rings have wide applications and are well-suited for torque- and pressure-resistant components.

Yaw bearings, which are found in every wind turbine, are made from rolled rings. Essentially, a yaw bearing is a large ring with teeth, all of which are either pointing outward or inward. The teeth allow the yaw bearing to engage with a smaller wheel attached to the yaw motor. The yaw motor turns the wind turbine so that the rotor (to which blades are attached) faces the wind in order to optimize electricity generation. The yaw bearing is used by the yaw motor to turn the wind turbine.

During the first half of 2007, we began supplying rolled rings that are made to our specifications by unrelated contract manufacturers to companies in the domestic wind power industry, as well as railway and heavy vehicle manufacturing companies. Currently, we have contracts to supply rolled rings to Luoyang Shengjia Bearing Co., Ltd. (contracted amount approximately $0.7 million), Luoyang Special Large-Size Bearing Co., Ltd. (contracted amount approximately $0.5 million), Luoyang Zhuxing Bearings Co., Ltd. (contracted amount approximately $0.5 million) and Luoyang Bearing Technology Co., Ltd. (contracted amount approximately $0.5 million).

We have also devoted a workspace of approximately 108,000 square feet at our Wuxi facilities to set up our own rolled ring manufacturing operation, which we plan to develop and expand in three phases. We have launched the first phase of our plan and are in the process of acquiring and installing manufacturing equipment. Upon completion of this initial phase, which is expected by October 2008, we anticipate that we will have the capacity to manufacture rolled rings up to five meters in diameter, using the axial closed-die rolling technology. Rolled rings manufactured using this method are characterized by high level of precision and surface smoothness, thereby minimizing post-production cutting and finishing work, as well as high level of structural strength and flexibility. Moreover, by the use of such advanced technology, we estimate that we will be able to save approximately 35% in materials versus other, more traditional, ring manufacturing techniques. We are also planning to have the capacity, upon completion of phase one, to manufacture shafts weighing up to 40 tons and measuring up to two meters in diameter, using the cross wedge rolling technique. Shafts are used by wind turbine makers to connect the wind turbine rotor to the gear box (a main shaft), and the gear box to the power generator (a small shaft). Compared to traditional methods of forging, cutting and forming shaft-type structures, the cross wedge rolling technique is highly efficient and inexpensive. More importantly, shafts formed by this technology have high quality, with surface that requires virtually no additional processing after formation.

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For the second phase of our plan, we will continue to develop our manufacturing techniques and are planning to achieve capacity to produce forged rolled rings of up to six meters in diameter and shafts of up to 150 tons in weight. Concurrently, we will acquire the equipment necessary to produce yaw bearings from our rolled rings. Our goal for the third phase of our plan is to have the manufacturing capacity, at completion, to produce forged rolled rings and yaw bearings of up to eight meters in diameter and up to 150 tons in weight, and shafts of up to 500 tons in weight, to suit different applications and purposes.

We plan to deploy technology that will enable the high level of automation necessary for our intended manufacturing process. To that end, we have already acquired a state-of-the-art heat treatment value simulation software developed by the Forging Technology Section of the Mechanical Engineering Institute, a research organization. We are preparing to acquire a 4,500-ton oil press for the first phase of our plan, and plan to acquire a 6,000-ton oil press for the second phase and a 12,500-ton hydraulic press for the third phase.

Marketing and Distribution

Currently, our principal customers for our electrical power equipment are coking plants and coal-fired power stations. Our principal customers for rolled rings, on the other hand, are in the wind power, railway and heavy vehicle manufacturing industries, which purchase our products as components in equipment and system installations.

Our coking-related equipment is primarily sold to plants in Shanxi Province. Our dust collectors are sold to coking plants and power stations throughout the country. Our rolled rings are currently sold to companies in Luoyang, a city in Henan Province. No part of our business in the electrical power equipment segment is dependent on a single customer or a few customers, the loss of which would seriously harm our business, or on contracts or subcontracts that are subject to renegotiation or termination by a governmental agency.

Competition

China’s continuing reliance on coal, balanced against the mandates of the National Action Plan on Climate Change, is driving the demand for auxiliary electrical power equipment like ours, which in turn is attracting many companies to the industry, including international companies such as Australia’s Waterco Co. and the European conglomerate Suez Co., and domestic manufacturers such as Harbin Hydrogen Control Equipment Industrial Co. and Shanghai Taixin Environmental Equipment Co., Ltd. Many of these companies have research and development capabilities and funding sources that are superior to ours. Nevertheless, we believe that we have a competitive advantage due to our nationally-recognized name in textile dyeing machinery.

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OUR SUPPLIERS

The main component of all of our products, both for Huayang Dye Machine and Huayang Electrical Power Equipment, is stainless steel. We purchase stainless steel tubes from Wuxi City Zhongtian Stainless Steel Co., Ltd., stainless steel plates from Wuxi City Fanshun Materials Co., Ltd., and stainless steel casings from Jiangyin Tongqing Machinery Manufacturing Co., Ltd. While we do not have long term contracts with these suppliers, we have extensive business relationship with them, and these companies have generally met our supply requirements. The price of stainless steel in China, while unstable, has generally been favorable to us as supply continues to exceed demand. However, we cannot guarantee that the present conditions of the stainless steel market will maintain. Any significant rise in the price of or demand for stainless steel could have an adverse affect on our results of operations.

Other materials needed to our manufacturing needs, such as stainless steel planks and transducers, are relatively easy to purchase from multiple vendors and we intend to work with two to three vendors to ensure the best pricing and quality of these supplies.

RESEARCH AND DEVELOPMENT

We believe product research and development (“R&D”) will be a key element of the future of our business. We plan to invest in R&D to create and develop new products in both of our operating segments while improving upon our current offerings.  Currently we have 9 technical personnel combined in both of our operating segments. We intend to use our future earnings, and proceeds from our financing transactions, to develop an effective R&D program.

For our dye machine business, we are currently working on the development of an air-stream based dye machine that can: (i) reduce consumption of steam and cooling water, thereby reduce waste, (ii) increase the speed for application of dye fluid and the number of dye applicators, thereby promoting efficiency and reducing energy consumption; (iii) reduce potential damage to a textile through use of air streams to move the textile during the dye process; (iv) maintain a textile’s ideal piling density through use of basket-style structure; and (v) be readily switched to a fluid-based mode of operation as required by an end-user where a particular textile requires washing and rinsing during the dye process.

In our electric power equipment segment, we are working to complete setting up phase one of our rolled ring manufacturing operation, and will concentrate our R&D efforts on developing enhancement of rolled rings and related products principally for the wind power industry.

As part of our research and development effort, we team up with and undertake research projects with both private-sector companies and public-sector entities. We currently have one joint R&D project:

Joint R&D Project

Description

Coking and desulfurizating equipment

We have entered into a long-term cooperation agreement with Shanxi Province Coking Design Research Institute (the “Institute”) to develop next-generation coking and desulfurization equipment with emphasis on environmentally-friendly features. Under this cooperation agreement, the Institute will develop the equipment, to which we will have the exclusive right to manufacture and distribute at our option. If we elect to exercise our exclusive right, we will then enter into a separate agreement with the Institute concerning revenue sharing for the particular equipment. Otherwise, if we elect not to exercise our exclusive right, we will have no other obligations to the Institute under the cooperation agreement.

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EMPLOYEES

As of November 13, 2007, we had a total of approximately 160 employees, all of which were full-time employees. Of these, 120 are in the dye machine segment, including 3 management personnel, 6 technicians, 12 sales representatives, 4 accounting and finance personnel, 3 purchasing agents, 6 quality control personnel and 86 workers. The remaining 40 employees are with our electrical equipment operations, including 3 engineers, 2 quality control personnel, 4 sales persons, 3 administrative staff, and 28 workers.

We our required to contribute a portion of our employees’ total salaries to the Chinese government’s social insurance funds, including medical insurance, unemployment insurance and job injuries insurance, in accordance with relevant regulations. In the last two fiscal years, we contributed, in the aggregate, approximately RMB 139,400 (approximately US$18,600) and RMB 170,000 (approximately US$22,700) for the fiscal years ended December 31, 2006 and 2005, respectively. We expect the amount of contribution to the government’s social insurance funds to increase in the future as we expand our workforce and operations.

All of our employees are members of a union, organized by the Union for Huishan District, Wuxi City as mandated by the PRC Union Law. Neither we nor any of our affiliates have experienced a work stoppage. Management believes that our relations with our employees are good.

PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR LABOR CONTRACTS

We rely on a combination of trademark, copyright and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our intellectual property and our brand. We have an issued patent in China in connection with one of our textile dyeing machines, valid for 10 years and we intend to apply for more patents to protect our core technologies. We also have confidentiality and non-compete policies in place as part of our company employment guideline which is given to each employee, and we enter into nondisclosure agreements with third parties.

The following table describes the intellectual property owned by us:

Type	Name	Issued by	Duration	Description
Trademark		Trademark Bureau of the People’s Republic of China	Ten years, expiring on February 27, 2012 (and renewable within six months prior to the end of each ten-year term for additional ten-year periods)	Logo, brand name used in connection with our products
Patent	Double overflow high temperature high speed dye machine ZL9822259.50.6	Intellectual Property Bureau of the People’s Republic of China	Ten years, expiring on April 28, 2009	The patented features include spraying nozzles that are adjustable to suit various types of fabric and minimize dyeing time, and a guiding mechanism to minimize rolled edges, fabric damage and knotting during the dyeing process

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We have also submitted patent applications with the Intellectual Property Bureau for our double overflow high temperature high speed dye machine (Application No. 981111.3.X), as well as two types of dye jigger control devices (Application Nos. 03220528-7 and 03220529-5). The patent examination process takes approximately 12 months to complete. We believe that successfully obtaining these patents will further strengthen our position in the dye machinery industry.

GOVERNMENT APPROVAL AND REGULATION OF PRINCIPAL PRODUCTS OR SERVICES

Green Power and both of the Huayang Companies have been issued business licenses with the appropriate municipal and provincial governments which specifically authorize the companies to operate their respective businesses. All of these business licenses, which are subject to annual review by the issuing agencies, are current as of the date of this Current Report. No additional approval or license is required for the manufacturing and sale of the textile dyeing and finishing machines, the auxiliary electrical power equipment or the rolled rings.

Circular 106 Compliance and Approval

On May 31, 2007, the PRC State Administration of Foreign Exchange (“SAFE”) issued an official notice known as “Circular 106”, which requires the owners of any Chinese company to obtain SAFE’s approval before establishing any offshore holding company structure for foreign financing as well as subsequent acquisition matters in China. Accordingly, in early September 2007, the owners of 100% of the equity in the Huayang Companies, namely Jianhua Wu and Lihua Tang, submitted their application to SAFE. On September 19, 2007, SAFE approved their application, permitting these Chinese nationals to establish an offshore company, Fulland, as a “special purpose vehicle” for any foreign ownership and capital raising activities by the Huayang Companies. After SAFE’s approval, Mr. Wu and Ms. Tang became the majority owners of Fulland on October 11, 2007.

ENVIRONMENTAL MATTERS

The manufacturing processes in both of our operating segments generate noise, wastewater, gaseous wastes and other industrial wastes. We have installed various types of anti-pollution equipment in our facilities to reduce, treat, and where feasible, recycle the wastes generated in our manufacturing processes. Our operations are subject to regulations promulgated by China’s Environmental Protection Administration, Jiangsu Province Environmental Protection Administration and the Wuxi City Environmental Administration. We are also subject to periodic monitoring by local environmental protection authorities in Wuxi.

We have made considerable efforts to develop and sell environmentally compatible products. We believe that our manufacturing facilities and equipment are in substantial compliance with all applicable environmental regulations. Additional measures to maintain compliance are not expected to materially affect our capital expenditures, competitive position, financial position or results of operations.

PRINCIPAL EXECUTIVE OFFICES

We maintain both our administrative headquarters and manufacturing facilities in the northern outskirts of Wuxi City, at No. 9 Yanyu Middle Road, Qianzhou Village, Huishan District, Wuxi City, Jiangsu Province, China. Our telephone number is (86) 51083397559.

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RISK FACTORS

You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. The statements contained in or incorporated into this offering that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Industry

Our businesses are subject to fluctuations in operating results due to general economic conditions, specific economic conditions in the industries in which it operates and other external forces.

Our businesses and operations could be affected by the following, among other factors:

· changes in general economic conditions and specific conditions in industries in which our businesses operate that can result in the deferral or reduction of purchases by end-use customers;

· the effects of terrorist activity and international conflicts, which could lead to business interruptions;

· the size, timing and cancellation of significant orders, which can be non-recurring;

· market acceptance of new products and product enhancements;

· announcements, introductions and transitions of new products by us or our competitors;

· deferrals of customer orders in anticipation of new products or product enhancements introduced by us or our competitors;

· changes in pricing in response to competitive pricing actions;

· supply constraints;

· the level of expenditures on research and development and sales and marketing programs;

· our ability to achieve targeted cost reductions;

· rising interest rates; and

· excess facilities.

The nature of our products creates the possibility of significant product liability and warranty claims, which could harm our business.

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Customers use some of our products in potentially hazardous applications that can cause injury or loss of life and damage to property, equipment or the environment. In addition, some of our products are integral to the production process for some end-users and any failure of our products could result in a suspension of operations. Although we maintain strict quality controls and procedures, we cannot be certain that our products will be completely free from defects. Moreover, we do not have any product liability insurance and may not have adequate resources to satisfy a judgment in the event of a successful claim against us. The successful assertion of product liability claims against us could result in potentially significant monetary damages and require us to make significant payments. In addition, because the insurance industry in China is still in its early stages of development, business interruption insurance available in China offers limited coverage compared to that offered in many other countries. We do not have any business interruption insurance. Any business disruption or natural disaster could result in substantial costs and diversion of resources.

A downturn in the major markets in which we served may adversely affect results.

While our businesses serve a broad array of end markets, a sustained downturn in the general industrial or textile markets could have a material adverse effect on our business, results of operation or financial condition.

If we fail to introduce enhancements to our existing products or to keep abreast of technological changes in our markets, our business and results of operations could be adversely affected.

Although certain technologies in the industries that we occupy are well established, we believe our future success depends in part on our ability to enhance our existing products and develop new products in order to continue to meet customer demands. Our failure to introduce new or enhanced products on a timely and cost-competitive basis, or the development of processes that make our existing technologies or products obsolete, could harm our business and results of operations.

Because we face intense competition from other companies for both of our operating segments, many of which have greater resources than we do, we may not be able to compete successfully and we may lose or be unable to gain market share.

The markets for products in both of our business segments are intensely competitive. Many of our competitors have established more prominent market positions, and if we fail to attract and retain customers and establish successful distribution networks in our target markets for our products, we will be unable to increase our sales. Many of our existing and potential competitors have substantially greater financial, technical, manufacturing and other resources than we do. Our competitors’ greater size in some cases provides them with a competitive advantage with respect to manufacturing costs because of their economies of scale and their ability to purchase raw materials at lower prices, as well as securing supplies at times of shortages. Many of our competitors also have greater brand name recognition, more established distribution networks and larger customer bases. In addition, many of our competitors have well-established relationships with our current and potential distributors and have extensive knowledge of our target markets. As a result, they may be able to devote greater resources to the research, development, promotion and sale of their products or respond more quickly to evolving industry standards and changes in market conditions than we can. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors may materially and adversely affect our financial condition and results of operations.

Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines.

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As our manufacturing processes generate noise, wastewater, gaseous and other industrial wastes, we are required to comply with all national and local regulations regarding protection of the environment. We are in compliance with present environmental protection requirements and have all necessary environmental permits to conduct our business. However, if more stringent regulations are adopted in the future, the costs of compliance with these new regulations could be substantial. We believe that we have all necessary permits to conduct our business as it is presently conducted. If we fail to comply with present or future environmental regulations, however, we may be required to pay substantial fines, suspend production or cease operations. We use, generate and discharge toxic, volatile and otherwise hazardous chemicals and wastes in our research and development and manufacturing activities. Any failure by us to control the use of, or to restrict adequately the discharge of, hazardous substances could subject us to potentially significant monetary damages and fines or suspensions in our business operations.

Our products are subject to PRC regulations that pertain to electrical equipment, which may materially adversely affect our business.

These regulations influence the design, components or operation of such products. New regulations and changes to current regulations are always possible and, in some jurisdictions, regulations may be introduced with little or no time to bring related products into compliance with these regulations. Our failure to comply with these regulations may restrict our ability to sell our products in the PRC. In addition, these regulations may increase our cost of supplying the products by forcing us to redesign existing products or to use more expensive designs or components. In these cases, we may experience unexpected disruptions in our ability to supply customers with products, or we may incur unexpected costs or operational complexities to bring products into compliance. This could have an adverse effect on our revenues, gross profit margins and results of operations and increase the volatility of our financial results.

We operate in industries that are cyclical, and downturns in such industries may adversely affect our operating results.

The textile and apparel industries have historically been subject to substantial cyclical variations and are particularly affected by adverse trends in the general economy. These industries are subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, pressure from retailers to reduce the costs of products and changes in consumer demand. These factors may decrease the demands for our dye machines or cause us to reduce our sales prices to our customers, which could cause our gross margin to decline if we are unable to offset price reductions with comparable reductions in our operating costs. If our sales prices decline and we fail to sufficiently reduce our product costs or operating expenses, our profitability will decline. This could have a material adverse effect on our results of operations, liquidity and financial condition.

Historically, a substantial portion of our revenue from our electrical equipment segment has been derived from sales of our products to companies in the coking and power generating industries, or to firms that design and construct facilities for these industries. The core industries in which our products are used are, to varying degrees, cyclical and have historically experienced severe downturns. A downturn in one or more of these industries could occur at any time. In the event of such a downturn, we have no way of knowing if, when and to what extent there might be a recovery. Deterioration in any of the cyclical industries we serve would harm our business and operating results because our customers would not likely have the resources necessary to purchase our products or would not likely have the need to build additional facilities or improve existing facilities.

Risks Relating to Our Business

Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.

We have a limited operating history. Huayang Dye Machine commenced operations in 1995 and Huayang Electrical Power Equipment in 2004. Accordingly, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in evolving industries such as the dye machinery industry and the electrical equipment industry in China. Some of these risks and uncertainties relate to our ability to:

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l achieve and/or maintain our position as a market leader in China in our industry segments;

l offer new and innovative products to attract and retain a larger customer base;

l attract additional customers and increase spending per customer;

l increase awareness of our brand and continue to develop user and customer loyalty;

l respond to competitive market conditions;

l respond to changes in our regulatory environment;

l manage risks associated with intellectual property rights;

l maintain effective control of our costs and expenses;

l raise sufficient capital to sustain and expand our business;

l attract, retain and motivate qualified personnel; and

l upgrade our technology to support additional research and development of new products.

If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

We are currently implementing various strategic business initiatives, and the success of our businesses will depend on its ability to effectively develop and implement these initiatives.

We are currently implementing various strategic business initiatives. In connection with the development and implementation of these initiatives, we have incurred, and expect to continue to incur, additional expenses, including, among others, expenses associated with discontinuing underperforming operations and closing certain of its plants and facilities and related severance costs. The development and implementation of these initiatives also requires management to divert a portion of its time from day-to-day operations. These expenses and diversions could have a significant impact on our operations and profitability, particularly if the initiatives included in any new initiative proves to be unsuccessful. Moreover, if we are unable to implement an initiative in a timely manner, or if those initiatives turn out to be ineffective or are executed improperly, our business and operating results would be adversely affected.

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Failure to successfully reduce our production costs may adversely affect our financial results.

A significant portion of our strategy relies upon our ability to successfully rationalize and improve the efficiency of our operations. In particular, our strategy relies on our ability to reduce our production costs in order to remain competitive. If we are not able to continue to successfully implement cost reduction measures, or if these efforts do not generate the level of cost savings that we expect going forward or result in higher than expected costs, there could be a material adverse effect on our business, financial condition, results of operations or cash flows.

If we are unable to make necessary capital investments or respond to pricing pressures, our business may be harmed.

In order to remain competitive, we need to invest continuously in research and development, manufacturing, customer service and support, and marketing. From time to time we also have to adjust the prices of our products to remain competitive. We may not have available sufficient financial or other resources to continue to make investments necessary to maintain our competitive position.

A decrease in supply or increase in cost of the materials used in our products could harm our profitability.

Any restrictions on the supply or the increase in the cost of the materials used by us in manufacturing our products could significantly reduce our profit margins. Efforts to mitigate restrictions on the supply or price increases of materials by entering into long-term purchase agreements, by implementing productivity improvements or by passing cost increases on to our customers may not be successful. Our profitability depends largely on the price and continuity of supply of the materials used in the manufacture of our products, which in many instances are supplied by a limited number of sources.

Unforeseen or recurring operational problems at our facilities may cause significant lost production, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our manufacturing processes could be affected by operational problems that could impair our production capability. Our facilities contain complex and sophisticated machines that are used in our manufacturing process. Disruptions at our facilities could be caused by maintenance outages; prolonged power failures or reductions; a breakdown, failure or substandard performance of any of our machines; the effect of noncompliance with material environmental requirements or permits; disruptions in the transportation infrastructure, including railroad tracks, bridges, tunnels or roads; fires, floods, earthquakes or other catastrophic disasters; labor difficulties; or other operational problems. Any prolonged disruption in operations at our facilities could cause significant lost production, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may not be able to manage the expansion of our operations effectively, which may have an adverse affect on our business and results of operations.

The revenues from the production and sale of our current product offerings and the projected revenues from these products may not be adequate to support our expansion and product development programs.  We will need substantial additional funds to expand our production facilities, pursue further research and development, obtain regulatory approvals; file, prosecute, defend and enforce our intellectual property rights and market our products.  We will seek additional funds through public or private equity or debt financing, strategic transactions and/or from other sources.  We could enter into collaborative arrangements for the development of particular products that would lead to our relinquishing some or all rights to the related technology or products. There are no assurances that future funding will be available on favorable terms or at all.  If additional funding is not obtained, we will need to reduce, defer or cancel development programs, planned initiatives or overhead expenditures, to the extent necessary.  The failure to fund our capital requirements would have a material adverse effect on our business, financial condition and results of operations.

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Our officers and directors own a substantial portion of our outstanding common stock, which will enable them to influence many significant corporate actions and in certain circumstances may prevent a change in control that would otherwise be beneficial to our shareholders.

Immediately after the Closing of the share exchange transaction, our directors and executive officers will control approximately 48.67% of our outstanding shares of stock that are entitled to vote on all corporate actions. These stockholders, acting together, could have a substantial impact on matters requiring the vote of the shareholders, including the election of our directors and most of our corporate actions. This control could delay, defer or prevent others from initiating a potential merger, takeover or other change in our control, even if these actions would benefit our shareholders and us. This control could adversely affect the voting and other rights of our other shareholders and could depress the market price of our common stock.

Our business depends substantially on the continuing efforts of our executive officers and our ability to maintain a skilled labor force, and our business may be severely disrupted if we lose their services.

Our future success depends substantially on the continued services of our executive officers, especially Mr. Jianhua Wu, our chief executive officer and the chairman of our Board. We do not maintain key man life insurance on any of our executive officers. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Therefore, our business may be severely disrupted, and we may incur additional expenses to recruit and retain new officers. In addition, if any of our executives joins a competitor or forms a competing company, we may lose some of our customers. Each of our executive officers has entered into an employment agreement with our subsidiary, which contains confidentiality and non-competition provisions. However, if any disputes arise between our executive officers and us, we cannot assure you, in light of uncertainties associated with the Chinese legal system, the extent to which any of these agreements could be enforced in China, where some of our executive officers reside and hold some of their assets. See “Risks Related to Doing Business in China — Uncertainties with respect to the Chinese legal system could have a material adverse effect on us.”

Our future success also depends, to a significant extent, on our ability to attract, train and retain technical personnel. Recruiting and retaining capable personnel, particularly those with expertise in our chosen industries, are vital to our success. There is substantial competition for qualified technical personnel, and there can be no assurance that we will be able to attract or retain our technical personnel. If we are unable to attract and retain qualified employees, our business may be materially and adversely affected.

Our failure to protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights or defend against third-party allegations of infringement may be costly.

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We rely primarily on patent, trademark, trade secret, copyright law and other contractual restrictions to protect our intellectual property. Nevertheless, these afford only limited protection and the actions we take to protect our intellectual property rights may not be adequate. For example, we have one issued patent from our dye machine segment, and three patent applications also from the same segment pending in China. We cannot assure you that our patent applications will be issued with claims sufficiently broad for our business. As a result, third parties may infringe or misappropriate our proprietary technologies or other intellectual property rights, which could have a material adverse effect on our business, financial condition or operating results. In addition, policing unauthorized use of proprietary technology can be difficult and expensive. Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. We cannot assure you that the outcome of such potential litigation will be in our favor. Such litigation may be costly and may divert management attention as well as expend our other resources away from our business. An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, prospects and reputation. In addition, we have no insurance coverage against litigation costs and would have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties. The occurrence of any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

Implementation of China’s intellectual property-related laws has historically been lacking, primarily because of ambiguities in China’s laws and difficulties in enforcement. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries.

We may be exposed to infringement or misappropriation claims by third parties, which, if determined adversely to us, could cause us to pay significant damage awards.

Our success also depends largely on our ability to use and develop our technology and know-how without infringing the intellectual property rights of third parties. The validity and scope of claims relating to technology patents relating to our industries involve complex scientific, legal and factual questions and analysis and, therefore, may be highly uncertain. We may be subject to litigation involving claims of patent infringement or violation of intellectual property rights of third parties. The defense and prosecution of intellectual property suits, patent opposition proceedings and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability to third parties, require us to seek licenses from third parties, to pay ongoing royalties, or to redesign our products or subject us to injunctions prohibiting the manufacture and sale of our products or the use of our technologies. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase or use of our products until resolution of such litigation.

Our dependence on a limited number of third-party suppliers for key raw materials and customized manufacturing equipment could prevent us from timely delivering our products to our customers in the required quantities, which could result in order cancellations and decreased revenues.

Stainless steel is the essential raw material for making all of our products. We purchase stainless steel tubes, cast and stock pieces from a limited number of third-party suppliers. If we fail to develop or maintain our relationships with these or our other suppliers, we may be unable to manufacture our products or our products may be available at a higher cost or after a long delay, and we could be prevented from delivering our products to our customers in the required quantities and at prices that are profitable. Problems of this kind could cause us to experience order cancellations and loss of market share. The failure of a supplier to supply materials and components that meet our quality, quantity and cost requirements in a timely manner could impair our ability to manufacture our products or increase our costs, particularly if we are unable to obtain these materials and components from alternative sources on a timely basis or on commercially reasonable terms. In addition, certain of our manufacturing equipment has been designed and made specifically for us. As a result, such equipment is not readily available from multiple vendors and would be difficult to repair or replace. Any significant damage to, or break down of, our customized manufacturing equipment could cause material interruptions to our operations and consequentially, could have a material adverse effect on our business and results of operations.

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Our success may depend on collaborative partners, licensees and other third parties over whom we have limited control

We will look for other areas in the electrical equipment industry for growth opportunity, and to that end, we may enter into arrangements with academic institutes, corporate and academic collaborators and others for the research and development of the relevant technologies. There are no assurances that we will be able to establish or maintain collaborations that are important to our business on favorable terms, or at all.

A number of risks arise from our dependence on collaborative agreements with third parties.  Product development and commercialization efforts could be adversely affected if any collaborative partner:

· terminates or suspends its agreement with us

· causes delays

· pursue other technologies or develop alternative products that could compete with the products we are developing, or

· otherwise fails to meet its contractual obligations.

Risks Related to Doing Business in China

Adverse changes in political and economic policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and materially and adversely affect our competitive position.

All of our business operations are conducted and all of our sales are made in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including:

· the amount of government involvement;

· the level of development;

· the growth rate;

· the control of foreign exchange; and

· the allocation of resources.

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While the Chinese economy has grown significantly in the past 20 years, the growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall Chinese economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

The Chinese economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China is still owned by the Chinese government. The continued control of these assets and other aspects of the national economy by the Chinese government could materially and adversely affect our business. The Chinese government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Efforts by the Chinese government to slow the pace of growth of the Chinese economy could result in decreased capital expenditure by solar energy users, which in turn could reduce demand for our products.

Any adverse change in the economic conditions or government policies in China could have a material adverse effect on the overall economic growth and the level of renewable energy investments and expenditures in China, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses.

Uncertainties with respect to the Chinese legal system could have a material adverse effect on us.

We conduct substantially all of our business through our subsidiary, Fulland and its subsidiary, Green Power, which is established in China. Green Power is generally subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to wholly foreign-owned enterprises. China’s legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, Chinese legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since these laws and regulations are relatively new and China’s legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

We rely on dividends paid by our subsidiaries for our cash needs

We conduct substantially all of our operations through our subsidiary, Fulland, and its subsidiary, Green Power, which is a limited liability company established in China. We rely on dividends paid by Green Power for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. The payment of dividends by entities organized in China is subject to limitations. Regulations in China currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. We are also required to set aside at least 10.0% of its after-tax profit based on China’s accounting standards each year to its general reserves until the accumulative amount of such reserves reach 50.0% of its registered capital. These reserves are not distributable as cash dividends. Green Power is also required to allocate a portion of its after-tax profits to its staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. In addition, if Green Power incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

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Fluctuation in the value of the Renminbi may have a material adverse effect on your investment.

The change in value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions. On July 21, 2005, the Chinese government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in approximately 2.1% appreciation of Renminbi against U.S. dollar. While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the Chinese government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against the U.S. dollar. As a portion of our costs and expenses is denominated in Renminbi, the revaluation in July 2005 and potential future revaluation has and could further increase our costs. In addition, as we rely entirely on dividends paid to us by our operating subsidiaries, any significant revaluation of the Renminbi may have a material adverse effect on our revenues and financial condition, and the value of, and any of our dividends payable on our ordinary shares in foreign currency terms. For example, to the extent that we need to convert U.S. dollars we receive from this offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.

Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.

All of our revenues and most of our expenses are denominated in Renminbi. If our revenues denominated in Renminbi increase or expenses denominated in Renminbi decrease in the future, we may need to convert a portion of our revenues into other currencies to meet our foreign currency obligations, including, among others, payment of dividends declared, if any, in respect of our ordinary shares. Under China’s existing foreign exchange regulations, our Chinese subsidiary, Green Power, is able to pay dividends in foreign currencies, without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, we cannot assure you that that the Chinese government will not take further measures in the future to restrict access to foreign currencies for current account transactions.

Foreign exchange transactions by Green Power under the capital account continue to be subject to significant foreign exchange controls and require the approval of China’s governmental authorities, including the SAFE. In particular, if Green Power borrows foreign currency loans from us or other foreign lenders, these loans must be registered with the SAFE, and if we finance Green Power by means of additional capital contributions, these capital contributions must be approved by certain government authorities including the Ministry of Commerce or its local counterparts. These limitations could affect the ability of Green Power to obtain foreign exchange through debt or equity financing.

We face risks related to health epidemics and other outbreaks.

Our business could be adversely affected by the effects of avian flu, SARS or another epidemic or outbreak. China reported a number of cases of SARS in April 2004. In 2005, there were reports on the occurrences of avian flu in various parts of China, including a few confirmed human cases. Any prolonged recurrence of avian flu, SARS or other adverse public health developments in China may have a material adverse effect on our business operations. These could include our ability to travel or ship our products outside of China, as well as temporary closure of our manufacturing facilities. Such closures or travel or shipment restrictions would severely disrupt our business operations and adversely affect our results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of avian flu, SARS or any other epidemic.

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Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us or otherwise materially adversely affect us.

          In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred to as Circular 75, which required PRC residents to register with the competent local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside of China on the strength of domestic PRC assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (i) purporting to cover the establishment or acquisition of control by PRC residents of offshore entities which merely acquire “control” over domestic companies or assets, even in the absence of legal ownership; (ii) adding requirements relating to the source of the PRC resident’s funds used to establish or acquire the offshore entity; (iii) covering the use of existing offshore entities for offshore financings; (iv) purporting to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated assets in China; and (v) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas financing and the use of proceeds. Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and acquisitions, equity investment or creation of any security interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. In the case of an SPV which was established, and which acquired a related domestic company or assets, before the implementation date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006; this date was subsequently extended indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations. Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPV’s affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.

We believe our stockholders who are PRC residents as defined in Circular 75 have registered with the relevant branch of SAFE, as currently required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiaries. However, we cannot provide any assurances that their existing registrations have fully complied with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect stockholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

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The OTC Bulletin Board is a quotation system, not an issuer listing service, market or exchange. Therefore, buying and selling stock on the OTC Bulletin Board is not as efficient as buying and selling stock through an exchange. As a result, it may be difficult for you to sell your common stock or you may not be able to sell your common stock for an optimum trading price.

          The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last sale prices and volume limitations in over-the-counter securities.

          Because trades and quotations on the OTC Bulletin Board involve a manual process, the market information for such securities cannot be guaranteed. In addition, quote information, or even firm quotes, may not be available. The manual execution process may delay order processing and intervening price fluctuations may result in the failure of a limit order to execute or the execution of a market order at a significantly different price. Execution of trades, execution reporting and the delivery of legal trade confirmations may be delayed significantly. Consequently, one may not be able to sell shares of our common stock at the optimum trading prices.

          When fewer shares of a security are being traded on the OTC Bulletin Board, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Lower trading volumes in a security may result in a lower likelihood of an individual’s orders being executed, and current prices may differ significantly from the price one was quoted by the OTC Bulletin Board at the time of the order entry.

          Orders for OTC Bulletin Board securities may be canceled or edited like orders for other securities. All requests to change or cancel an order must be submitted to, received and processed by the OTC Bulletin Board. Due to the manual order processing involved in handling OTC Bulletin Board trades, order processing and reporting may be delayed, and an individual may not be able to cancel or edit his order. Consequently, one may not able to sell shares of common stock at the optimum trading prices.

          The dealer’s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller of securities on the OTC Bulletin Board if the common stock or other security must be sold immediately. Further, purchasers of securities may incur an immediate “paper” loss due to the price spread. Moreover, dealers trading on the OTC Bulletin Board may not have a bid price for securities bought and sold through the OTC Bulletin Board. Due to the foregoing, demand for securities that are traded through the OTC Bulletin Board may be decreased or eliminated.

We are subject to the penny stock rules and these rules may adversely affect trading in our common stock.

          Our common stock is a “low-priced” security under rules promulgated under the Securities Exchange Act of 1934. In accordance with these rules, broker-dealers participating in transactions in low-priced securities must first deliver a risk disclosure document which describes the risks associated with such stocks, the broker-dealer’s duties in selling the stock, the customer’s rights and remedies and certain market and other information. Furthermore, the broker-dealer must make a suitability determination approving the customer for low-priced stock transactions based on the customer’s financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent from the customer, and provide monthly account statements to the customer. The effect of these restrictions probably decreases the willingness of broker-dealers to make a market in our common stock, decreases liquidity of our common stock and increases transaction costs for sales and purchases of our common stock as compared to other securities.

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Our stock price may be volatile, which may result in losses to our shareholders.

The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the Over-The-Counter Bulletin Board, the stock market in which shares of our common stock will be quoted, generally have been very volatile and have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following factors, some of which are beyond our control:

· variations in our operating results;

· announcements of technological innovations, new services or product lines by us or our competitors;

· changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;

· changes in operating and stock price performance of other companies in our industry;

· additions or departures of key personnel; and

· future sales of our common stock.

Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, following initial public offerings, the market prices for stocks of companies often reach levels that bear no established relationship to the operating performance of these companies. These market prices are generally not sustainable and could vary widely. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.

We will incur increased costs and compliance risks as a result of becoming a public company.

As a public company, we will incur significant legal, accounting and other expenses that Green Power and the Huayang Companies did not incur as private companies prior to the Exchange. We will incur costs associated with our public company reporting requirements. We also anticipate that we will incur costs associated with recently adopted corporate governance requirements, including certain requirements under the Sarbanes-Oxley Act of 2002, as well as new rules implemented by the SEC and the National Association of Securities Dealers (“NASD”). We expect these rules and regulations, in particular Section 404 of the Sarbanes-Oxley Act of 2002, to significantly increase our legal and financial compliance costs and to make some activities more time-consuming and costly. Like many smaller public companies, we face a significant impact from required compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires management of public companies to evaluate the effectiveness of internal control over financial reporting and the independent auditors to attest to the effectiveness of such internal controls and the evaluation performed by management. The SEC has adopted rules implementing Section 404 for public companies as well as disclosure requirements. The Public Company Accounting Oversight Board, or PCAOB, has adopted documentation and attestation standards that the independent auditors must follow in conducting its attestation under Section 404. We are currently preparing for compliance with Section 404; however, there can be no assurance that we will be able to effectively meet all of the requirements of Section 404 as currently known to us in the currently mandated timeframe. Any failure to implement effectively new or improved internal controls, or to resolve difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet reporting obligations or result in management being required to give a qualified assessment of our internal controls over financial reporting or our independent auditors providing an adverse opinion regarding management’s assessment. Any such result could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

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We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

If we fail to maintain the adequacy of our internal controls, our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act of 2002 could be impaired, which could cause our stock price to decrease substantially.

Since, prior to the share exchange transaction, Fulland operated as a private company without public reporting obligations, Fulland has committed limited personnel and resources to the development of the external reporting and compliance obligations that would be required of a public company. Recently, we have taken measures to address and improve our financial reporting and compliance capabilities and we are in the process of instituting changes to satisfy our obligations in connection with joining a public company, when and as such requirements become applicable to us. Prior to taking these measures, we did not believe we had the resources and capabilities to do so. We plan to obtain additional financial and accounting resources to support and enhance our ability to meet the requirements of being a public company. We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls, reporting systems or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially.

We do not anticipate paying any cash dividends.

We presently do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends is within the discretion of our Board of Directors. We presently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.

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SELECTED CONSOLIDATED FINANCIAL DATA

You should read the summary consolidated financial data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition or Plan of Operations” and our predecessor’s financial statements and the related notes included elsewhere in this report. We derived the financial data for the fiscal years ended December 31, 2006 and 2005 and for the nine months ended September 30, 2007 and 2006, and as of September 30, 2007 and December 31, 2006 from the financial statements included in this report. The historical results are not necessarily indicative of the results to be expected for any future period.

	Nine months ended September 30,					Year ended December 31,		Year ended December 31,
	2007		2006			2006		2005
	(Unaudited)		(Unaudited)			(Audited)		(Audited)
Net Revenues	$	16,589,475	$	12,344,395		$	18,198,810	$	12,082,376
Cost of Sales		11,831,546		8,830,941			12,758,065		8,863,823
Gross Profit		4,757,929		3,513,454			5,44,745		3,218,553
Total Operating Expenses		773,981		768,956			761,367		825,244
Income from Operations		3,983,948		2,744,498			4,679,378		2,393,309
Total Other Income (Expense)		6,740,454		(5,515	)		5,465		22,036
Income Before Income Taxes		10,724,402		2,738,983			4,673,913		2,371,273
Income Taxes		1,315,094		913,397			1,542,391		789,218
Net Income	$	9,409,308	$	1,825,586		$	3,131,522	$	1,582,055

		As of September 30,	As at December 31,
		2007		2006			2005
		(Unaudited)
Consolidated Balance Sheet Data:
Cash and Cash Equivalents	$	600,745	$	421,390		$	230,179
Working Capital (Deficit)		3,496,562		(137,493	)		(4,859,689	)
Total Assets		22,865,264		14,249,768			13,444,629
Total Current Liabilities		4,759,451		6,077,249			8,626,687
Total Stockholders’ Equity		18,105,813		8,172,519			4,817,942

The share exchange transaction under the Exchange Agreement is deemed to be a reverse acquisition, where the Registrant (the legal acquirer) is considered the accounting acquiree and Fulland (the legal acquiree) is considered the accounting acquirer. Certain information regarding pro forma financial information for the share exchange transaction is included as Exhibit 99.3 to the current report on Form 8-K filed on November 13, 2007.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion of the financial condition and results of operation of the Registrant for the fiscal years ended December 31, 2006 and 2005, and for the nine months ended September 30, 2007 and 2006 should be read in conjunction with the selected consolidated financial data, the financial statements and the notes to those statements that are included elsewhere in this Current Report on Form 8-K (“Form 8-K”). Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 8-K. We use terms such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

Prior to November 13, 2007, we were a public reporting blind pool company with no assets. On November 13, 2007, we executed and completed the transactions contemplated by the share exchange agreement with Fulland and its stockholders and Synergy, which was then our principal stockholder. Pursuant to this agreement, and simultaneously with a financing from sales of our 3% convertible subordinated notes, (i) we issued 36,577,704 shares of common stock to the former stockholders of Fulland (in exchange for their shares in Fulland) and (ii) purchased 8,006,490 shares of common stock from Synergy for $625,000 and cancelled such shares. The $625,000 payment was made from the proceeds of the financing.

Fulland conducts its business operations through its wholly-owned subsidiary, Greenpower, in PRC as a wholly foreign owned limited liability company. Greenpower, through the Huayang Companies, is engaged in the design and manufacture of dye machines, auxiliary electrical equipment and related parts or fittings and the sale of such product and relevant consulting services or post-sale services. Greenpower is also currently distributing rolled rings made by unrelated manufacturer, but is in the process of setting up its own rolled ring manufacturing facility. Greenpower operates and controls the Huayang Companies through contractual arrangements. Fulland used the contractual arrangements to acquire control of the Huayang Companies, instead of acquiring the business of Huayang Companies in order not to violate the laws of the PRC which significantly restrict a PRC company from selling its assets to a foreign entity other than for cash and otherwise impose restriction on foreign investment in PRC companies.

The acquisition of Fulland was accounted for as a reverse merger because on a post-merger basis, the former shareholders of Fulland held a majority of the outstanding common stock of the Company on a voting and fully-diluted basis. As a result of the share exchanges, Fulland was deemed to be the acquirer for accounting purposes. Accordingly, the financial statement data presented are those of Fulland (including the Huayang Companies) for all periods prior to our acquisition of Fulland on November 13, 2007, and the financial statements of the consolidated companies from the acquisition date forward.

We are not engaged in any business or operations other than pursuant to the business conducted by the Huayang Companies. As such, we are completely dependent on the contractual arrangements. As described in the financial statements included in this report, the assets and liabilities at September 30, 2007 and the results of operations for the nine months ended September 30, 2007 and 2006 and the years ended December 31, 2006 and 2005 are those of the Huayang Companies. All of those assets and operations are located in the PRC and the contractual arrangements are subject to interpretation and enforcement under the laws of the PRC. If we are unable to enforce any legal rights we may have under these contracts or otherwise, our ability to conduct our business is in jeopardy. In addition, the terms of these contracts expire in November 2016 and there are no assurances these agreements will be renewed. If the Contractual Arrangements are not renewed or are significantly modified, unless we have expanded our business and operations, of which there are no assurances, we will in all likelihood be forced to cease our operations. Further, changes in the laws of the PRC may affect our ability to conduct our business in the present manner.

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Through September 30, 2007, and continuing thereafter, our revenues have been derived from two unrelated businesses - the manufacturing of dyeing and finishing equipment and the manufacture of electrical power equipment. We market products from these two segments with independent marketing groups to different customer bases. The dyeing and finishing equipment business has been our principal source of revenue and operating income, accounting for 83.3% of our revenue and 89.3% of our operating income in the nine months ended September 30, 2007, 81.8% of our revenue and 81.3% of our operating income in the year ended December 31, 2006, 96.3% of our revenue and substantially all of our operating income in the year ended December 31, 2005. Substantially all of our sales of these products are made to companies in the PRC. As a result, we are dependent upon the continued growth of the textile industry in the PRC. To the extent that growth in this industry stagnates in the PRC, whether as a result of export restrictions from countries such as the United States, who are major importers of Chinese-made textiles, or shifts in international manufacturing to countries which may have a lower cost than the PRC or overexpansion of the Chinese textile industry, we will have more difficult in selling these products in the PRC, and we may have difficulty exporting our equipment. Further, as the textile industry seeks to lower costs by purchasing equipment that uses the most technological developments to improve productivity, reduce costs and have less adverse environmental impact, if we are not able to offer products utilizing the most current technology, our ability to market our products will suffer. Although we seek to work with our customers in designing equipment to meet their anticipated needs, we cannot assure you that we will be able to develop products and enhancements that are required or desired by the industry.

In our electrical power equipment division, we manufacture specialty equipment used in the production of coal generated electricity. In 2007, we commenced the sale and distribution of rolled rings as part of our electrical power equipment division. Revenues from our electrical power equipment division accounted for accounting for 16.7% of revenues and 10.7% of operating income in the nine months ended September 30, 2007, 18.2% of revenues and 18.7% of operating income in the year ended December 31, 2006, and 3.7% of revenues and no portion of operating income in the year ended December 31, 2005. During the nine months ended September 30, 2007, we began to generate revenues from the sale of rolled rings. These activities accounted for 3.3% of revenues in the nine months ended September 30, 2007. Revenues from the electrical power equipment division were not significant for the nine months ended September 30, 2006. We market the electrical power equipment to operators of coal-fired electricity generation plants and coking plants. Our ability to market these products is dependent upon the continued growth of these plants and our ability to offer products that enable their operators to operate through a cleaner process than would otherwise be available at a reasonable cost. To the extent that government regulations are adopted that require power and coking plants to reduce or eliminate polluting discharges, our equipment would need to be designed to meet such requirements. Rolled rings, which are presently made for us by unrelated manufacturers, can be used in a number of industries. We are in the process of constructing our own manufacturing facility to produce rolled rings for use primarily by the wind power industry. Using the proceeds from our November 2007 financing, we intend to complete phase one of the facility by October 2008. Wind power currently accounts for a small percentage of the power generated in the PRC, and our ability to market to this segment is dependent upon both the growth of the acceptance of wind power as an energy source in the PRC and the acceptance of our products. We expect the most significant cash expenditure that we will incur before we can generate significant revenues from wind power business segment is the acquisition of newly-constructed buildings and the related land use rights from Wuxi Huayuang Boiler Company, Ltd., in which we hold a 33% interest, for $11.9 million. As of September 30, 2007, we had made payments of $5.9 million, which are classified as deposits on long-term assets on the balance sheet. The remaining balance of $6.0 million is due in the first quarter of 2008.

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Critical Accounting Policies and Estimates

Use of Estimates

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Reverse Acquisition

On November 13, 2007, we acquired Fulland in a transaction in which we issued 36,577,704 shares of common stock to the former stockholders of Fulland and purchased 8,006,490 shares of common stock from our then-principal stockholder and cancelled such shares. The exchange was treated as a recapitalization that gave effect to the share exchange agreement discussed above. Under generally accepted accounting principles, our acquisition of Fulland is considered to be capital transactions in substance, rather than a business combination. That is, the acquisition is equivalent to the acquisition by Fulland of us, with the issuance of stock by Fulland for the net monetary assets of the Company. This transaction is accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition, except that no goodwill is recorded. Under reverse takeover accounting, our historical financial statements are those of the Fulland, which is treated as the acquiring party for accounting purposes. Since Fulland and Greenpower has not been engaged in any business activities, our financial statements for periods prior to the closing of the reverse acquisition reflect only business of the Huayang Companies. The financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented. Thus, the 36,577,704 shares of common stock issued to the former Fulland stockholders are deemed to be outstanding from December 31, 2004.

Variable Interest Entities

Pursuant to FASB Interpretation No. 46R “Consolidation of Variable Interest Entities” (“FIN 46R”), an Interpretation of Accounting Research Bulletin No. 51, we are required to include in our consolidated financial statements the financial statements of variable interest entities. FIN 46R requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss for the variable interest entity or is entitled to receive a majority of the variable interest entity’s residual returns. Variable interest entities are those entities in which we, through contractual arrangements, bear the risk of, and enjoy the rewards normally associated with ownership of the entity, and therefore we are the primary beneficiary of the entity. As a result of our contractual agreements with the Huayang Companies, we are entitled to the profits of the Huayang Companies in addition to other rights. Both of these companies are variable interest entities, and their financial statements are consolidated with ours.

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Inventories

Inventories, consisting of raw materials and finished goods related to our products, are stated at the lower of cost or market utilizing the weighted average method.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using straight-line method over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows:

	Useful Life
Building and building improvements	20 - 40	Years
Manufacturing equipment	10 - 15	Years
Office equipment and furniture	5-8	Years
Vehicle	5	Years

The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.

Long-lived assets are reviewed periodically, or more often if circumstances dictate, to determine whether their carrying value has become impaired. We consider assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. We also re-evaluate the amortization periods to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we examine the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

Intangible assets

There is no private ownership of land in the PRC. All land in the PRC is owned by the government and cannot be sold to any individual or company. The government grants a land use right which permits the holder of the land use right to use the land for a specified period. Our land use rights were granted with a term of 50 years. Any transfer of the land use right requires government approval. We have recorded as an intangible asset the costs paid to acquire a land use right. The land use rights are amortized on the straight-line method over the term of the 50 year term of the land use right.

Purchased technological know-how includes secret formulas, manufacturing processes, technical, procedural manuals and the certificate of drugs production and is amortized using the straight-line method over the expected useful economic life of five years, which reflects the period over which those formulas, manufacturing processes, technical and procedural manuals are kept secret in accordance with the agreement between us and the selling parties.

Our Intangible assets are reviewed periodically or more often if circumstances dictate, to determine whether their carrying value has become impaired. We consider assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. We also re-evaluate the amortization periods to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

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Revenue recognition

Product sales are generally recognized when title to the product has transferred to customers in accordance with the terms of the sale. The Company recognizes revenues in accordance with the SEC Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements” as amended by SAB No. 104 (together, “SAB 104”), and Statement of Financial Accounting Standards (SFAS) No. 48 “Revenue Recognition When Right of Return Exists.” SAB 104 states that revenues should not be recognized until it is realized or realizable and earned. In general, the Company records revenues when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured.  

We have no contractual obligation to accept returns. However, on a case by case negotiated basis, the Company may permit customers to return their products. To date, the Company has not had to accept any returns. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 48, “Revenue Recognition when the Right of Return Exists,” revenues is recorded net of an allowance for estimated returns. Such reserves are based upon management’s evaluation of historical experience and estimated costs. The amount of the reserves ultimately required could differ materially in the near term from amounts included in the consolidated financial statements.

Shipping and handling

Shipping and handling costs related to costs of goods sold are included in costs of goods sold. We install and setup equipment for our customers at their facilities.

Research and development

Research and development costs are expensed as incurred, and are included in general and administrative expenses. These costs primarily consist of cost of material used and salaries paid for the development of the Company’s products and fees paid to third parties. Our total research and development expense through September 30, 2007 has not been significant.

Income taxes

The Company is governed by the Income Tax Law of the PRC. Income taxes are accounted for under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probably that taxable profit will be available against which deductible temporary differences can be utilized.

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Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

The Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no affect on the Company’s financial statements.

Value added tax

Enterprises or individuals who sell products, engage in repair and maintenance or import and export goods in the PRC are subject to a value added tax in accordance with Chinese laws. The value added tax standard rate is 17% of the gross sales price. A credit is available whereby VAT paid on the purchases of semi-finished products, raw materials used in the production of the Company’s finished products, and payment of freight expenses can be used to offset the VAT due on sales of the finished product. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice of the PRC, the Company paidVAT and business tax based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenues are recognized, and there may be a considerable delay between the date on which the revenues are recognized and the date on which the tax invoice is issued. In the event that the PRC tax authorities dispute the date of which revenues is recognized for tax purposes, the PRC tax office has the right to assess a penalty, which can range from zero to five times the amount of the taxes that are determined to be late or deficient. In the event that a tax penalty is assessed on late or deficient payments, the penalty will be expensed as a period expense if and when a determination has been made by the taxing authorities that a penalty is due.

Recent accounting pronouncements

In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements” (SFAS 157), which provides guidance for how companies should measure fair value when required to use a fair value measurement for recognition or disclosure purposes under generally accepted accounting principle (GAAP). SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact, if any, the adoption of SFAS 157 will have on its financial statements.

In December 2006, FASB Staff Position No. EITF 00-19-2,“Accounting for Registration Payment Arrangements,” was issued. The FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5,“Accounting for Contingencies.” The Company believes that its current accounting is consistent with the FSP. Accordingly, adoption of the FSP had no effect on its financial statements.

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In June 2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for use in Future Research and Development Activities” (“FSP EITF 07-3”), which addresses whether nonrefundable advance payments for goods or services that used or rendered for research and development activities should be expensed when the advance payment is made or when the research and development activity has been performed. The Company is currently evaluating the effect of this pronouncement on financial statements.

Results of Operations

Nine months ended September 30, 2007 and 2006

The following table sets forth the results of our operations for the periods indicated as a percentage of total net sales:

	Nine Months Ended September 30,
	2007				2006
		Dollars	Percent			Dollars		Percent
Revenues	$	16,589,475	100.00	%	$	12,344,395		100.00	%
Cost of sales		11,831,546	71.32	%		8,830,941		71.54	%
Gross profit		4,757,929	28.68	%		3,513,454		28.46	%
Selling, general and administrative expenses		773,981	4.66	%		769,956		6.23	%
Income from operations		3,983,948	24.01	%		2,744,498		22.23	%
Other income (expenses)		6,740,454	40.63	%		(5,515	)	(0.04	)%
Income before provision for income taxes		10,724,402	64.65	%		2,738,983		22.19	%
Provision for income taxes		1,315,094	7.93	%		913,397		7.40	%
Net income		9,409,308	56.72	%		1,825,586		14.79	%
Other comprehensive income Foreign currency translation adjustment		523,986	3.16	%		226,670		1.84	%
Comprehensive income	$	9,933,294	59.88	%	$	2,052,256		16.63	%

The following table sets forth information as to the revenues, gross profit and gross margin for our two lines of business for the nine months ended September 30, 2007 and 2006.

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	Nine Months Ended September 30,
	2007			2006
Dyeing and finishing equipment
Revenues	$	14,487,221		$	12,159,238
Cost of sales		10,259,754			8,653,159
Gross profit		4,227,467			3,506,079
Gross margin		29.18	%		28.83	%
Electric power equipment
Revenues	$	2,102,254		$	185,157
Cost of sales		1,571,792			177,782
Gross profit		530,462			7,375
Gross margin		25.23	%		3.98	%

Revenues. During the nine months ended September 30, 2007, we had revenues of $16,589,475, as compared to revenues from sales of $12,344,395 for the nine months ended September 30, 2006, an increase of $4,245,080 or approximately 34.4%. The overall increase in total revenues was attributable to development of our electric power equipment division from $185,157 for the nine months ended September 30, 2006 to $2,102,254 for the nine months ended September 30, 2007. This increases resulted from revenues from large orders for coker equipment and introduction of new line of products such as large-scaled wind-powered electricity engine rings that are three meters in diameter. Our revenues from dyeing and finishing equipment increased $2,327,983, or 19.1%, from $12,159,238 for the nine months ended September 30, 2006, to $14,487,221 for the nine months ended September 30, 2007. This increase in revenue resulted from our marketing efforts designed both to develop new customers and make follow-on sales to existing customers.

Cost of sales. Cost of sales for the nine months ended September 30, 2007 increased $3,000,605 or 33.98%, from $8,830,941 for the nine months ended September 30, 2006 to $11,831,546 for the nine months ended September 30, 2007. Cost of goods sold for Huayang Dye Machine was $10,259,754 for the nine months ended September 30, 2007 as compared to $8,653,159 for the nine months ended September 30, 2006, representing 70.8% and 71.2% of revenues, respectively. Cost of goods sold for Huayang Electrical Power Equipment was $1,571,792 for the nine months ended September 30, 2007 as compared to $177,782 for the nine months ended September 30, 2006, representing 74.8% and 96.0%, respectively.

Gross profit. Gross profit was $4,757,929 for the nine months ended September 30, 2007 as compared to $3,513,454 for the nine months ended September 30, 2006, representing gross margins of 28.68% and 28.46%, respectively. Gross profit for Huayang Dye Machine was $4,227,467 for the nine months ended September 30, 2007 as compared to $3,506,079 for the nine months ended September 30, 2006, representing gross margins of approximately 29.2% and 28.8%, respectively. The increase in our gross profits was immaterial and attributable to normal fluctuations. Gross profit for Huayang Electrical Power Equipment was $530,462 for the nine months ended September 30, 2007 as compared to $7,375 for the nine months ended September 30, 2006, representing gross margins of approximately 25.2% and 4.0%, respectively. The increase in our gross profits was mainly due to significant increase in sales while we are focusing on this segment of our business, and we are dedicated to maximizing our revenues in our wind power segment. During the nine months ended September 30, 2006, our revenues from Huayang Electrical Power Equipment was insignificant and we were not able to implement any manufacturing efficiencies.

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Selling, general and administrative expenses. Selling, general and administrative expenses totaled $773,981 for the nine months ended September 30, 2007, as compared to $768,956 for the nine months ended September 30, 2006, an increase of $5,025 or approximately 0.65%.

Other income (expenses). Our other expenses consisted of financial expenses and non-operating expenses. We had other income of $6,740,454 for the nine months ended September 30, 2007 as compared to other expenses $5,515 for the nine months ended September 30, 2006, a difference of $6,745,969. Other income for the nine months ended September 30, 2007 reflects the reversal of tax accrual previously made as the result of the grant by the local tax agency to the Huayang Companies of a special tax exemption and release from any unpaid corporate income tax and value added tax liabilities and any related penalties through September 30, 2007. This waiver covered all tax reporting periods through September 30, 2007. Total tax waiver for the nine months ended September 30, 2007 is summarized as follows:

		September 30, 2007
VAT tax exemption	$	2,527,183
Income tax exemption		4,206,021
Others		38,238
Total	$	6,771,442

Net income. As a result of the factors described above, our net income for the nine months ended September 30, 2007 was $9,409,308, or $.26 per share (basic and diluted), as compared to $1,825,586, or $.05 per share (basic and diluted) for the nine months ended September 30, 2006.

Years Ended December 31, 2006 and 2005

The following table sets forth the results of our operations for the periods indicated as a percentage of net sales:

	Years Ended December 31,
	2007					2006
	Dollars		Percent			Dollars		Percent
Revenues	$	18,198,810		100.0	%	$	12,082,376		100.0	%
Cost of sales		12,758,065		70.1	%		8,863,823		73.4	%
Gross profit		5,440,745		29.9	%		3,218,553		26.6	%
Selling, general and administrative expenses		761,367		4.2	%		825,244		6.8	%
Income from operations		4,679,378		25.7	%		2,393,309		19.8	%
Other expenses		5,465		0.0	%		22,036		0.2	%
Income before provision for income taxes		4,673,913		25.7	%		2,371,273		19.6	%
Provision for income taxes		1,542,391		8.5	%		789,218		6.5	%
Net income		3,131,522		17.2	%		1,582,055		13.1	%
Other comprehensive income Foreign currency translation adjustment		223,055		1.2	%		0		0.9	%
Comprehensive income	$	3,354,577		18.4	%	$	1,582,055		14.0	%

The following table sets forth information as to the revenues, gross profit and gross margin for our two lines of business for the years ended December 31, 2006 and 2005.

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	Year Ended December 31,
	2006			2005
Dyeing and finishing equipment:
Revenues	$	14,877,367		$	11,634,985
Cost of sales		10,331,383			8,472,445
Gross profit		4,545,984			3,162,540
Gross margin		30.56	%		27.18	%
Electric power equipment:
Revenues	$	3,321,443		$	447,391
Cost of sales		2,426,682			391,378
Gross profit		894,761			56,013
Gross margin		26.94	%		12.52	%

Revenues. During the year ended December 31, 2006, we had revenues of $18,198,810 as compared to revenues of $12,082,376 for the year December 31, 2005, an increase of approximately 50.6%. This increase is attributable to an increase in the sale of dye machinery of $3,242,382 or 27.9% and an increase in the sale of electrical power equipment of $2,874,052 or 642.4%. During 2005, we had just commenced sales of electrical power equipment, and our revenues from that division were not significant. The increase in revenues in that division reflected our ability to market our products.

Cost of sales. Cost of sales for 2006 increased $3,894,242 or 43.9%, from $8,863,823 for the year ended December 31, 2005 to $12,758,065 for the year ended December 31, 2006. The cost of sales reflected the increases in sales in both divisions. Since the sales volume for 2006 increased significantly from 2005, we were able to improve our manufacturing efficiencies which reduced the cost of sales as a percentage of revenues for this division.

Gross profit. Gross profit was $5,440,745 for the year ended December 31, 2006 as compared to $3,218,553 for the year ended December 31, 2005, resulting in gross margins of 29.9% and 26.6% or revenues, respectively. The increase in our gross profits was mainly due to an increase in sales and manufacturing efficiencies which affected both of our divisions.

Depreciation expense. Depreciation expenses totaled $267,130 for the year ended December 31, 2006, as compared to $255,260 for the year ended December 31, 2005, an increase of approximately $11,870 or 4.7%.

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Selling, general and administrative expenses. Selling, general and administrative expenses totaled $494,237 for the year ended December 31, 2006, as compared to $569,984 for the year ended December 31, 2005, a decrease of $75,747 or 13.3%. This decrease is primarily attributable to increased operating efficiencies.

Other expenses. Other expenses, representing primarily interest expense net of interest income, was not significant in either year. We had other expenses of $5,465 for the year ended December 31, 2006 as compared to $22,036 for the year ended December 31, 2005, a decrease of $16,571 or 75.2%. The decrease in other expenses is mainly due to an increase in interest income of $7,514 offset by a decrease in interest expense of $9,057 due to a decrease in borrowings.

Net income. For the reasons described above, our net income for the year ended December 31, 2006 was $3,131,522 or $.09 per share (basic and diluted) as compared to $1,582,055 or $.04 per share (basic and diluted) for the year ended December 31, 2005.

Liquidity and Capital Resources

Our working capital position increased $3,634,055 to $3,496,562 at September 30, 2007 from a working capital deficit of $137,493 at December 31, 2006. This increase in working capital is primarily attributable to an increase in accounts receivable of $2,693,879, an increase in cash of $179,355, a decrease in VAT and service taxes payable and income taxes payable of approximately $4,713,982 which related to a one-time tax exemption, and offset by a decrease in inventory of approximately $483,537, a decrease in prepaid expenses and other of approximately $70,686, an increase in short term bank loans of approximately $281,352, an increase in accounts payable of approximately $1,210,679, and an increase in accrued expense and advances from customers of approximately $1,875,936.

Net cash provided by operating activities for the nine months ended September 30, 2007 was $6,184,985 as compared to net cash used in operating activities of $699,219 for the nine months ended September 30, 2006. For the nine months ended September 30, 2007, net cash provided by operating activities was primarily attributable to our net income of $9,409,308, increases in our accounts payable, accrued expenses, VAT and service taxes payable, income taxes payable and advances from customers of $1,161,510, $22,058, $1,011,064, $957,899, and $1,830,260, respectively, and decreases in inventories and prepaid and other current assets of $426,386 and $72,686, respectively, offset by increase in accounts receivable, advances to suppliers, and non cash items of $2,538,272, $5,745,400, $127,886, and $6,040,028, respectively. For the nine months ended September 30, 2006, net cash used in operating activities was attributable primarily to increases in our accounts receivables, inventories, and advanced to suppliers of $1,717,524, $420,986, and $87,155, respectively and decreases in accounts payable, accrued expenses, and advances from customers of $189,035, $1,829,448, and $514,002, respectively, and offset by increases in our taxes payables of $1,529,183, non cash item of $706,181, and net income of $1,825,586.

Net cash used by investing activities for the nine months ended September 30, 2007 amounted to $6,286,352 was primarily attributable to increase in deposit on long-term assets and due from related parties of $5,792,030 and $486,032, respectively. Net cash used in investing activities for the nine months ended September 30, 2006 amounted to $610,645 was primarily attributable to decrease in due from related parties of $636,238.

Net cash provided financing activities was $260,561 for the nine months ended September, 30, 2007 and was consisted of proceeds from loans payable. Net cash provided financing activities was $29,454 for the nine months ended September, 30, 2006 and was attributed to repayments to loans payable of $455,209 and offset by increase in related party advances of $484,663.

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We reported a net increase in cash for the nine months ended September 30, 2007 of $179,355 as compared to a net decrease in cash of $55,322 for the nine months ended September 30, 2006.

In connection with the expansion of our electrical equipment division to develop and market rolled rings and related equipment to the wind power industry, we are acquiring newly-constructed buildings and the related land use rights from Wuxi Huayuang Boiler Company, Ltd., in which we holds a 33% interest, for $11.9 million. As of September 30, 2007, we had made payments of $5.9 million, which are classified as deposits on long-term assets on the balance sheet. The remaining balance of $6.0 million is due in the first quarter of 2008.

Subsequent to September 30, 2007, we raised gross proceeds of $5,525,000 from the sale of our 3% notes in the principal amount of $5,525,000. The notes are automatically converted into an aggregate of 14,787,135 shares of Series A Preferred Stock and warrants to purchase 11,176,504 shares of common stock at $0.58 per share, 5,588,252 shares of common stock at $0.83 per share, and 2,065,000 shares of common stock at $0.92 per share upon the filing of the restated certificate of incorporation which, among other changes, creates a class of preferred stock and gives the directors the power to create one or more series of preferred stock and creates the Series A Preferred Stock.

The purchase agreement pursuant to which we issued the notes includes the following provisions.

l We agreed to appoint such number of independent directors that would result in our board being comprised of a majority of independent directors, that the audit committee would consist solely of independent directors and the compensation committee would have a majority of independent directors within 90 days after the closing, or February 11, 2008. Failure to meet this date will result in liquidated damages commencing February 12, 2008, until the date on which the requirement is satisfied. Thereafter, if we do not meet these requirements for a period of 60 days for an excused reason, as defined in the purchase agreement, or 75 days for a reason which is not an excused reason, this would result in the imposition of liquidated damages.

l We agreed to have a qualified chief financial officer who may be a part-time chief financial officer until February 13, 2008. If we cannot hire a qualified chief financial officer promptly upon the resignation or termination of employment of a former chief financial officer, we may engage an accountant or accounting firm to perform the duties of the chief financial officer. In no event shall we either (i) fail to file an annual, quarter or other report in a timely manner because of the absence of a qualified chief financial officer, or (ii) not have a person who can make the statements and sign the certifications required to be filed in an annual or quarterly report under the Securities Exchange Act of 1934.

l No later than February 11, 2008, we will have an audit committee comprised solely of not less than three independent directors and a compensation committee comprised of at least three directors, a majority of which shall be independent directors.

l Liquidated damages for failure to comply with the preceding three covenants are computed in an amount equal to 12% per annum of the purchase price, up to a maximum of 12% of the purchase price, which is $663,000, which is payable in cash or Series A Preferred Stock, at the election of the Investors.

l We entered into a registration rights agreement with the Investors pursuant to which we agreed to file, by January 12, 2008, a registration statement covering the common stock issuable upon conversion of the Series A Preferred Stock and exercise of the warrants and to have the registration statement declared effective by June 11, 2008. Our failure to have the registration statement declared effective by June 11, 2008 and other timetables provided in the registration rights agreement would result in the imposition of liquidated damages, which are payable through the issuance of additional shares of Series A Preferred Stock at the rate of 4,860 shares of Series A Preferred Stock for each day, based on the proposed registration of all of the underlying shares of common stock, with a maximum of 1,770,000 shares. The number of shares issuable per day is subject to adjustment if we cannot register all of the required shares as a result of the Securities and Exchange Commission’s interpretation of Rule 415. The registration rights agreement also provides for additional demand registration rights in the event that the investors are not able to register all of the shares in the initial registration statement.

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l The investors have a right of first refusal on future financings.

l Until the earlier of November 13, 2011 or such time as the investors shall have sold all of the underlying shares of common stock, we are restricted from issuing convertible debt or preferred stock.

l Until the earlier of November 13, 2010 or such time as the investors have sold 90% of the underlying shares of common stock, our debt cannot exceed twice the preceding four quarters earnings before interest, taxes, depreciation and amortization.

l We entered into an escrow agreement pursuant to which we issued a 3% convertible promissory note due March 31, 2008 in the principal amount of $3,000,000. Upon the filing of the restated certificate of incorporation and the certificate of designation relating to the Series A Preferred Stock, this note will be automatically converted into 24,787,135 shares of Series A Preferred Stock. The note and the Series A Preferred Stock issuable upon conversion of the note are to be held in escrow subject to the following:

o 14,787,135 shares are held pursuant to the following provisions. If, for either the year ended December 31, 2007 or 2008, our pre-tax earnings per share are less than the target numbers, all or a portion of such shares are to be delivered to the investors. If, for either year, the pre-tax earnings are less then 50% of the target, all of the shares are to be delivered to the investors. If the shortfall is less than 50%, the number of shares to be delivered to the investors is determined on a formula basis.

o The target number for 2007 is $0.08316 per share, and the target number for 2008 is $0.13131 per share. The per share numbers are based on all shares that are outstanding or are issuable upon exercise or conversion of all warrants or options, regardless of whether such shares would be used in computing diluted earnings per share under GAAP.

o If we do not file our Form 10-KSB for either 2007 or 2008 within 30 days after the filing is required, after giving effect to any extension permitted by Rule 12b-25 under the Securities Exchange Act of 1934, any shares remaining in escrow shall be delivered to the Investors.

o The remaining 10,000,000 shares of Series A Preferred Stock are to be delivered to the investors in the event that, based on our audited financial statements for 2007 or 2008 we or certain affiliated companies owe any taxes to the PRC government or any authority or taxing agency of the PRC. For each $1.00 of such tax liability, four shares of Series A Preferred Stock are to be delivered to the investors.

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l With certain exceptions, until the investors have sold all of the underlying shares of common stock, if we sells common stock or issues convertible securities with a conversion or exercise price which is less than the conversion price of the Series A Preferred Stock, the conversion price of the Series A Preferred Stock and the exercise price of the warrants is reduced to the lower price.

The warrants have a term of five years, and expire on November 13, 2012. The warrants provide a cashless exercise feature; however, the holders of the warrants may not make a cashless exercise during the twelve months commencing on November 13, 2007 in the case of the $0.58 warrants, and during the eighteen (18) period commencing on November 13, 2007 in the case of the $0.83 warrants and $0.92 warrants, and after these respective periods only if the underlying shares are not covered by an effective registration statement.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows.

At September 30, 2007, our contractual obligations consisted of $665,106, which represented bank loans that are due within one year. In addition, in connection with the expansion of our business to manufacture rolled rings, principally for the wind power industry, we entered into an agreement with a related party in which we have a 33% interest, to purchase buildings and land use rights for approximately $11.9, million, of which approximately $5.9 million has been paid the approximately $6.0 million is due during the first quarter of 2008. Since our obligations are denominated in RMB, any change in the exchange rate would affect the amount of the payment in United States dollars.

Off-balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

Quantitative and Qualitative Disclosures about Market Risk

We do not use derivative financial instruments in our investment portfolio and we have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. We consider investments in highly liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents. However, in order to manage the foreign exchange risks, we may engage in hedging activities to manage our financial exposure related to currency exchange fluctuation. In these hedging activities, we might use fixed-price, forward, futures, financial swaps and option contracts traded in the over-the-counter markets or on exchanges, as well as long-term structured transactions when feasible.

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Interest Rates. Our exposure to market risk for changes in interest rates relates primarily to our short-term investments and short-term obligations; thus, fluctuations in interest rates would not have a material impact on the fair value of these securities. At September 30, 2007, we had approximately $600,745 in cash and cash equivalents. A hypothetical 2% increase or decrease in interest rates would not have a material impact on our earnings or loss, or the fair market value or cash flows of these instruments.

Foreign Exchange Rates. All of our sales are denominated in Renminbi (“RMB”). As a result, changes in the relative values of U.S. Dollars and RMB affect our reported levels of revenues and profitability as the results are translated into U.S. Dollars for reporting purposes. In particular, fluctuations in currency exchange rates could have a significant impact on our financial stability due to a mismatch among various foreign currency-denominated sales and costs. Fluctuations in exchange rates between the U.S. dollar and RMB affect our gross and net profit margins and could result in foreign exchange and operating losses.

Our exposure to foreign exchange risk primarily relates to currency gains or losses resulting from timing differences between signing of sales contracts and settling of these contracts. Furthermore, we translate monetary assets and liabilities denominated in other currencies into RMB, the functional currency of our operating business. Our results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in our statement of shareholders’ equity. We recorded net foreign currency gains of $523,986 and $226,670 in the nine months ended September 30, 2007 and 2006, respectively. We have not used any forward contracts, currency options or borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of future exchange rate fluctuations on our results of operations and may incur net foreign currency losses in the future. As our sales denominated in foreign currencies, such as RMB and Euros, continue to grow, we will consider using arrangements to hedge our exposure to foreign currency exchange risk.

Our financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. The value of your investment in our stock will be affected by the foreign exchange rate between U.S. dollars and RMB. To the extent we hold assets denominated in U.S. dollars, including the net proceeds to us from this offering, any appreciation of the RMB against the U.S. dollar could result in a change to our statement of operations and a reduction in the value of our U.S. dollar denominated assets. On the other hand, a decline in the value of RMB against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in our company and the dividends we may pay in the future, if any, all of which may have a material adverse effect on the price of our stock.

DESCRIPTION OF PROPERTY

Our main office and our manufacturing facilities are located in Wuxi, China, on a plot of land approximately 20,000 square meters in size. We have been issued a Land Use Right Certificate for the land until April 19, 2010 by the municipal government of Wuxi City, which may be renewed. We currently have seven buildings on the property as follows: office building, warehouse, raw material processing hall, metal processing hall, assembling hall, laboratory and quality control, and guard house. We believe that our existing facilities are well maintained and in good operating condition.

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Additionally, in 2003, we leased a plot of land approximately 31 Chinese acres in size from the local government of the Town of Chienzhou in Wuxi City. The lease has a term of fifty years (until October 29, 2053), and requires a one-time payment of approximately RMB 4 million (approximately US $500,000), which sum has been paid. This property is presently vacant, but will facilitate our expansion plans in the future.

SECURITY OWNERSHIP PRIOR TO CHANGE OF CONTROL

The following table sets forth certain information concerning the number of our common shares owned beneficially as of November 12, 2007 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors and named executive officers, and (iii) officers and directors as a group. Unless otherwise indicated, our shareholders listed possess sole voting and investment power with respect to the common shares shown.

Title of Class	Name and Address of Beneficial Owners (1)	Number of Shares of Common Stock Beneficially Owned (2)		Percent of Shares of Common Stock Beneficially Owned
Common Stock	Synergy Business Consulting, LLC (3)		8,006,490		95.13	%
Common Stock	Bartly J. Loethen (3) (4)		8,006,490		95.13	%
	All officers and directors as a group (1 person)		8,006,490		95.13	%

(1)

Unless otherwise noted, the address for each of the named beneficial owners and directors and officers is 730 West Randolph, 6th Floor, Chicago, Illinois 60661.

(2)

Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on November 12, 2007. As of November 12, 2007, there were 8,416,000 common shares issued and outstanding.

(3)	Mr. Bartly J. Loethen is the manager and majority member of Synergy Business Consulting, LLC and has voting and investment power with respect to the securities.
(4)	Chairman, President, Vice President, Chief Financial Officer, Treasurer, Secretary and Sole Director.

SECURITY OWNERSHIP IMMEDIATELY AFTER CHANGE OF CONTROL

The following table sets forth certain information regarding our common stock beneficially owned after the Closing on November 13, 2007, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding common stock, (ii) each current executive officers and directors, and (iii) all current executive officers and directors as a group.

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Title of Class	Name and Address Of Beneficial Owners (1)	Number of Shares of Common Stock Beneficially Owned (2)			Percent of Shares of Common Stock Beneficially Owned (3)
Common Stock	Jianhua Wu Chief Executive Officer and Chairman of the Board of Directors		18,414,175 (4	)		49.79% (4	)
Common Stock	Adam Wasserman (5) Chief Financial Officer and Treasurer		0			0	%
Common Stock	Lihua Tang Secretary and Director		18,414,175 (4	)		49.79% (4	)
Common Stock	Xi Liu Director		0			0	%
Common Stock	Shike Zhu Director		0			0	%
Common Stock	Maxworthy Ltd. (4)		18,414,175 (4	)		49.79% (4	)
Common Stock	Yunxia Ren (6)		8,190,200			22.14	%
Common Stock	Haoyang Wu		2,047,550			5.54	%
Common Stock	Pacific Rim Consultants, Inc., Trustee (7)		3,089,753			8.35	%
Common Stock	All officers and directors as a group (6 persons)		18,414,175			49.79	%

(1)

Unless otherwise noted, the address for each of the named beneficial owners is: No. 9 Yanyu Middle Road, Qianzhou Village, Huishan District, Wuxi City, Jiangsu Province, PRC.

(2)

Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding.

(3)

Pursuant to the terms of the Exchange Agreement dated November 13, 2007, we issued 36,577,704 common shares to the Fulland Shareholders equal to approximately 99% of our issued and outstanding common shares as of the Closing Date of the Share Exchange Transaction. Immediately after the Closing of the Share Exchange Transaction, after giving effect to the cancellation of 8,006,490 common shares by Synergy Business Consulting, LLC pursuant to the terms of the Exchange Agreement, there are approximately 36,987,214 issued and outstanding shares of our common stock. Percentage totals may vary slightly due to rounding.

(4)

Mr. Jianhua Wu and Ms. Lihua Tang are majority shareholders of Maxworthy Ltd., which address is: P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands, and Mr. Wu is also the managing director of Maxworthy. Thus, both Mr. Wu and Ms. Tang indirectly own the shares of the Registrant that are held by Maxworthy, through their majority ownership of Maxworthy. Thus, the number of shares reported herein as beneficially owned by Mr. Wu and Ms. Tang reflect the shares held by Maxworthy, and Mr. Wu and Ms. Tang may be deemed to have or share investment control over Maxworthy’s portfolio.

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(5)	Adam Wasserman’s address is: 1643 Royal Grove Way, Weston, Florida 33327.
(6)	Yunxia Ren’s address is: No. 25 Jin Xiu Second Village, Qianzhou Town, Huishan District, Wuxi City, Jiangsu Province, PRC.
(7)	Pacific Rim Consultants, Inc.’s address is: 2875 South Orange Avenue, Suite 500-2125, Orlando, Florida 32806-545. Pacific Rim Consultants is holding the shares of common stock of the Registrant as trustee for the benefits of seven beneficiaries. Justin A. Wolfson is the President of Pacific Rim Consultants and has sole voting and investment control of the common stock of the Registrant held by Pacific Rim Consultants.

MANAGEMENT

Appointment of New Officers and Directors

In connection with the Exchange Agreement, effective as of the Closing Date, Bartly J. Loethen resigned as the sole member of our Board, and four (4) successor directors were appointed, namely, Jianhua Wu, Lihua Tang, Xi Liu and Shike Zhu (collectively the “New Directors”). Concurrently,  Mr. Loethen resigned from his positions as our President, Vice President, Chief Financial Officer, Treasurer and Secretary, and we appointed three (3) new officers (collectively the “New Officers”). Descriptions of the New Directors and New Officers can be found below in the section titled “New Management.”

New Management

The following table sets forth the names and ages of the New Directors and New Officers, who assumed their positions on the Closing Date of the Exchange Agreement:

Name	Age	Position
Mr. Jianhua Wu	52	Chief Executive Officer and Chairman of the Board of Directors
Mr. Adam Wasserman	43	Chief Financial Officer and Treasurer
Ms. Lihua Tang	53	Secretary and Director
Xi Liu	40	Director
Shike Zhu	45	Director

Jianhua Wu, Chief Executive Officer and Chairman of the Board, founded both of the Huayang Companies and is presently the Executive Director and General Manager of Huayang Dye Machine, positions that he has held since September 2002. Mr. Wu is a certified mechanical engineer, and worked in such capacity prior to founding Huayang Dye Machine. Under Mr. Wu’s leadership, Huayang Dye Machine has been the recipient of numerous awards in recognition of the quality of its products. Mr. Wu is the husband of Ms. Lihua Tang, our Secretary and a director.

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Adam Wasserman, Chief Financial Officer, joined the company upon the closing of the reverse take-over transaction. Since November 1999, Mr. Wasserman has been CEO of CFO Oncall, Inc., a Weston, Florida based provider of consultant accounting services specializing in financial reporting, budgeting and planning, mergers and acquisitions, audit preparation services, accounting, automated systems, banking relations and internal controls. Mr. Wasserman has also served as the Chief Financial Officer of Transax International Limited since May 2005, Lotus Pharmaceuticals, Inc. since October 2006, and Genesis Technology Group, Inc, since 2000. From June 1991 to November 1999 he was Senior Audit Manager at American Express Tax and Business Services, in Fort Lauderdale, Florida where his responsibilities included supervising, training and evaluating senior staff members, work paper review, auditing, maintaining positive client relations, preparation of tax returns and preparation of financial statements and the related footnotes. From September 1986 to May 1991, Mr. Wasserman was employed by Deloitte & Touche, LLP. During his employment, his significant assignments included audits of public (SEC reporting) and private companies, tax preparation and planning, management consulting, systems design, staff instruction, and recruiting. Mr. Wasserman holds a Bachelor of Administration from the State University of New York at Albany. He is a CPA (New York) and a member of The American Institute of Certified Public Accountants and is a director and the treasurer and an executive board member of Gold Coast Venture Capital Association.

Lihua Tang, Secretary and Director, is presently the Executive Director and General Manager of Huayang Electric Equipment, and a Director and Deputy General Manager of Huayang Dye Machine in charge of personnel and procurement. Ms. Tang has held these positions since September 2002. Ms. Tang is a certified assistant mechanical engineer, and worked in such capacity before joining the Huayang Companies. Ms. Tang is the wife of Mr. Jianhua Wu, our Chief Executive Officer and Chairman of the Board of Directors.

Xi Liu is an independent director on our Board. Mr. Liu has extensive material engineering backgrounds, being a 1989 graduate of Jiangsu University of Technology with a degree in metal material and heat treatment, and having been trained at the Volvo facilities in Penta, Sweden in 1999. Immediately after graduating from the university, Mr. Fang worked at China FAW Group Corporation, the oldest and one of largest Chinese automakers, as an engineer, before leaving in 2005 as an assistant manager in the Purchasing Department of the Wuxi Diesel Engine Works plant. He then joined WAM Bulk Handling Machinery (Shanghai) Co., Ltd., part of the Italian industrial giant WAMGROUP, as a purchasing and sourcing manager.

Shike Zhu is an independent director on our Board. From 1998 to the present, Mr. Zhu has been a Director at TianTai TianRi Rubber Products Co., Ltd. in Zhejiang Province. In addition, Mr. Zhu is the Chairman of HuaiNan TianRui Goods & Materials Co., Ltd. in Anhui Province, a position he has held since 2003. Mr. Zhu is a graduate of Zhejiang TV University.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of the New Directors and New Officers have been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor have they been a party to any judicial or administrative proceeding during the past five years, except for matters that were dismissed without sanction or settlement, that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

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Code of Ethics

We have not adopted a code of ethics as of the date of this current report. Prior to the Closing, we had one individual acting as a sole director and executive officer of the company, and we had no employees. Accordingly, our management believed it was not necessary to have a code of ethics at such time. However, following the transaction under the Exchange Agreement we plan to adopt a code of ethics.

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, and to the best of our knowledge, other than reported in our annual report on Form 10-KSB filed on August 13, 2007, all executive officers, directors and greater than 10% shareholders filed the required reports in a timely manner.

Board of Directors, Board Meetings and Committees

Our Board is comprised of four (4) members, two of whom, Jianhua Wu and Lihua Tang, are management members of the Huayang Companies. All members of the Board serve in this capacity until their terms expire or until their successors are duly elected and qualified. Our bylaws provide that the authorized number of directors is between three (3) and five (5).

Mr. Jianhua Wu has been appointed as the Chairman of the Board. In this capacity he is responsible for meeting with our Chief Financial Officer to review our financial and operating results, agendas and minutes of board and committee meetings, and presiding at the meetings of the committees of the Board.

Our Board held no formal meetings during the most recently completed fiscal year. All proceedings of the Board were conducted by resolutions, consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of Delaware and our By-laws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.

Board Committees; Director Independence

As of this date our Board has not appointed a nominating committee, audit committee or compensation committee, or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Up to the present time, our Board and management did not believe that it was necessary to have such committees because we believed the functions of such committees could be adequately performed by our Board. Further, we are not a “listed company” under SEC rules and thus we are not required to have a compensation committee or a nominating committee. The functions ordinarily handled by these committees are currently handled by our entire Board.

However, under the terms of the Purchase Agreement, we agreed to form, within 90 days after the Closing, an audit committee comprised solely of not less than three independent directors and a compensation committee comprised of not less than three directors, a majority of whom are independent directors. Further, if our Board decides to form an executive or nominating committee or any other committee, we agreed that a majority of the members of such committee would be comprised of independent directors. If we do not comply with this obligation to have a majority of independent directors, or independent directors do not comprise all of the members of the audit committee and a majority of the members of the compensation committee or any other committee within the grace periods provided, we are obligated to pay to the Investors, as liquidated damages and not as a penalty, an amount equal to twelve percent (12%) per annum of the aggregate purchase price of the Series A Preferred Stock under the Purchase Agreement, payable in the manner and at the time provided in the Purchase Agreement, and such payment will be based on the number of days that such condition exists.

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We presently do not have, nor are we required to have, an “audit committee financial expert” as such term is defined in the rules promulgated under the Securities Act of 1933 and the Securities and Exchange Act of 1934.

Of the four New Directors, management believes that Mr. Xi Liu and Mr. Shike Zhu would be considered “independent” under Rule 4200(a)(15) of the National Association of Securities Dealers listing standards. Since our Board currently consists of two non-independent directors and two independent directors, we intend to seek and appoint a qualified candidate to fill a vacancy on the board as an additional independent director.

We do not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. Our Board believes that, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to our Board and we do not have any specific process or procedure for evaluating such nominees. Our Board assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.

A shareholder who wishes to communicate with our Board may do so by directing a written request addressed to our Chief Executive Officer at the address appearing on the face page of this Current Report. We do not have a policy regarding the attendance of board members at the annual meeting of shareholders.

Compensation Committee Interlocks and Insider Participation

No interlocking relationship exists between our Board and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

EXECUTIVE COMPENSATION

The following summary compensation table indicates the cash and non-cash compensation earned during the fiscal year ended December 31, 2006 by both our sole executive officer immediately prior to, and our current executive officers appointed immediately after, the Closing of the Exchange Agreement.

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Summary Compensation Table

Name and Principal Position	Year		Salary ($)			Bonus ($)		Stock Awards ($)		Option Awards ($)		Non- Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compen- sation ($)		Total ($)
Bartly J. Loethen, former President, Vice President, Chief Financial Officer, Treasurer and Secretary (1)		2006		-0-			-0-		-0-		-0-		-0-		-0-		-0-		-0-
Jianhua Wu, Current Chief Executive Officer (2)		2006		3,610	(4)		-0-		-0-		-0-		-0-		-0-		-0-		3,610
Adam Wasserman, Current Chief Financial Officer (3)		2006		-0-			-0-		-0-		-0-		-0-		-0-		-0-		-0-

(1)	Mr. Bartly J. Loethen became our sole executive officer as President, Vice President, Chief Financial Officer, Treasurer and Secretary on March 14, 2007, and in connection with the closing of the Exchange Agreement, he resigned from all of these positions on November 13, 2007.
(2)	Mr. Jianhua Wu became our Chief Executive Officer on November 13, 2007, in connection with the share exchange transaction contemplated by the Exchange Agreement. Mr. Wu’s compensation for the fiscal year ended December 31, 2006 reflects compensation received from the Huayang Companies.
(3)	Mr. Adam Wasserman was appointed as our Chief Financial Officer effective November 13, 2007, subsequent to the end of the most recent fiscal year ended December 31, 2006. Accordingly, no compensation was paid to Mr. Wasserman during 2006. A description of his employment agreement can be found below in the section titled “Employment Agreements”.
(4)	Expressed in U.S. Dollars based on the average interbank exchange rate of RMB 7.81750 for each 1.00 U.S. Dollar for fiscal year ended December 31, 2006.

Employment Agreements

Effective November 13, 2007, Mr. Adam Wasserman was appointed as our Chief Financial Officer. Under the terms of the employment agreement, Mr. Wasserman will provide general services to us as CFO, including but not limited to advising our management about financial issues related to being a public company. We will pay Mr. Wasserman for his services at an hourly rate of approximately $135 per hour. We estimate that the fees payable to our CFO for services rendered will be approximately $8,350 per month, of which 50% may be paid in shares of our common stock at the beginning of each quarterly period. The share price used to calculate the number of shares for our CFO fees will be tied to the most recent price of our common shares in any financing by us. We will reimburse Mr. Wasserman for any out of pocket expenses, including travel expenses.

Potential Payments upon Termination or Change-In-Control

SEC regulations state that we must disclose information regarding agreements, plans or arrangements that provide for payments or benefits to our executive officers in connection with any termination of employment or change in control of the company. We currently have no employment agreements with any of our executive officers providing for payments or benefits in connection with a termination of employment or change in control of the company, nor any compensatory plans or arrangements resulting from the resignation, retirement or any other termination of any of our executive officers, from a change-in-control, or from a change in any executive officer’s responsibilities following a change-in-control. As a result, we have omitted this table. 

Director Compensation

We do not have any agreements or formal plan for compensating our directors for their service in their capacity as directors, although our Board may, in the future, award stock options to purchase shares of common stock to our directors.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Agreement and Plan of Share Exchange

On November 13, 2007, we executed the Exchange Agreement with Fulland and the Fulland Shareholders, on the one hand, and we and our majority stockholder, on the other hand. Fulland owns 100% of Green Power, which is a WFOE under the laws of the PRC. Green Power has entered into a series of contractual arrangements with the Huayang Companies, comprising of Huayang Dye Machine and Huayang Electrical Power Equipment, both of which are limited liability companies headquartered in, and organized under the laws of, the PRC. Fulland, Green Power and the Huayang Companies are sometimes referred to together as the Huayang Group.

Pursuant to the Exchange Agreement, on November 13, 2007, we issued 36,577,704 shares of common stock to the Fulland Shareholders in exchange for 100% of the common stock of Fulland. Concurrently with the closing, Synergy, our then majority stockholder, sold 8,006,490 shares of our common stock to us for which we paid Synergy $625,000 from the proceeds of the November 2007 private placement. After the Closing, we had a total of 36,987,214 shares of common stock outstanding, with the Fulland Shareholders (and their assignees) owning approximately 99% of the total issued and outstanding common shares, and the balance held by those who held our stockholders common stock prior to the Closing, other than Synergy.

As a result of the Share Exchange Transaction, the Fulland Shareholders became our controlling shareholders and Fulland became our wholly owned subsidiary. In connection with Fulland becoming our wholly owned subsidiary, we acquired the business and operations of the Huayang Group, and our principal business activities are conducted through the Huayang Group’s operating companies in China, namely Huayang Dye Machine and Huayang Electrical Power Equipment.

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Our Contractual Arrangements with the Huayang Companies and Their Respective Shareholders

PRC law currently limits foreign equity ownership of Chinese companies. To comply with these foreign ownership restrictions, we operate our business in China through a series of contractual arrangements with the Huayang Companies and their respective shareholders that were executed on October 12, 2007. For a description of these contractual arrangements, see “Contractual Arrangements with the Huayang Companies and Their Shareholders” in Item 2.01 above, which is hereby incorporated herein by reference.

Related Party Transactions of the Huayang Companies

Set forth below are the related party transactions since December 31, 2006, among the Huayang Companies’ shareholders, officers and/or directors, and the Huayang Companies. As a result of the share exchange transaction, we have contractual arrangements with the Huayang Companies which give us the ability to substantially influence the Huayang Companies’ daily operations and financial affairs, appoint its senior executives and approve all matters requiring shareholder approval.

Due from related parties

From time to time, the Huayang Companies advanced funds for working capital purposes to companies in which they have partial ownership interests. These advances are non interest bearing, unsecured and payable on demand. At September 30, 2007, we had a receivable from affiliated entities partially owned by the Huayang Companies of $504,962. At September 30, 2007, due from related parties was due from the following:

Name	Relationship	Amount
Wuxi Huayang Yingran Mechanical Ltd. (1)	Cost method investee	$	169,447
Wuxi Huayang Boiler Ltd. (2)	Equity method investee and common ownership		335,515
		$	504,962

(1) Huayang Dye Machine is the owner of five percent of the registered capital of Wuxi Huayang Yingran Mechanical Ltd.

(2) Huayang Electrical Power Equipment is the owner of 33.3% of the registered capital of Wuxi Huayang Boiler Ltd. The remaining 66.67% are owned by Lihua Tang (40%), a director and wife of our CEO, and Haoyang Wu (26.67%), son of our CEO and a shareholder. 

Ms. Lihua Tang had two bank accounts in the PRC under her name, both of which were made available to the Huayang Companies for use in their operations. We used these funds to pay operating expenses of the Huayang Companies, as a result of which, at December 31, 2007, there was no balance in those accounts.

DESCRIPTION OF SECURITIES

Common Stock

Our Company’s Certificate of Incorporation, as amended, provide for authority to issue 75,000,000 shares of common stock with par value of $0.00002 per share.

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After the Closing of the Share Exchange Transaction, we shall have approximately 36,987,214 shares of our common stock issued and outstanding held by approximately 1,138 stockholders of record. Holders of our common stock are entitled to equal voting rights, consisting of one vote per share on all matters submitted to a stockholder vote. Holders of common stock do not have cumulative voting rights. Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. The presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our certificate of incorporation. In the event of liquidation, dissolution or winding up of our company, either voluntarily or involuntarily, each outstanding share of the common stock is entitled to share equally in our assets.

Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.

Under our Certificate of Incorporation, which shall be amended as agreed under the Purchase Agreement, we may not pay any dividends with respect to the Series A Preferred Stock, and further, no dividends may be declared or payable with respect to our common stock while the Series A Preferred Stock is outstanding. We have not paid cash dividends in the past, and due to this restriction we do not expect to pay any dividends within the foreseeable future, and any earnings are expected to be reinvested. In addition, under our Certificate of Incorporation as we agreed to amend it, we will not be permitted to redeem or purchase any shares of our common stock or any other class or series of capital stock which is junior to or on a parity with the Series A Preferred Stock while the Series A Preferred Stock is outstanding.

Preferred Stock

We currently have no shares of preferred stock issued and outstanding, and we currently have no provision for preferred stock in our Certificate of incorporation, and as amended. In connection with the Financing, however, we have entered into agreement to amend our Certificate of Incorporation to authorize the issuance of 60,000,000 shares of preferred stock at a par value of $0.001 per share, which shall be issuable upon the conversion of the notes issued under the Purchase Agreement dated November 13, 2007.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on the Over-The-Counter Bulletin Board (“OTCBB”) under the symbol “CWSI.OB”. In the two year period leading up to December 18, 2007, which is the date we changed our trading symbol to CWSI.OB, our common stock was traded on the OTCBB under the symbol “MLEX”. The following table sets forth, for the periods indicated, the reported high and low closing bid quotations for our common stock as reported on the OTCBB since our inception. The bid prices reflect inter-dealer quotations, do not include retail markups, markdowns or commissions and do not necessarily reflect actual transactions.

Common Stock

Quarter Ended	High Bid		Low Bid
January 31, 2008	$	2.80	$	2.00
October 31, 2007	$	0.40	$	0.37
July 31, 2007	$	0.50	$	0.37
April 30, 2007	$	1.35	$	0.15
January 31, 2007	$	0.15	$	0.15
October 31, 2006	$	0.20	$	0.10
July 31, 2006	$	0.35	$	0.35
April 30, 2006	$	0.35	$	0.35

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Shareholders

After the closing of the Share Exchange Transaction, we had approximately 1,138 shareholders of record of our issued and outstanding common stock.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is Empire Stock Transfer Inc. The transfer agent’s address is 2470 St. Rose Parkway, Suite 304, Henderson, Nevada 89074, and their telephone number is (702) 818-5898.

Dividend Policy

We do not currently intend to pay any cash dividends in the foreseeable future on our common stock and, instead, intend to retain earnings, if any, for future operation and expansion. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board may deem relevant. Pursuant to the Purchase Agreement relating to our November 2007 Financing, we cannot pay dividends as long as the notes or the series A preferred stock is outstanding.

EQUITY COMPENSATION PLAN INFORMATION

We currently do not have any equity compensation plans.

LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

RECENT SALES OF UNREGISTERED SECURITIES

Reference is made to Item 3.02 of this Current Report on Form 8-K/A for a description of recent sales of unregistered securities, which is hereby incorporated herein by reference.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Pursuant to the provisions of the State of Delaware’s General Corporate Law, we have adopted the following indemnification provisions in our Certificate of Incorporation:

“NINTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of § 102 of the General Corporate Law of the State of Delaware, as the same may be amended and supplemented.

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TENTH: The corporation shall, to the fullest extent permitted by § 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.”

The indemnification provisions described above provide coverage for claims arising under the Securities Act and the Exchange Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons pursuant to our Certificate of Incorporation, Bylaws, Delaware’s General Corporate Law, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

WHERE YOU CAN FIND MORE INFORMATION

Because we are subject to the requirements of the Securities Exchange Act, we file reports, proxy statements and other information with the SEC.  You may read and copy these reports, proxy statements and other information at the public reference room maintained by the SEC at its Public Reference Room, located at 100 F Street, N.E. Washington, D.C. 20549.  You may obtain information on the operation of the public reference room by calling the SEC at (800) SEC-0330.  In addition, we are required to file electronic versions of those materials with the SEC through the SEC’s EDGAR system. The SEC also maintains a web site at http://www.sec.gov, which contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.

Item 3.02 Unregistered Sales of Equity Securities

On November 13, 2007, and as described under Item 2.01 above, pursuant to the Exchange Agreement, we issued 36,577,704 shares of our common stock to the Fulland Shareholders in exchange for 100% of the outstanding shares of Fulland. The issuance of these shares was exempt from registration pursuant to Section 4(2) and/or Regulation S thereof. We made this determination based on the representations of the Skystar Shareholders which included, in pertinent part, that such shareholders were either (a) “accredited investors” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, or (b) not a “U.S. person” as that term is defined in Rule 902(k) of Regulation S under the Act, and that such shareholders were acquiring our common stock, for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to the resale or distribution thereof, and that each member understood that the shares of our common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.

On November 13, 2007, and also as described under Item 2.01 above, pursuant to the Purchase Agreement, we issued 3% convertible subordinated notes in the principal amount of $5,525,000 to the Investors in connection with the closing of the Financing described more fully in Item 2.01 above. The issuance of these securities was exempt from registration under Section 4(2) of the Securities Act. The Company made this determination based on the representations of Investors, which included, in pertinent part, that such investors were either (a) “accredited investors” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, or (b) not a “U.S. person” as that term is defined in Rule 902(k) of Regulation S under the Act, and that such Investor was acquiring our common stock, for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to the resale or distribution thereof, and that each Investor understood that the shares of our common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.

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Item 5.01 Changes in Control of Registrant.

As more fully described in Items 1.01 and 2.01 above, on November 13, 2007, we executed the Exchange Agreement by and among Fulland and the Fulland Shareholders, on the one hand, and us and the Majority Stockholder, on the other hand. The Closing of this Share Exchange Transaction occurred on November 13, 2007. Reference is made to the disclosures set forth under Items 1.01 and 2.01 of this Current Report on Form 8-K, which disclosures are incorporated herein by reference.

Under the Exchange Agreement, on the Closing Date, we issued 36,577,704 shares of our common stock to the Fulland Shareholders in exchange for 100% of the capital stock of Fulland. As a result of this transaction, the Fulland Shareholders acquired control of our company because the Reporting Company Shares, in the aggregate, equal approximately 99% of the outstanding shares of our common stock (on a fully-diluted basis) on the Closing Date. Each share of our outstanding common stock entitles the holders of common stock to one vote. Thus, the Fulland Shareholders hold the majority number of voting shares of our company on a fully diluted basis.

The closing of the transactions under the Exchange Agreement, which resulted in the change in control of the Registrant, occurred on November 13, 2007. A copy of the Exchange Agreement is included as Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on November 13, 2007.

In connection with this change in control, and as explained more fully in Item 2.01 above under the section titled “Management” and in Item 5.02 below, effective on November 13, 2007, Bartly J. Loethen resigned as our President, Vice President, Chief Financial Officer, Treasurer and Secretary. Concurrently, Jianhua Wu was appointed as our Chief Executive Officer, Adam Wasserman as our Chief Financial Officer and Ms. Lihua Tang as our Secretary pursuant to the terms of the Exchange Agreement. Additionally, effective on November 13, 2007, Mr. Loethen resigned as the sole member of our Board, and four (4) successor directors were appointed to the Board, namely, Jianhua Wu, Lihua Tang, Xi Liu and Shike Zhu.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b)Resignation of Officers and Directors

Pursuant to the terms of the Exchange Agreement, Bartly J. Loethen resigned as our President, Vice President, Chief Financial Officer, Treasurer, Secretary, and as the sole member of our Board, effective November 13, 2007, the Closing Date of the Exchange Agreement.

(c)Appointment of Officers

In connection with the Share Exchange Transaction, effective November 13, 2007, the following persons were appointed as our officers (individually, a “New Officer” and collectively, the “New Officers”):

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Name	Age	Position
Jianhua Wu	52	Chief Executive Officer
Adam Wasserman	43	Chief Financial Officer
Lihua Tang	53	Secretary

Other than Mr. Jianhua Wu and Ms. Lihua Tang, who are husband and wife, there are no family relationships among any of our New Officers or members of the Board. Other than Mr. Wasserman, none of the New Officers currently has an employment agreement with us. Mr. Wasserman’s employment agreement is more fully described in the section under the heading “Employment Agreement” in Item 2.01 above. Other than the transactions in connection with the Share Exchange Transaction, as described above in Item 2.01, no transactions occurred in the last two years to which we were a party in which any of the New Officers had or is to have a direct or indirect material interest. Related party transactions involving Mr. Jianhua Wu and Ms. Lihua Tang are described in Item 2.01 above. 

Descriptions of our New Officers can be found in Item 2.01 above, in the section titled “New Management.”  

(d)Appointment of Directors

In connection with the Share Exchange Transaction, effective November 13, 2007, the following persons were appointed as new members of our Board (individually, a “New Director” and collectively, the “New Directors”):

Name	Age	Position
Jianhua Wu	52	Chairman of the Board of Directors
Lihua Tang	53	Director
Xi Liu	40	Director
Shike Zhu	45	Director

Other than Mr. Jianhua Wu and Ms. Lihua Tang, who are husband and wife, there are no family relationships among any of our New Officers or New Directors. None of the New Directors has been named or, at the time of this Current Report, is expected to be named to any committee of our Board. Other than the transactions in connection with the Share Exchange Transaction, as described above in Item 2.01, no transactions occurred in the last two years to which we were a party in which any of the New Directors had or is to have a direct or indirect material interest. Related party transactions involving Mr. Jianhua Wu and Ms. Lihua Tang are described in Item 2.01 above.

Descriptions of our New Directors can be found in Item 2.01 above, in the section titled “New Management.”

Item 5.06 Change in Shell Company Status

As explained more fully in Item 2.01 above, we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately before the Closing of the Exchange. As a result of the Exchange, Green Power became our wholly owned subsidiary and main operating business. Consequently, upon the closing of the Exchange we ceased to be a shell company. For information about the Exchange, please see the information set forth above under Item 2.01 of this Current Report on Form 8-K above, which information is incorporated herein by reference.

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Item 9.01   Financial Statement and Exhibits

(a) Financial statements of businesses acquired.

The audited consolidated financial statements of the Huayang Group as of December 31, 2006 and 2005 are filed as Exhibit 99.13 to our current report on Form 8-K filed with the SEC on November 13, 2007 and are incorporated herein by reference.

The unaudited condensed combined financial statements of the Huayang Group as of September 30, 2007 and for the nine and three months ended September 30, 2007 and 2006 are filed as Exhibit 99.23 to this current report and are incorporated herein by reference.

(b) Pro forma financial information.

The Pro Forma Financial Information is filed as Exhibit 99.15 to our current report on Form 8-K filed with the SEC on November 13, 2007 and is incorporated herein by reference.

(c) Shell company transactions.

Reference is made to Items 9.01(a) and 9.01(b) above and the exhibits referred to therein, which are incorporated herein by reference.

(d) Exhibits

Exhibit Number	Description
2.1	Share Exchange Agreement among the Registrant, the Majority Stockholder, Fulland and the Fulland Shareholders dated November 13, 2007*
3.1	Certificate of incorporation of the Registrant as filed with the State of Delaware*
3.2	Amended Certificate of incorporation of the Registrant as filed with the Secretary of Delaware*
3.3	Bylaws of the Registrant*
99.1	Cooperation Agreement dated May 24, 2006 between Shanxi Province Coking Design Research Institute and Wuxi Huayang Electrical Power Equipment Co., Ltd. (“Huayang Electrical Power Equipment”)*
99.2	Amended and Restated Securities Purchase Agreement dated January 31, 2008**
99.3	Registration Rights Agreement dated November 13, 2007*
99.4	Lock-up Agreement dated November 13, 2007*
99.5	Form of 3% Convertible Subordinated Note dated November 13, 2007*
99.6	“Make Good” 3% Convertible Subordinated Note dated November 13, 2007*
99.7	Form of “A” Warrant to Purchase Common Stock**
99.8	Form of “B” Warrant to Purchase Common Stock**
99.9	Form of “C” Warrant to Purchase Common Stock**

65

99.10	Consulting Services Agreement between Green Power Environment Technology (Shanghai) Co., Ltd. (“Green Power”) and Wuxi Huayang Dye Machine Co., Ltd. (“Huayang Dye Machine”) dated October 12, 2007*
99.11	Equity Pledge Agreement between Green Power, Huayang Dye Machine and the owners of Huayang Dye Machine dated October 12, 2007*
99.12	Operating Agreement between Green Power, Huayang Dye Machine and the owners of Huayang Dye Machine dated October 12, 2007*
99.13	Proxy Agreement between Green Power, Huayang Dye Machine and the owners of Huayang Dye Machine dated October 12, 2007*
99.14	Option Agreement between Green Power, Huayang Dye Machine and the owners of Huayang Dye Machine dated October 12, 2007*
99.15	Consulting Services Agreement between Green Power and Huayang Electrical Power Equipment dated October 12, 2007*
99.16	Equity Pledge Agreement between Green Power, Huayang Electrical Power Equipment and the owners of Huayang Electrical Power Equipment dated October 12, 2007*
99.17	Operating Agreement between Green Power, Huayang Electrical Power Equipment and the owners of Huayang Electrical Power Equipment dated October 12, 2007*
99.18	Proxy Agreement between Green Power, Huayang Electrical Power Equipment and the owners of Huayang Electrical Power Equipment dated October 12, 2007*
99.19	Option Agreement between Green Power, Huayang Electrical Power Equipment and the owners of Huayang Electrical Power Equipment dated October 12, 2007*
99.20	Legal Opinion from PRC Counsel dated November 13, 2007*
99.21	Letter of Resignation by Bartly J. Loethen to the Board of Directors of the Registrant*
99.22	Audited Consolidated Financial statements of the Huayang Group for the years ended December 31, 2006 and December 31, 2005*
99.23	Unaudited Consolidated Financial statements of the Huayang Group for the nine months ended September 30, 2007 and 2006**
99.24	Pro Forma Financial Information*

* Filed with the current report on Form 8-K of the Registrant filed with the Securities and Exchange Commission on November 13, 2007, and incorporated by reference.

** Filed herewith.

66

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 1, 2008	China Wind Systems, Inc.
By:	/s/ Jianhua Wu
	Jianhua Wu
	Chief Executive Officer

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EX-99.2

AMENDED AND RESTATED

SECURITIES PURCHASE AGREEMENT

BETWEEN

CHINA WIND SYSTEMS, INC.

AND

BARRON PARTNERS LP

AND

THE OTHER INVESTORS NAMED HEREIN

dated

November 13, 2007

and amended and restated on

January 31, 2008

AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT

This AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (the “Agreement”) amends and restates that certain Securities Purchase Agreement made and entered into as of the 13^th day of November, 2007 (“Prior Agreement”) between Malex, Inc., a Delaware corporation, renamed China Wind Systems, Inc. (the “Company”), and Barron Partners LP, a Delaware limited partnership (“Barron”), and any other investors named on the signature page of this Agreement (together with Barron, the “Investors” and each an “Investor”). This Agreement is made and entered into as of January 31, 2008.

RECITALS:

WHEREAS, under the Prior Agreement, the Investors purchased from the Company, upon the terms and subject to the conditions of the Prior Agreement, for the Purchase Price, as hereinafter defined, one or more convertible notes (the “Notes”) in the aggregate principal amount of $5,525,000, which Notes are convertible into either

(a) an aggregate of (i) 14,787,135 shares of the Company’s Series A Convertible Preferred Stock, par value $.001 per share (“Series A Preferred Stock”), with each share of Series A Preferred Stock being initially convertible into one (1) share of the Company’s common stock, par value $.001 per share (“Common Stock”), subject to adjustment, and (ii) common stock purchase warrants (the “Warrants”) to purchase 11,176,504 shares of Common Stock at $0.58 per share, 5,588,252 shares of Common Stock at $0.83 per share, and 2,065,000 shares at $0.92 per share; or

(b) an aggregate of (i) 14,787,135 shares of the Common Stock, subject to adjustment, and (ii) Warrants to purchase 11,176,504 shares of Common Stock at $0.58 per share, 5,588,252 shares of Common Stock at $0.83 per share, and 2,065,000 shares at $0.92 per share; or

(c) if the Restated Certificate and the Certificate of Designation, as hereinafter defined, shall not have been filed as required by this Agreement and the Note, 33,616,891 shares of Common Stock; and

WHEREAS, each Investor purchased Notes in the principal amount set forth in Schedule A of the Agreement;

WHEREAS, contemporaneously with the Closing, the Company acquired all of the issued and outstanding capital stock of Fulland Limited, a Cayman Islands corporation (“Fulland”), which is the sole stockholder of Greenpower Environmental Technologies Co., Ltd., a corporation organized under the laws of the Peoples’ Republic of China as a wholly foreign owned enterprise (“Greenpower”); and

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WHEREAS, Greenpower is a party to agreements with Huayang Dye Machine Co., Ltd. (“Dye Co.”) and Huayang Electricity Power Equipment Co., Ltd. (“Power Co.”) and, together with Dye Co., collectively, the “PRC Companies”), pursuant to which Greenpower has the right to advise, consult, manage and operate the PRC Companies and collect and own all of their net profits, and, pursuant to a proxy and voting agreement and a voting trust and escrow agreement, the stockholders of the PRC Companies have vested their voting control over the PRC Companies to Greenpower; and

WHEREAS, the parties are entering into this Agreement to amend and restate certain terms of the Prior Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby conclusively acknowledged, the parties hereto, intending to be legally bound, agree as follows:

Article 1

INCORPORATION BY REFERENCE AND DEFINITIONS

1.1Incorporation by Reference. The foregoing recitals and the Exhibits and Schedules attached hereto and referred to herein, are hereby acknowledged to be true and accurate, and are incorporated herein by this reference.

1.2Supersedes Other Agreements. This Agreement, to the extent that it is inconsistent with any other instrument or understanding among the parties, shall supersede such instrument or understanding to the fullest extent permitted by law. A copy of this Agreement shall be filed at the Company’s principal office.

1.3Certain Definitions. For purposes of this Agreement, the following capitalized terms shall have the following meanings (all capitalized terms used in this Agreement that are not defined in this Article 1 shall have the meanings set forth elsewhere in this Agreement):

1.3.1“4.9% Limitation” has the meaning set forth in Section 2.1.3 of this Agreement.

1.3.2“1933 Act” means the Securities Act of 1933, as amended.

1.3.3“1934 Act” means the Securities Exchange Act of 1934, as amended.

1.3.4“Affiliate” means a Person or Persons directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the Person(s) in question. The term “control,” as used in the immediately preceding sentence, means, with respect to a Person that is a corporation, the right to the exercise, directly or indirectly, of more than 50% of the voting rights attributable to the shares of such controlled corporation and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such controlled Person.

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1.3.5“Articles” means the certificate of incorporation of the Company, as the same may be amended from time to time.

1.3.6“Authorized Stock Proviso” has the meaning set forth in Section 4.4.3 of this Agreement.

1.3.7“Bylaws” means the bylaws of the Company, as the same may be amended from time to time.

1.3.8“Certificate of Designation” means the certificate of the rights, preferences and privileges, subject to the limitations, with respect to the Series A Preferred Stock. The Certificate of Designation shall be in substantially the form of Exhibit A to this Agreement.

1.3.9“Closing”means the consummation of the transactions contemplated by this Agreement, all of which transactions shall be consummated contemporaneously with the Closing.

1.3.10“Closing Date” means the date on which the Closing occurs.

1.3.11“Closing Escrow Agreement” shall mean the agreement between the Company, the Investors and the Escrow Agent pursuant to which securities are deposited into escrow to be held as provided in Section 6 of this Agreement. The Closing Escrow Agreement shall be in substantially the form of Exhibit B to this Agreement.

1.3.12“Common Stock” means the Company’s common stock, which is presently designated as the common stock, par value $.00002 per share. Pursuant to the Restated Certificate, the par value will be changed to $.001 per share.

1.3.13“Company’s Governing Documents” means the Articles and Bylaws.

1.3.14“Delaware Law” shall mean the Delaware General Corporation Law.

1.3.15“EBITDA” means consolidated earnings before interest, taxes, depreciation and amortization, determined in accordance with GAAP.

1.3.16“Escrow Agreement” means the Escrow Agreement dated November 6, 2007, among the Company, Barron Partners and Sichenzia Ross Friedman Ference LLP, as Escrow Agent.

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1.3.17“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors of and consultants (other than consultants whose services relate to the raising of funds) of the Company pursuant to any stock or option plan that was or may be adopted by a majority of independent members of the Board of Directors of the Company or a majority of the members of a committee of independent directors established for such purpose, (b) securities upon the exercise of or conversion of any (i) securities issued hereunder and pursuant to the Registration Rights Agreement, the Notes, the Warrants and the Certificate of Designation, (ii) any other options, warrants or convertible securities which are outstanding on after completion of the Closing or (iii) securities issued pursuant to options and warrants issued under a plan adopted pursuant to (a) above, and (c) securities issued pursuant to acquisitions, licensing agreements, or other strategic transactions, provided any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business which the Company’s board of directors believes is beneficial to the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

1.3.18“GAAP” means United States generally accepted accounting principles consistently applied.

1.3.19“Make-Good Note” shall mean the note issued pursuant to Section 6.15.9 of this Agreement, and shall be in substantially the form of Exhibit C to this Agreement.

1.3.20“Material Adverse Effect” means any adverse effect on the business, operations, properties or financial condition of the Company or any of its Subsidiaries that is material and adverse to the Company and its Subsidiaries taken as a whole and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company or any Subsidiary to perform any of its material obligations under this Agreement, the Registration Rights Agreement or the Warrants or to perform its obligations under any other material agreement.

1.3.21“Note(s)” shall have the meaning set forth in the introductory paragraph of this Agreement and shall be in substantially the form of Exhibit D to this Agreement.

1.3.22“Person” means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.

1.3.23“PRC Agreements” shall mean the agreements between Greenpower and the PRC Companies.

1.3.24“PRC Company Stockholders” shall mean the stockholders of the PRC Companies, which, as of the date of this Agreement, are WU Jianhua and TANG Lihua, as to Dye Co. and TANG Lihua, WU Haoyang (WU Jianhua’s son) and Dye Co., as to Power Co.

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1.3.25“Preferred Stock” means the preferred stock, par value $.001 per share, as created by the Restated Certificate.

1.3.26“Pre-Tax Income” means income before income taxes determined in accordance with GAAP plus (a) any charges under GAAP which are reflected in the Company’s financial statements which relate to the transaction contemplated by this Agreement and the Registration Rights Agreement and the other Transaction Documents, including the issuance of the Note and any other securities issuable pursuant to this Agreement, the Note and the Registration Rights Agreement, minus (b) the amount, if any, by which all non-recurring losses or expenses exceed all non-recurring items or income or gain. Pre-Tax Income shall not be adjusted if all non-recurring items of income or gain exceed all non-recurring losses or expenses. Items shall be deemed to be non-recurring only if they qualify as non-recurring pursuant to GAAP.

1.3.27“Proxy Statement” means a proxy statement filed with the SEC pursuant to Section 14(a) of the 1934 Act which seeks stockholder approval of the Restated Certificate or an information statement pursuant to Section 14(c) of the 1934 Act advising stockholders that the holders of a majority of the shares of Common Stock have approved the Restated Certificate, whichever shall be appropriate.

1.3.28“Purchase Price” means the $5,525,000 to be paid by the Investors to the Company for the Securities.

1.3.29“Registration Rights Agreement” means the registration rights agreement between the Investor and the Company in substantially the form of Exhibit E to this Agreement.

1.3.30“Registration Statement” means the registration statement under the 1933 Act to be filed with the SEC for the registration of the Shares pursuant to the Registration Rights Agreement.

1.3.31“Related Companies” shall mean Fulland, Greenpower and the PRC Companies, each of which is a “Related Company.”

1.3.32“Restated Certificate” means the restated certificate of incorporation which is in substantially the form of Exhibit F to this Agreement.

1.3.33“Restricted Stockholders” shall have the meaning set forth in Section 6.16 of this Agreement.

1.3.34“Restriction Termination Date” shall mean the date on which the Investors shall have (a) converted all Notes and shares of Series A Preferred Stock and exercised all Warrants (other than Warrants that shall have expired unexercised) and (b) sold the underlying Shares in the public market.

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1.3.35“Restriction Termination Date at 90%” shall mean the date on which the Investors shall have (a) converted Notes and shares of Series A Preferred Stock and exercised Warrants (other than Warrants that shall have expired unexercised) and (b) sold 90% of the Total Shares.

1.3.36“Securities” means the Note, the shares of Series A Preferred Stock, the Warrants and the Shares.

1.3.37“SEC” means the Securities and Exchange Commission.

1.3.38“SEC Documents” means, at any given time, the Company’s latest Form 10-K or Form 10-KSB and all Forms 10-Q or 10-QSB and 8-K and all proxy statements or information statements filed between the date the most recent Form 10-K or Form 10-KSB was filed and the date as to which a determination is being made.

1.3.39“Series A Preferred Stock” means the shares of Series A Preferred Stock having the rights, preferences and privileges and subject to the limitations set forth in the Certificate of Designation.

1.3.40“Shares” means, collectively, the shares of Common Stock issued or issuable (i) upon conversion of the Notes or Series A Preferred Stock and (ii) upon exercise of the Warrants.

1.3.41“Subsidiary” means an entity in which the Company and/or one or more other Subsidiaries directly or indirectly own either 50% of the voting rights or 50% of the equity interests.

1.3.42“Subsequent Financing” means any offer and sale of shares of Preferred Stock or debt that is initially convertible into shares of Common Stock or otherwise senior or superior to the Series A Preferred Stock.

1.3.43“Target Number” has the meaning set forth in Section 6.15.2 of this Agreement.

1.3.44“Total Shares” means the number of shares of Common Stock as have been or would be issued upon conversion of the Notes and the Series A Preferred Stock and Warrants issuable upon conversion of the Notes. The number of Total Shares shall be adjusted to reflect any change in the conversion price of the Notes or Series A Preferred Stock and the expiration of any Warrants.

1.3.45“Transaction Documents” means this Agreement, all Schedules and Exhibits attached hereto, the Notes, the Certificate of Designation, the Warrants, the Registration Rights Agreement, the Closing Escrow Agreement and all other documents and instruments to be executed and delivered by the parties in order to consummate the transactions contemplated hereby.

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1.3.46“Unsold Shares” means the difference between (a) the number of shares of Series A Preferred Stock which were initially issued upon conversion of the Notes and (b) the number of shares of Series A Preferred Stock, regardless of when such shares were issued, which have been converted into Common Stock with the Common Stock having been sold.

1.3.47“Warrants” means the common stock purchase warrants in substantially the forms of Exhibits G-1, G-2 and G-3 to this Agreement.

1.4References. All references in this Agreement to “herein” or words of like effect, when referring to preamble, recitals, article and section numbers, schedules and exhibits shall refer to this Agreement unless otherwise stated.

1.5Value of Series A Preferred Stock. Whereever this Agreement provides for the delivery of shares of Series A Preferred Stock in satisfaction of an obligation under this Agreement, a share of Series A Preferred Stock shall have a value equal to its liquidation preference as set forth in the Certificate of Designation.

Article 2

SALE AND PURCHASE OF NOTES; PURCHASE PRICE

2.1Sale of Notes.

2.1.1Upon the terms and subject to the conditions set forth herein, and in accordance with applicable law, the Company agrees to sell to the Investors, and each Investor severally agrees to purchase from the Company, on the Closing Date, Notes for portion of the Purchase Price set forth after the Investor’s name on Schedule A to this Agreement in the principal amount set forth in said Schedule A. At or prior to the Closing each Investor shall wire the Investor’s portion of the Purchase Price to the Escrow Agent, who shall release the Purchase Price to the Company upon receipt of instructions from the Investor and the Company as provided in the Escrow Agreement. The Company shall cause the Notes to be issued to the Investors upon the release of the Purchase Price to the Company by the Escrow Agent pursuant to the terms of the Escrow Agreement.

2.1.2The Notes shall be convertible into Preferred Stock and Warrants, or Common Stock and Warrants or Common Stock in the manner set forth in the first introductory paragraph of this Agreement, all as set forth in the Notes. As provided in the Notes, upon filing of the Restated Certificate and the Certificate of Designation, the Notes shall be automatically converted, without any action on the part of the holder thereof, into an aggregate of 14,787,135 shares of Series A Preferred Stock and Warrants to purchase an aggregate of 11,176,504 shares of Common Stock at $0.58 per share, 5,588,252 shares of Common Stock at $0.83 per share, and 2,065,000 shares at $0.92 per share, less any securities issued as a result of a conversion prior to such automatic conversion. The Warrants are subject to redemption by the Company as provided in those Warrants.

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2.1.3Except as expressly provided in the Certificate of Designation and the Warrants, an Investor shall not be entitled to convert the Notes or Series A Preferred Stock into shares of Common Stock or to exercise the Warrants to the extent that such conversion or exercise would result in beneficial ownership by the Investor and its Affiliates of more than 4.9% of the then outstanding number of shares of Common Stock on such date after giving effect to such conversion or exercise. For the purposes of this Agreement beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act, and Regulation 13d-3 thereunder. The limitation set forth in this Section 2.1.3 is referred to as the “4.9% Limitation.” As a result of the 4.9% Limitation, no Investor will have 5% of the voting power of the Company; provided, however, that this sentence shall not affect any of an Investor’s rights under the Certificate of Designation.

Article 3

CLOSING DATE AND DELIVERIES AT CLOSING

3.1Closing Date. The Closing of the transactions contemplated by this Agreement, unless expressly determined herein, shall be held at the offices of the Sichenzia Ross Friedman Ference LLP, 61 Broadway, New York, New York 10006, at 2:00 P.M. local time, on the Closing Date or on such other date and at such other place as may be mutually agreed by the parties, including closing by facsimile with originals to follow.

3.2Deliveries by the Company. In addition to and without limiting any other provision of this Agreement, the Company agrees to deliver, or cause to be delivered, to the escrow agent under the Escrow Agreement, the following:

(a)At or prior to Closing, an executed Agreement with all exhibits and schedules attached hereto;

(b)At the Closing, Notes in the names of the Investors in the amounts set forth in Schedule A to this Agreement;

(c)The executed Registration Rights Agreement;

(d)The executed Closing Escrow Agreement;

(e)Evidence that the Company has acquired all of the outstanding shares of Fulland.

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(f)Copies of all SEC correspondence since last Form 10-KSB and any correspondence which was issued prior to the last Form 10-KSB which has not been resolved to the satisfaction of the SEC.

(g)Schedule of all amounts owed (cash and stock) to officers, consultants and key employees (salary, bonuses, etc.).

(h)Certifications in form and substance acceptable to the Company and the Investors from any and all brokers or agents involved in the transactions contemplated hereby as to the amount of commission or compensation payable to such broker or agent as a result of the consummation of the transactions contemplated hereby and from the Company or Investor, as appropriate, to the effect that reasonable reserves for any other commissions or compensation that may be claimed by any broker or agent have been set aside;

(i)Management letter from the Company’s registered independent accounting firm or confirmation from such firm that no such letter were issued in connection with the Company’s most recent audit;

(j)Evidence of approval of the Board of Directors of the Company of the Transaction Documents and the transactions contemplated hereby and thereby;

(k)Agreements from the Restricted Stockholders pursuant to Section 6.16 of this Agreement.

(l)Evidence that the Restated Certificate has been approved by the directors, and that the board of directors has authorized the filing of the Proxy Statement with the SEC.

(m)Good standing certificate from the Secretary of State of the State of Delaware;

(n)Copy of the Company’s Articles, as currently in effect, certified by the Secretary of State of the State of Delaware;

(o)An opinion from the Company’s counsel concerning the Transaction Documents and the transactions contemplated hereby in form and substance reasonably acceptable to Investors;

(p)An opinion from the Company’s PRC counsel that (i) each of the Related Companies is legally established and validly existing as an independent legal entity; (ii) each of the Related Companies is an independent legal person and none of them is exposed to liabilities incurred by the other party; (iii) the PRC Agreements constitute valid and binding obligations of the parties to such agreements, and (iv) each of the PRC Agreements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of the PRC;

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(q)An agreement between Greenpower and the PRC Companies pursuant to which the PRC Companies transfer to Greenpower all of the patent, trademark and other intellectual property rights and other intangible assets;

(r)Evidence that all agreement between Greenpower and the PRC Companies are executed and are satisfactory in all material respects to the Investors;

(s)The executed disbursement instructions pursuant to the Escrow Agreement, which shall provide that the Escrow Agent continue to hold $100,000 to pay the Company’s anticipated obligations to its investor relations company;

(t)Evidence satisfactory to the Investors that (i) the PRC Companies have, in the aggregate, not less than RMB¥3,500,000 in cash on the Closing Date; (ii) the combined debt of the PRC Companies and Greenpower shall not exceed RMB¥5,000,000 on the Closing Date; and (iii) all accrued and unpaid taxes as of the Closing Date shall have been forgiven.

(u)Copies of all executive employment agreements, all past and present financing documentation or other documentation where stock could potentially be issued or issued as payment, all past and present litigation documents;

(v)Copies of the non-competition agreements provided in Section 4.17 of this Agreement;

(w)Such other documents or certificates as shall be reasonably requested by Investors or their counsel; and

(x)The Company must be current in its filings with the SEC, and the Company’s Common Stock must be trading on the OTC Bulletin Board.

3.3Deliveries by Investors. In addition to and without limiting any other provision of this Agreement, the Investors agree to deliver, or cause to be delivered, to the Escrow Agent under the Escrow Agreement, the following:

(a)A deposit from each Investor as to the Investor’s portion of the Purchase Price;

(b)The executed Agreement with all Exhibits and Schedules attached hereto;

(c)The executed Registration Rights Agreement;

(d)The executed Closing Escrow Agreement;

(e)The executed disbursement instructions pursuant to the Escrow Agreement; and

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(f)Such other documents or certificates as shall be reasonably requested by the Company or its counsel.

3.4Delivery of Original Documents. In the event any document provided to the other party in Paragraphs 3.2 and 3.3 herein are provided by facsimile, the party shall forward an original document to the other party within seven (7) business days.

3.5Further Assurances. The Company and each Investor shall, upon request, on or after the Closing Date, cooperate with each other (specifically, the Company shall cooperate with the Investors, and each Investor shall cooperate with the Company) by furnishing any additional information, executing and delivering any additional documents and/or other instruments and doing any and all such things as may be reasonably required by the parties or their counsel to consummate or otherwise implement the transactions contemplated by this Agreement.

3.6Waiver. An Investor may waive any of the requirements of Section 3.2 of this Agreement, and the Company may waive any of the provisions of Section 3.3 of this Agreement. The Investors may also waive any of the requirements of the Company under the Escrow Agreement.

Article 4

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Investors as of the date hereof and as of Closing Date (which warranties and representations shall survive the Closing regardless of any examinations, inspections, audits and other investigations the Investors have heretofore made or may hereinafter make with respect to such warranties and representations) as follows:

4.1Organization and Qualification. Each of the Company, each Subsidiary and each of the Related Companies is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and is duly qualified to do business in any other jurisdiction by virtue of the nature of the businesses conducted by it or the ownership or leasing of its properties, except where the failure to be so qualified will not, when taken together with all other such failures, have a Material Adverse Effect on the business, operations, properties, assets, financial condition or results of operation of the Company, its Subsidiaries and the Related Companies taken as a whole.

4.2Company’s Governing Documents. The complete and correct copies of the Company’s Governing Documents (a) have been provided to the Investor and (b) have been filed with the SEC in accordance with the regulations of the SEC and (c) will be in full force and effect on the Closing Date.

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4.3Capitalization.

4.3.1The authorized and outstanding capital stock of the Company as of the date of this Agreement and as adjusted to reflect the issuance and sale of the Securities pursuant to this Agreement is set forth in Schedule 4.3.l to this Agreement. Schedule 4.3.1 lists all shares and potentially dilutive events, including shares issuable pursuant to employment, consulting and other services agreements, acquisition agreements, options and equity-based incentive plans, debt securities, convertible securities, financing or business relationships as well as each agreement, plan, arrangement or understanding pursuant to which any shares of any class of capital stock may be issued, a copy of each of which has been provided to the Investors.

4.3.2All shares of capital stock described above to be issued have been duly authorized and when issued, will be validly issued, fully paid and non-assessable and free of preemptive rights.

4.3.3Except pursuant to this Agreement and as set forth in Schedule 4.3.1, there are no outstanding options, warrants, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any class of capital stock of the Company, or agreements, understandings or arrangements to which the Company is a party, or by which the Company is or may be bound, to issue additional shares of its capital stock or options, warrants, scrip or rights to subscribe for, calls or commitment of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, any shares of any class of its capital stock. The Company agrees to inform the Investors in writing of any additional warrants granted prior to the Closing Date.

4.3.4Neither of the PRC Companies, nor Greenpower nor Fulland has any agreement or understanding, whether formal or informal, which could result in the issuance of any equity securities or right to purchase or otherwise acquire equity securities of such corporation.

4.4Authority.

4.4.1The Company has all requisite corporate power and authority to execute and deliver this Agreement, Notes and the Securities issuable upon conversion of the Notes, the Registration Rights Agreement, the Closing Escrow Agreement and any other Transaction Documents to which the Company is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement, the Notes and the Securities issuable upon conversion of the Notes, the Registration Rights Agreement, the Closing Escrow Agreement and any other Transaction Documents to which the Company is a party have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company is necessary to authorize this Agreement or to consummate the transactions contemplated hereby and thereby except as disclosed in this Agreement. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditors’ rights and except that any the granting of equitable relief is in the discretion of the court.

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4.4.2The Note, when issued pursuant to this Agreement, constitutes the valid, binding and obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditors’ rights and except that any the granting of equitable relief is in the discretion of the court. The Restated Certificate has been approved by the board of directors. Upon the filing of the Restated Certificate and the Certificate of Designation, the equity Securities issuable upon conversion of the Note, when so issued, will be duly and validly authorized and issued, fully paid and non-assessable and the Warrants will be the valid and binding obligations of the Company, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditors’ rights and except that any the granting of equitable relief is in the discretion of the court. All such Securities, when so issued, will be free and clear of all liens, charges, claims, options, pledges, restrictions, preemptive rights, rights of first refusal and encumbrances whatsoever (other than those incurred by the Investor).

4.4.3Notwithstanding any contrary representations and warranties, no representation is made with respect to the ability of any Investor to convert the Note or, following the filing of the Restated Certificate and the Certificate of Designation, the Series A Preferred Stock or exercise any Warrant if and to the extent that the conversion price of the Note or the Series A Preferred Stock, as defined in the Note or the Certificate of Designation, or the number of Shares issuable upon exercise of the Warrants would result in the issuance of a number of shares of Common Stock which is greater than the amount by which the authorized Common Stock exceeds the sum of the outstanding Common Stock and the shares of Common Stock reserved for issuance pursuant to outstanding agreements and outstanding options, warrants, rights, convertible securities and other securities upon the exercise or conversion of which or pursuant to the terms of which additional shares of Common Stock may be issuable (the foregoing proviso being referred to as the “Authorized Stock Proviso”).

4.4.4Each Related Company is legally established, and validly existing as an independent legal entities; (ii) each Related Company is an independent legal person and none of them is exposed to liabilities incurred by the other party; (iii) the PRC Agreements constitute valid and binding obligations of the parties to such agreements, and (iv) each of the PRC Agreements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of the PRC.

4.5No Conflict; Required Filings and Consents. Neither the execution and delivery of this Agreement by the Company nor the issuance of the Notes and other Transaction Documents, and the performance by the Company of its obligations hereunder and thereunder will: (i) conflict with or violate the Company’s or any Subsidiary’s Governing Instruments; (ii) conflict with, breach or violate any federal, state, foreign or local law, statute, ordinance, rule, regulation, order, judgment or decree (collectively, “Laws”) in effect as of the date of this Agreement and applicable to the Company or any Subsidiary; or (iii) result in any breach of, constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to any other entity any right of termination, amendment, acceleration or cancellation of, require payment under, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their respective properties or assets is bound, other than such violations, conflicts, breaches, defaults, terminations, accelerations or creations of liens that would not, in the aggregate, have a Material Adverse Effect except to the extent that stockholder approval may be required as a result of the Authorized Stock Proviso, in which event, the Company will seek stockholder approval to an increase in the authorized Common Stock sufficient to enable the Company to be in compliance with this Section 4.5. Neither the execution of this Agreement nor the consummation of the terms contemplated by this Agreement will impair Greenpower’s rights under the PRC Agreements.

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4.6Reports and Financial Statements.

4.6.1The consolidated financial statements of the Related Companies for the years ended December 31, 2006 and 2005, including consolidated balance sheets, statements of operations, stockholders’ equity and cash flows, together with the notes thereon, certified by Sherb & Co., LLP (“Sherb”), the Company’s independent registered accounting firm, together with the unaudited consolidated financial statements for the six months ended June 30, 2007 and 2007, consisting of a balance sheet at June 30, 2007, statement of stockholders’ equity for the six months ended June 30, 2007, and statements of operations and cash flows for the six months ended June 30, 2007 and 2006, which have been reviewed by Sherb have been delivered to the Investors. Each of the consolidated balance sheets fairly presents the financial position of the Related Companies, as of its date, and each of the consolidated statements of income, stockholders’ equity and cash flows (including any related notes and schedules thereto) fairly presents the results of operations, cash flows and changes in stockholders’ equity, as the case may be, of the Related Companies for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved. Sherb is independent as to the Company and each of the Related Companies in accordance with the rules and regulations of the SEC. The books and records of the Related Companies have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transaction. Neither the Company nor any of the Related Companies has received any advice from Sherb to the effect that there is any significant deficiency or material weakness in the Company’s or any Related Party’s controls or recommending any corrective action on the part of the Company or any Related Party. Neither the Company nor any Related Party has any contingent liability which is not reflected in the financial statements. To the extent that the consolidated financial statements of Fulland do not include the financial condition or results of operations of the PRC Companies, separate statements for the PRC Companies, conforming to the delivery requirements of this Section 4.6.1, shall have been delivered.

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4.6.2The Company’s Form 10-KSB for the year ended April 30, 2007, contains the audited financial statements of the Company, certified by Comiskey and Company, (“Comiskey”), the Company’s independent registered accounting firm, for the years ended April 30, 2007 and 2006, and the Company’s Form 10-QSB for the quarter ended April 30, 2007 contains the unaudited financial statements of the Company which have been reviewed by Comiskey. The balance sheets fairly present the financial position of the Company, as of their respective dates, and each of the consolidated statements of income, stockholders’ equity and cash flows (including any related notes and schedules thereto) fairly presents the results of operations, cash flows and changes in stockholders’ equity, as the case may be, of the Company for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved. Comiskey is independent as to the Company in accordance with the rules and regulations of the SEC. The books and records of the Company have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transaction. The Company has not received any letters of comments from the SEC relating to any filing made by the Company with the SEC which has not been addressed by an amended filing, and each amended filing fully responds to the questions raised by the staff of the SEC. The Company maintains disclosure controls and procedures that are effective to ensure that information required to be disclosed by the Company in its annual and quarterly reports filed with the SEC is accumulated and communicated to the Company’s management, including its principal executive and financial officers as appropriate, to allow timely decisions regarding required disclosure. There were no significant changes in the Company’s internal controls or other factors that could significantly affect such controls subsequent to December 31, 2006. The Company has not received any advice from Comiskey to the effect that there is any significant deficiency or material weakness in the Company’s controls or recommending any corrective action on the part of the Company or any Subsidiary. The Company does not have any contingent liabilities.

4.7Compliance with Applicable Laws. Neither the Company nor any Subsidiary nor any Related Party is in violation of, or, to the knowledge of the Company is under investigation with respect to or has been given notice or has been charged with the violation of, any Law of a governmental agency, except for violations which individually or in the aggregate do not have a Material Adverse Effect.

4.8Brokers. Except as set forth on Schedule 4.8, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.

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4.9SEC Documents. The Investors acknowledge that the Company is a publicly held company and has made available to the Investors upon request true and complete copies of any requested SEC Documents. The Company has registered its Common Stock pursuant to Section 12(d) of the 1934 Act, and the Common Stock is quoted and traded on the OTC Bulletin Board of the National Association of Securities Dealers, Inc. The Company has received no notice, either oral or written, with respect to the continued quotation or trading of the Common Stock on the OTC Bulletin Board. The Company has not provided to the Investor any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act, and rules and regulations of the SEC promulgated thereunder and the SEC Documents did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.10Litigation. To the knowledge of the Company, no litigation, claim, or other proceeding before any court or governmental agency is pending or to the knowledge of the Company, threatened against the Company, the prosecution or outcome of which may have a Material Adverse Effect.

4.11Employment Agreements. Except as disclosed in the Company’s Form 10-KSB for the year ended December 31, 2006 or as otherwise disclosed pursuant to this Agreement, the Company does not have any agreement or understanding with any officer or director, and there has been no material change in the compensation of any officer and director from that shown in said Form 10-KSB.

4.12Exemption from Registration. Subject to the accuracy of the Investors’ representations in Article V of this Agreement, except as required pursuant to the Registration Rights Agreement, the sale of the Note by the Company to the Investor or the issuance of Series A Preferred Stock or Common Stock and Warrants will not require registration under the 1933 Act. When issued upon conversion of the Notes or the Series A Preferred Stock, as the case may be, or upon exercise of the Warrants in accordance with their terms, the Shares underlying the Preferred Stock and the Warrants will be duly and validly authorized and issued, fully paid, and non-assessable. The Company is issuing Notes, and upon conversion of the Notes, the Preferred Stock and the Warrants in accordance with and in reliance upon the exemption from securities registration afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC under the 1933 Act, and/or Section 4(2) of the 1933 Act.

4.13No General Solicitation or Advertising in Regard to this Transaction. Neither the Company nor any of its Affiliates nor, to the knowledge of the Company, any Person acting on its or their behalf (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D as promulgated by the SEC under the 1933 Act) or general advertising with respect to the sale of the Preferred Stock or Warrants, or (ii) made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Notes, Series A Preferred Stock, Common Stock or Warrants, under the 1933 Act, except as required herein.

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4.14No Material Adverse Effect. Since December 31, 2006, no event or circumstance resulting in a Material Adverse Effect has occurred or exists with respect to the Company, any Subsidiary or any Related Party. No material supplier or customer has given notice, oral or written, that it intends to cease or reduce the volume of its business with the Company, any Subsidiary or any Related Party from historical levels. Since December 31, 2006, no event or circumstance has occurred or exists with respect to the Company, any Subsidiary or any Related Party, that, under any applicable law, rule or regulation, requires or would require, public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in writing to the Investor.

4.15Material Non-Public Information. The Company has not disclosed to the Investors any material non-public information that (i) if disclosed, would reasonably be expected to have a material effect on the price of the Common Stock or (ii) according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the date hereof but which has not been so disclosed.

4.16Internal Controls And Procedures. The Company and its Subsidiaries and each of the Related Parties maintain books and records and internal accounting controls which provide reasonable assurance that (i) all transactions to which the Company or any Subsidiary or any Related Party is a party or by which their respective properties are bound are executed with management’s authorization; (ii) the recorded accounting of the Company’s, any Subsidiary’s or any Related Party’s consolidated assets is compared with existing assets at regular intervals; (iii) access to the Company’s, any Subsidiary’s or any Related Party’s consolidated assets is permitted only in accordance with management’s authorization; and (iv) all transactions to which the Company or any Subsidiary or any Related Party is a party or by which any of their respective properties are bound are recorded as necessary to permit preparation of the financial statements of the Company and the Related Companies individually (unless the financial condition and results of operations and cash flows are consolidated with those of the Company under GAAP) in accordance with GAAP.

4.17Non-Competition Agreement. Each of the Company’s executive officers shall have entered into an agreement with the Company pursuant to which they agree that, to the maximum extent permitted by law, the Company’s executive officers shall not be involved in any business venture, whether as an officer, director, partner, manager, lender, guarantor, consultant or any other capacity in any business which competes with or is similar in nature to the Company in China. To the extent that the provisions of this Section 4.17 are not enforceable under applicable law, the non-competition agreement shall provide that it shall be deemed to restrict the executive officers only to the maximum extent permitted by law. A copy of a true and correct English translation of each of these agreements has been provided to the Investors.

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4.18Full Disclosure. No representation or warranty made by the Company in this Agreement and no certificate or document furnished or to be furnished to the Investor pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.

Article 5

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

Each Investor severally and not jointly represents and warrants to the Company that:

5.1Concerning the Investors. The state in which any offer to purchase shares hereunder was made or accepted by such Investor is the state shown as such Investor’s address. The Investor was not formed for the purpose of investing solely in the Securities.

5.2Authorization and Power. The Investor has the requisite power and authority to enter into and perform this Agreement and to purchase the securities being sold to it hereunder. The execution, delivery and performance of this Agreement by the Investor and the consummation by the Investor of the transactions contemplated hereby have been duly authorized by all necessary partnership action where appropriate. This Agreement, the Registration Rights Agreement and the Closing Escrow Agreement have been duly executed and delivered by such Investor and at the Closing shall constitute valid and binding obligations of such Investor enforceable against the Investor in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

5.3No Conflicts. The execution, delivery and performance of this Agreement and the consummation by such Investor of the transactions contemplated hereby or relating hereto do not and will not (i) result in a violation of such Investor’s charter documents or bylaws where appropriate or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument to which such Investor is a party, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Investor or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a Material Adverse Effect on such Investor). The Investor is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of such Investor’s obligations under this Agreement or to purchase the securities from the Company in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, the Investor is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

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5.4Financial Risks. Such Investor acknowledges that such Investor is able to bear the financial risks associated with an investment in the securities being purchased by such Investor from the Company and that it has been given full access to such records of the Company and its Subsidiaries and to the officers of the Company and its Subsidiaries as it has deemed necessary or appropriate to conduct its due diligence investigation. Such Investor is capable of evaluating the risks and merits of an investment in the securities being purchased by the Investor from the Company by virtue of its experience as an investor and its knowledge, experience, and sophistication in financial and business matters and the Investor is capable of bearing the entire loss of its investment in the securities being purchased by the Investor from the Company.

5.5Accredited Investor. The Investor is (i) an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and (6), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the securities being purchased by the Investor from the Company.

5.6Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or Commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of such Investor. Such Investor understands that any obligations under agreements or arrangements with brokers disclosed in Schedule 4.8 are obligations of the Company.

5.7Knowledge of Company. Such Investor and such Investor’s advisors, if any, have been, upon request, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the securities being purchased by such Investor from the Company. Such Investor and such Investor’s advisors, if any, have been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries.

5.8Risk Factors. Each Investor understands that such Investor’s investment in the securities being purchased by such Investor from the Company involves a high degree of risk. Such Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the securities being purchased by the Investor from the Company. Such Investor warrants that such Investor is able to bear the complete loss of such Investor’s investment in the securities being purchased by the Investor from the Company.

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5.9Full Disclosure. No representation or warranty made by such Investor in this Agreement and no certificate or document furnished or to be furnished to the Company pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. Except as set forth or referred to in this Agreement, Investor does not have any agreement or understanding with any person relating to acquiring, holding, voting or disposing of any equity securities of the Company.

Article 6

COVENANTS OF THE COMPANY

6.1Registration Rights. The Company shall cause the Registration Rights Agreement to remain in full force and effect according to the provisions of the Registration Rights Agreement and the Company shall comply in all material respects with the terms thereof. The Company does not have any agreement or obligation which would enable any Person to include securities in any registration statement required to be filed on behalf of the Investors pursuant to the Registration Rights Agreement and will not take any action which will give any Person any right to include securities in any such registration statement. Except as contemplated by the Registration Rights Agreement, no Person has any demand or piggyback registration right with respect to any securities of the Company. The Company will not file any registration statement covering any shares of Common Stock issuable to any officers, directors, Affiliates of or consultants to the Company until the earlier of (a) thirty (30) months from the Closing Date or (b) the Restriction Termination Date at 90%; provided, however, that the Company may file a registration statement on Form S-8 for shares issued or issuable pursuant to employee stock option plans for employees who are not officers, directors or Affiliates of the Company.

6.2Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, the maximum number of shares of Common Stock for the purpose of enabling the Company to issue the shares of Common Stock underlying the Notes, Series A Preferred Stock and Warrants.

6.3Compliance with Laws. The Company hereby agrees to comply and to cause each Subsidiary and each Related Party to comply in all respects with the Company’s reporting, filing and other obligations under the Laws.

6.4Exchange Act Registration. The Company will continue its obligation to report to the SEC under Section 12 of the 1934 Act and will use its best efforts to comply in all respects with its reporting and filing obligations under the 1934 Act, and will not take any action or file any document (whether or not permitted by the 1934 Act or the rules thereunder) to terminate or suspend any such registration or to terminate or suspend its reporting and filing obligations under the 1934 until the Investors have disposed of all of their Shares.

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6.5Corporate Existence; No Conflicting Agreements. The Company will take all steps necessary to preserve and continue the corporate existence of the Company. The Company shall not enter into any agreement, the terms of which agreement would restrict or impair the right or ability of the Company to perform any of its obligations under this Agreement or any of the other agreements attached as exhibits hereto.

6.6Listing, Securities Exchange Act of 1934 and Rule 144 Requirements.

6.6.1The Company shall not take any action which would cause its Common Stock not to be traded on the OTC Bulletin Board, except that the Company may list the Common Stock on the Nasdaq Stock Market or the American or New York Stock Exchange if it meets the applicable listing requirements. If, for any time after the Closing, the Company is no longer in compliance with this Section 6.6.1, then the Company shall pay to the Investors as liquidated damages and not as a penalty, an amount equal to twelve percent (12%) per annum, based on the lesser of (a) the Purchase Price or (b) that percentage of the Purchase Price which the Unsold Shares bears to the number of shares of Common Stock initially issuable upon conversion of the Series A Preferred Stock sold pursuant to this Agreement. The Unsold Shares shall mean shares of Series A Preferred Stock with respect to which both (i) the Series A Preferred Stock has not been converted and (ii) the underlying shares of Common Stock have not been sold or otherwise transferred pursuant to a registration statement or Rule 144. Such damages shall be payable quarterly on the tenth (10^th) day of the following calendar quarter, and shall cease at the time the Company begins complying with the provisions of this Section 6.6.1.

6.6.2Commencing not later than two years from the Closing Date, the Company shall have caused its Common Stock to be listed on the Nasdaq Global Market or Nasdaq Capital Market or the New York or American Stock Exchange, and, from and after the date of such listing, the Common stock shall continue to be listed on one of such markets or exchanges until the Restriction Termination Date at 90%. If, for any time after the Closing and prior to the Restriction Termination Date at 90%, the Company is not in compliance with this Section 6.6.2, then the Company shall pay to the Investors as liquidated damages and not as a penalty, an amount equal to six percent (6%) per annum, based on the lesser of (a) the Purchase Price or (b) that percentage of the Purchase Price which the Unsold Shares bears to the number of shares of Common Stock initially issuable upon conversion of the Series A Preferred Stock issued upon conversion of the Note. Notwithstanding the foregoing, no liquidated damages shall be payable pursuant to this Section 6.6.2 during any period for which liquidated damages are payable pursuant to Section 6.6.1.

6.6.3Liquidated damages payable pursuant to Sections 6.6.1 and 6.6.2 shall be payable in shares of Series A Preferred Stock or cash, as the Investors may request. In no event shall the total liquidated damages payable pursuant to Sections 6.6.1 and 6.6.2, whether in cash or Series A Preferred Stock, exceed in the aggregate twelve percent (12%) of the Purchase Price of the Unsold Shares that are outstanding as of the date on which a computation is being made.

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6.7No Convertible Debt or Preferred Stock. On or prior to the Closing Date, the Company will cause to be cancelled or paid all convertible debt in the Company. Until the earlier of (a) four years from the Closing Date or (b) the Restriction Termination Date, the Company will not issue any convertible debt or any shares of any class or series of Preferred Stock.

6.8Debt Limitation. The Company agrees until the earlier of (a) three years after Closing Date or (b) the Restriction Termination Date at 90%, it will not have outstanding any debt in an amount greater than twice the sum of the EBITDA from continuing operations for the past four quarters. Nothing in this Section 6.8 shall be construed to prohibit the Company from borrowing from the Chinese government or from Chinese banks as long as such loans do not result in the Company being in default of any of its covenants set forth in this Article 6.

6.9Reset Equity Deals. On or prior to the Closing Date, the Company will cause to be cancelled any and all reset features related to any shares outstanding that could result in additional shares being issued. Until the earlier of (a) five years from the Closing Date or (b) the Restriction Termination Date, the Company will not enter into any transactions that have any reset features that could result in additional shares being issued.

6.10Independent Directors.

6.10.1The Company shall have caused the appointment of the majority of the board of directors, which shall not consist of more than nine members, to be independent directors, as defined by the rules of the Nasdaq Stock Market, not later than the ninety (90) days after the Closing Date.

6.10.2If, at any time subsequent to ninety (90) days after the Closing Date until the earlier of (a) three years from the Closing or (b) the Restriction Termination Date at 90%, the board of directors shall not be composed of a majority of independent directors:

6.10.2.1for a reason other than for an Excused Reason, the Company shall have 60 days to take such steps as are necessary so that a majority of the Company’s directors are independent directors, and

6.10.2.2for an Excused Reason, the Company shall have 75 days from the date that the Company becomes aware of the event (or the last event if there are more than one such event) giving rise to the Excused Reason, to take such steps as are necessary so that a majority of the Company’s directors are independent directors.

6.10.3The term “Excused Reason” shall mean the death or resignation of an independent director or the occurrence of an event whereby an independent director ceases to be independent.

6.10.4From and after the Closing Date, the Company shall have a chief financial officer who speaks and understands both English and Chinese and is familiar with GAAP (a “qualified CFO”), who may serve on a part time basis until three months after the Closing Date, by which time the Company shall have a full-time qualified CFO. In the event that at any time subsequent to the Closing Date the Company fails to have a qualified CFO, the Company shall, within 60 days from the date that the Company ceases to have a qualified CFO, hire a qualified CFO. If the Company shall not be able to hire a qualified CFO promptly upon the resignation or termination of employment of the former chief financial officer, the Company may engage an accountant or accounting firm to perform the duties of the chief financial officer until a qualified CFO can be hired. In no event shall the Company either (i) fail to file an annual, quarter or other report in a timely manner because of the absence of a qualified CFO, or (ii) not have a person who can make the statements and sign the certifications required to be filed in an annual or quarterly report under the 1934 Act.

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6.10.5If, at the time set forth in Section 6.10.1, or during the period referred to in Section 6.10.2 of this Agreement, the Company shall have failed to have a board of directors composed of a majority of independent directors after the date by which such situation was to have been cured pursuant to Section 6.10.2.1 or Section 6.10.2.2 of this Agreement, whichever shall apply, or if the Company shall have failed to file an annual or quarterly report in a timely manner because of the absence or lack of a qualified CFO, the Company shall pay to the Investors, as liquidated damages and not as a penalty, an amount equal to twelve percent (12%) per annum of the Purchase Price of the then outstanding shares of Series A Preferred Stock, payable monthly on the tenth (10^th) day of the following month, in cash or in Series A Preferred Stock at the option of the Investors, based on the number of days that such condition exists beyond the applicable grace period. The parties agree that the only damages payable for a violation of such provisions shall be such liquidated damages. The parties hereto agree that the liquidated damages provided for in this Section 6.10.5 constitute a reasonable estimate of the damages that may be incurred by the Investors by reason of the failure of the Company to have a majority of directors as independent directors. If the Company fails to comply with Section 6.10.1, the period for measuring liquidated damages pursuant to this Section 6.10.5 shall commence at the end of the 90 day period referred to therein and continue until the Company shall have a majority of independent directors, and the grace periods allowed by Section 6.10.2 shall not apply.

6.10.6In no event shall the total payments made pursuant to this Section 6.10 and Section 6.11, whether in cash or Series A Preferred Stock exceed in the aggregate twelve percent (12%) of the Purchase Price of the shares of Series A Preferred Stock that are outstanding as of the date on which a computation is being made.

6.10.7Within three months from the Closing Date, the Company shall hire a bilingual (English and Chinese) technical sales person at the level which is not less than that of a vice president.

6.11Independent Directors; Committees.No later than ninety (90) days after the Closing Date, the Company will have an audit committee comprised solely of not less than three independent directors and a compensation committee comprised of not less than three directors, a majority of whom are independent directors. Further, if the Company shall form an executive or nominating committee or any other committee, a majority of the members of such committee shall be independent directors. If at any time subsequent to the Closing Date during the period when the Company is required to have a majority of independent directors pursuant to Section 6.10 of this Agreement, independent directors do not comprise all of the members of the audit committee and a majority of the members of the compensation committee or any other committee within the grace periods provided in Section 6.10, the Company shall pay to the Investors, as liquidated damages and not as a penalty, an amount equal to twelve percent (12%) per annum of the Purchase Price of the then outstanding Series A Preferred Stock payable in the manner and at the time provided in Section 6.10, such payment shall be based on the number of days that such condition exists. The parties agree that the only damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be such liquidated damages. Notwithstanding the foregoing, no liquidated damages shall be payable pursuant to this Section 6.11 during any period for which liquidated damages are payable pursuant to Section 6.10.

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6.12Use of Proceeds. The Company will use the net proceeds from the sale of the Securities, after payment of legal fees and other closing costs, including a payment of not more than $625,000 in connection with the reverse acquisition, $400,000 to a stockholder as previously approved by the Investors, and to provided funds for Greenpower to purchase and own new equipment in accordance with a schedule previously provided to the Investors, with Greenpower having the right to permit the PRC Companies to use the equipment in connection with Greenpower’s business. The Company shall also allocate $200,000 which will be retained in escrow, of which $100,000 shall be allocated to pay the Company’s anticipated obligations to its investor relations firm and $100,000 shall be retained for the payment of professional fees payable subsequent to the Closing. In addition, not less than 75% of the proceeds from the exercise of warrants shall be used by Greenpower to purchase scheduled assets and equipment for use in its business. Neither the Company nor any Subsidiary shall use any portion of the proceeds from the sale of the Notes or the exercise of the Warrants to make any payment to either of the PRC Companies except as for the purchase of capital in a transaction in which all of the proceeds of such purchase are used by the PRC Companies for the manufacture of products to be sold by Greenpower.

6.13Right of First Refusal.

6.13.1Until the earlier of (i) three years from the date of this Agreement or (ii) such time as the Investors, as a group, cease to own at least five percent (5%) of the total number of shares of Common Stock that were issued or are issuable upon conversion of Series A Preferred Stock that were initially issued to the Investors, in the event that the Company seeks to raise additional funds through a private placement of its securities (a “Proposed Financing”), other than Exempt Issuances, each Investor shall have the right to participate in any subsequent funding by the Company of the offering price on a pro rata basis, based on the percentage that (a) the number of such Investor’s Percentage Shares, without regard to the 4.9% Limitation but excluding shares of Common Stock issuable upon exercise of Warrants, bears to (b) the total number of shares of Common Stock outstanding plus the number of Shares issuable upon conversion of the Series A Preferred Stock and any other series of convertible preferred stock or debt securities, without regard to the 4.9% Limitations any other limitations on exercise such other convertible preferred stock or debt securities. This Section 6.13 shall apply to each such offering based on the total purchase price of the securities being offered by the Company. This right is personal to the Investors and is not transferable, whether in connection with the sale of stock or otherwise.

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6.13.2The terms on which the Investors shall purchase securities pursuant to Proposed Financing shall be the same as such securities are purchased by other investors. The Company shall give the Investors the opportunity to participate in the offering by giving the Investors not less than ten (10) days notice setting forth the terms of the Proposed Financing. In the event that the terms of the Proposed Financing are changed in a manner which is more favorable to the potential investor, the Company shall provide the Investors, at the same time as the notice is provided to the other potential investors, with a new ten (10) day notice setting forth the revised terms that are provided to the other potential investors.

6.13.3In the event that the Investors does not exercise its right to participate in the Proposed Financing within the time limits set forth in Section 6.13.2 of this Agreement, the Company may sell the securities in the Proposed Financing at a price and on terms which are no more favorable to the investors than the terms provided to the Investors. If the Company subsequently changes the price or terms so that the price is more favorable to the investors or so the terms are more favorable to the investors, the Company shall provide the Investors with the opportunity to purchase the securities on the revised terms in the manner set forth in Section 6.13.2 of this Agreement.

6.14Price Adjustment. From the Closing Date until such time as the Restriction Termination Date, except for Exempt Issuances, as to which this Section 6.14 does not apply, if the Company closes on the sale or issuance of Common Stock at a price, or warrants, options, convertible debt or equity securities with a exercise price per share or exercise price per share which is less than the Conversion Price, as defined in the Note and the Certificate of Designation, then in effect (such lower sales price, conversion or exercise price, as the case may be, being referred to as the “Lower Price”), the Conversion Price in effect from and after the date of such transaction shall be reduced to the Lower Price. For purpose of determining the exercise price of warrants issued by the Company, the price, if any, paid per share for the warrants shall be added to the exercise price of the warrants. A similar provision shall be included in the Warrants.

6.15Deliveries from Escrow Based on Pre-Tax Earnings Per Share.

6.15.1At the Closing, the Company shall deliver to the Escrow Agent the Make-Good Note as provided in Section 6.15.9, and following the Closing, and promptly after the filing of the Company’s Certificate of Designation setting forth the rights preferences and privileges of the Series A Preferred Stock as provided in the Make-Good Note, and pursuant to the Closing Escrow Agreement, the Company shall deliver to the Escrow Agent 24,787,135 shares of Series A Preferred Stock, of which 14,787,135 shares are held pursuant to this Section 6.15.

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6.15.2In the event the Company’s consolidated Pre-Tax Earning per share, on a fully-diluted basis, for the year ended December 31, 2007 or 2008 is less than the amount per share hereinafter provided (the “Target Number”), the percentage shortfall shall be determined by dividing the amount of the shortfall by the applicable Target Number. The Target Number for 2007 shall be $0.08316 per share, and the Target Number for 2008 shall be $0.13131 per share.

6.15.3If the percentage shortfall for 2007 is equal to or greater than fifty percent (50%), then the Escrow Agent shall deliver the 14,787,135 shares of Series A Preferred Stock to the Investors in the ratio of their initial purchase of Securities.

6.15.4If the percentage shortfall for 2007 is less than fifty percent (50%), then the adjustment percentage shall be determined. The adjustment percentage shall mean the percentage that the percentage shortfall bears to fifty percent (50%). The Escrow Agent shall deliver to the Investors in the ratio of their initial purchase of Securities such number of shares of Series A Preferred Stock as is determined by multiplying the adjustment percentage by 14,787,135 shares and retain the balance. For example, if the percentage shortfall is 20%, the adjustment percentage would be 40%, and 40% of the 14,787,135 shares of Series A Preferred Stock, or 5,914,854 shares, would be delivered to the Investors, with the balance being retain by the Escrow Agent.

6.15.5If the percentage shortfall for 2008 is equal to or greater than fifty percent (50%), then the Escrow Agent shall deliver all of the shares of Series A Preferred Stock then held by the Escrow Agent to the Investors in the ratio of their initial purchase of Securities.

6.15.6If the percentage shortfall for 2008 is less than fifty percent (50%), then the adjustment percentage for 2008 shall be determined. The adjustment percentage shall mean the percentage that the percentage shortfall bears to fifty percent (50%). The maximum number of shares to be delivered shall be determined by multiplying the adjustment percentage by 14,787,135 shares. The number of shares to be delivered to the Investors shall be the lesser of the number of shares of Series A Preferred Stock then held by the Escrow Agent or the number of shares determined by the preceding sentence. The Escrow Agent shall deliver to the Investors the number of shares of Series A Preferred Stock as is determined pursuant to this Section 6.15.6 in the ratio of their initial purchase of Securities.

6.15.7For purpose of determining Pre Tax Earning Per Share on a fully-diluted basis, all shares of Common Stock issuable upon conversion of convertible securities and upon exercise of warrants and options (whether or not vested) shall be deemed to be outstanding, regardless of whether (i) such shares are treated as outstanding for determining diluted earnings per share under GAAP, (ii) such securities are “in the money,” or (iii) such shares may be issued as a result of the 4.9% Limitation; provided, however, that none of the shares of Series A Preferred Stock held in escrow pursuant to this Section 6.15 nor the shares of Common Stock issuable upon conversion of such Series A Preferred Stock shall be deemed outstanding for purpose of this Section 6.15.

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6.15.8The distribution of shares of Series A Preferred Stock pursuant to this Section 6.15 shall be made within five (5) business days after the Company files its Form 10-KSB with the SEC for the applicable year. In the event that the Company does not file its Form 10-KSB for the year ended December 31, 2007 or 2008 with the SEC within thirty (30) days after the date that filing was required, after giving effect to any extension pursuant to Rule 12b-25 of the Exchange Act, all of the remaining 14,787,135 shares of Series A Preferred Stock shall be delivered to the Investors.

6.15.9The Company’s obligation pursuant to this Section 6.15 and Section 6.24 is to place in escrow a total of 24,787,135 shares of Series A Preferred Stock. Since the Company does not presently have authorized Preferred Stock, at the Closing, in lieu of the 14,787,135 shares of Series A Preferred Stock which would be delivered pursuant to Section 6.15.9 and the 10,000,000 shares of Series A Preferred Stock which would be delivered pursuant to Section 6.25, the Company shall deliver to the Escrow Agent the Company’s 6% convertible promissory note due March 31, 2008, in the principal amount of $3,000,000 (the “Make-Good Note”), which shall automatically convert into 24,787,135 shares of Series A Preferred Stock upon the filing of the Restated Articles and the Certificate of Designation; provided, that if the Restated Articles and the Certificate of Designation shall not have been filed by the maturity date, the Make-Good Note shall automatically convert into 24,787,135 shares of Common Stock.

6.15.10The parties understand that, pursuant to the Closing Escrow Agreement, the Escrow Agent will not make any deliveries of shares without the signed written instructions from the Company and the Investors.

6.16Insider Selling. No Restricted Stockholders may sell any shares of Common Stock in the public market prior to the earlier of 27 months from the Closing Date or the Restriction Termination Date; provided, however, that if any Restricted Stockholder who is director and not an executive officer of the Company shall cease to be a director, such Person may sell not more than a total of 50,000 shares of Common Stock in the public market during the period set forth in this sentence. Restricted Stockholders shall mean any Person who is an officer, director or Affiliate of the Company or who becomes an officer or director of the Company subsequent to the Closing Date. Without limiting the generality of the foregoing, the Restricted Stockholders shall not to directly or indirectly offer to sell, grant an option for the purchase or sale of, transfer, pledge assign, hypothecate, distribute or otherwise encumber or dispose of any securities in the Company in a transaction which is not in the public market unless the transferee agrees to be bound by the provisions of this Section 6.16.The Company shall require any newly elected officer or director to agree to the restriction set forth in this Section 6.16. Andrew Barron Worden and the Investors shall not be considered Restricted Stockholders. The restrictions in this Section 6.16 shall not apply to shares issued pursuant to a stock option or long-term incentive plans which may be approved by the Compensation Committee provided that such committee is comprised of a majority of independent directors.

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6.17Employment and Consulting Contracts. For three years after the Closing, the Company shall have a unanimous approval from the Compensation Committee that any awards other than salary are usual, appropriate and reasonable for any officer, director or consultants whose compensation is more than $100,000 per annum. This Section 6.17 does not apply to attorneys, accountants and other persons who provide professional services to the Company.

6.18Subsequent Equity Sales. From the date hereof until the Restriction Termination Date, the Company shall be not effect or enter into an agreement to effect any Subsequent Financing involving a “Variable Rate Transaction” or an “MFN Transaction” (each as defined below). The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock. The term “MFN Transaction” shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions which grants to an investor the right to receive additional shares based upon future transactions of the Company on terms more favorable than those granted to such investor in such offering. Any Investor shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages. Notwithstanding the foregoing, this Section 6.18 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction or MFN Transaction shall be an Exempt Issuance.

6.19Restated Certificate.The Company’s board of directors has approved the Restated Certificate. The Company shall promptly, but not later than thirty (30) days after the Closing Date, file the Proxy Statement with the SEC, and shall mail the Proxy Statement to stockholders within five (5) business days after the SEC has completed its review of the Proxy Statement, of, if the SEC does not review the Proxy Statement, within fifteen (15) business days after the Proxy Statement is filed with the SEC. The Company shall schedule an annual or special meeting of stockholders as soon as possible, but not later than twenty five (25) days after the Proxy Statement is mailed to stockholders. The Company shall file the Restated Certificate with the Secretary of State of the State of Delaware promptly, but not later than three (3) business days after the meeting of stockholders at which the Restated Certificate is approved. Wu Jianhua, Tang Lihua and Ren Yunxia each agree to vote in favor of the Restated Certificate.

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6.20Stock Splits. All forward and reverse stock splits shall effect all equity and derivative holders proportionately.

6.21Retention of Investor Relations Firm. The Company shall instruct the Escrow Agent to retain $100,000 of the proceeds of the sale of the Securities to be utilized for payment to investor relations firms. The Company shall retain an investor relations firm within 30 days after the Closing Date.

6.22Payment of Due Diligence Expenses. At Closing the Escrow Agent shall disperse to Barron the sum of $30,000.00 for its due diligence expenses.

6.23No Outside Interests. Until the Restriction Termination Date, the Company’s chairman and chief executive officer will devote their full time and attention to the business of the Company and shall not have any business interests or activities other than as chairman or chief executive officer, as the case may be, except that he or she may devote time, which shall not be material and which shall not interfere with his or her duties as the Company’s chairman or chief executive officer, as the case may be, to personal passive investments and charitable and community activities. Furthermore, none of the PRC Company Stockholders shall have any interests or engage in any business which is directly or indirectly competitive with that of the Company or any Related Party.

6.24No Waiver of Non-Competition Obligations. Until the Restriction Termination Date, the Company shall not waive the obligations of its executive officers pursuant to the non-competition agreements described in Section 4.17 of this Agreement.

6.25Issuance of Additional Shares based on Tax Obligations. The Company has represented to the Investors that neither the Company nor any Subsidiary nor any Related Party has any tax liabilities or obligations to the government of the PRC or any PRC governmental authority or taxing agency, and that all previously accrued taxes have been forgiven in accordance with the laws of the PRC. In the event that, based on the Company’s audited financial statements for the year ended December 31, 2007 or 2008, the Company or any of its Subsidiaries or any Related Company owes taxes to any such government or government agency for any period ended on or prior to September 30, 2007 (the “Covered Period”), the Company shall issue to the Investors, in proportion to their investment, four shares of Series A Preferred Stock for each US$1.00 of tax liability shown on the balance sheet or owed or paid by any of the Company, any Subsidiary or any Related Company to any such government or government agency relating to the Covered Period; provided, however, that, subject to the further provision of this Section 6.25, in no event shall the number of shares of Series A Preferred Stock issuable pursuant to this Section 6.25 exceed 10,000,000 shares. Such shares shall be delivered not later than five days after the Company’s Form 10-KSB for the each of the years ended December 31, 2007 and 2008 with respect to any tax payment or accruals covered by this Section 6.25 for such year; provided, however, that if the Company shall not have filed its Form 10-KSB for 2008 within 45 days after such form is required to be filed, the Company shall issue to the Investors, 10,000,000 shares of Series A Preferred Stock. In the event that more than 10,000,000 shares are due, the excess shall be taken from the 14,787,135 shares of series A preferred stock held in escrow pursuant to the Section 6.15 of this Agreement. Notwithstanding the foregoing, if, at any time prior to the completion of the audit for 2007 or 2008 it shall be determined that the Company, any Subsidiaries or any Related Party has any tax obligation or pays or accrued any taxes relating to the Covered Period, the payment pursuant to this Section 6.25 shall be made at that time. If a final settlement shall have been made, after making delivery of shares to the Investors pursuant to this Section 6.25, the Company’s obligations under this Section 6.25 shall terminate, otherwise, the Company’s obligations set forth in this Section 6.25 shall continue as herein provided. The Company shall, at the Closing, deliver a certificate for 10,000,000 shares of Series A Preferred Stock, which shall be issued in the name of the Escrow Agent, pursuant to the Closing Escrow Agreement. Any shares not delivered to the Investors pursuant to this Section 6.25 shall be returned to the Company and cancelled at such time as the Company’s obligations under this Agreement terminate.

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6.26No Loans or Advances. Until the first to occur of three years from the Closing Date or the Restriction Termination Date at 90%, the Company and its Subsidiaries will not make, and will use their commercially reasonable best efforts to ensure that no PRC Company shall make, any loans, advances or other extensions of credit to the executive officers or directors of the Company, any Subsidiary or any Related Company or any family member or Affiliate of any of such executive officers or directors.

Article 7

COVENANTS OF THE INVESTOR

Each Investor, severally and not jointly, covenants and agrees with the Company as follows:

7.1Compliance with Law. Each Investor’s trading activities with respect to shares of the Company’s Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and rules and regulations of any public market on which the Company’s Common Stock is listed.

7.2Transfer Restrictions.The Investor’s acknowledge that (a) the Preferred Stock, Warrants and Shares underlying the Preferred Stock and Warrants have not been registered under the provisions of the 1933 Act, and may not be transferred unless (i) subsequently registered thereunder or (ii) the Investor shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Preferred Stock, Warrants and Shares underlying the Notes and Warrants to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; and (b) any sale of the Shares underlying the Preferred Stock and Warrants made in reliance on Rule 144 promulgated under the 1933 Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such securities under circumstances in which the seller, or the person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder. Each Investor agrees that until the Restriction Termination Date it will not sell the Common Stock short or effect any sales based upon market-based metrics.

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7.3Restrictive Legend.Each Investor acknowledges and agrees that the Securities and the Shares shall bear a restrictive legend and a stop-transfer order may be placed against transfer of any such Securities except that the requirement for a restrictive legend shall not apply to Shares sold pursuant to a current and effective registration statement or a sale pursuant Rule 144 or any successor rule.

Article 8

CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS

The obligation of the Company to consummate the transactions contemplated hereby shall be subject to the fulfillment, on or prior to Closing Date, of the following conditions:

8.1No Termination. This Agreement shall not have been terminated pursuant to Article 10 hereof.

8.2Representations True and Correct. The representations and warranties of the Investors contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on as of the Closing Date.

8.3Compliance with Covenants. The Investors shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied by it prior to or at the Closing Date.

8.4No Adverse Proceedings. On the Closing Date, no action or proceeding shall be pending by any public authority or individual or entity before any court or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby.

Article 9

CONDITIONS PRECEDENT TO INVESTOR’S OBLIGATIONS

The obligation of the Investors to consummate the transactions contemplated hereby shall be subject to the fulfillment, on or prior to Closing Date unless specified otherwise, of the following conditions:

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9.1No Termination. This Agreement shall not have been terminated pursuant to Article 10 hereof.

9.2Representations True and Correct. The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on as of the Closing Date.

9.3Compliance with Covenants. The Company shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied by it prior to or at the Closing Date.

9.4No Adverse Proceedings. On the Closing Date, no action or proceeding shall be pending by any public authority or individual or entity before any court or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby.

Article 10

TERMINATION, AMENDMENT AND WAIVER

10.1Termination. This Agreement may be terminated at any time prior to the Closing Date

10.1.1by mutual written consent of the Investor and the Company;

10.1.2by the Company upon a material breach of any representation, warranty, covenant or agreement on the part of any Investor set forth in this Agreement, or any Investor upon a material breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company or the Investor, respectively, shall have become untrue, in either case such that any of the conditions set forth in Article 8 or Article 9 hereof would not be satisfied (a “Terminating Breach”), and such breach shall, if capable of cure, not have been cured within five (5) business days after receipt by the party in breach of a notice from the non-breaching party setting forth in detail the nature of such breach.

10.2Effect of Termination. Except as otherwise provided herein, in the event of the termination of this Agreement pursuant to Section 10.1 hereof, there shall be no liability on the part of the Company or any Investor or any of their respective officers, directors, agents or other representatives and all rights and obligations of any party hereto shall cease.

10.3Amendment and Waiver.

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10.3.1This Agreement may be amended by the parties hereto any time prior to the Closing Date by an instrument in writing signed by the parties hereto, subject to the provisions of Section 10.3.3; provided, however that the 4.9% Limitation may not be amended or waived.

10.3.2At any time prior to the Closing Date, the Company or the Investors, as appropriate, may: (a) extend the time for the performance of any of the obligations or other acts of other party or; (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto which have been made to it or them; or (c) waive compliance with any of the agreements or conditions contained herein for its or their benefit other than the 4.9% Limitation which may not be waived. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby, subject to Section 10.3.3 of this Agreement.

10.3.3Any amendment or waiver signed by the holders of 75% of the principal amount of the Note or, after the issuance of the Series A Preferred Stock, 75% of the holders of the then outstanding shares of Series A Preferred Stock, or, after the conversion of all shares of Series A Preferred Stock, the holders of Warrant to purchase a majority of the shares of Common Stock then issuable upon exercise of the Warrants, shall be deemed to be approval of the Investors; provided, that any amendment or waiver which changes the conversion rate or conversion price of the Notes or Series A Preferred Stock or the exercise price of the Warrants shall require the approval of all of the holders of the Warrants.

Article 11

GENERAL PROVISIONS

11.1Transaction Costs Except as otherwise provided herein, each of the parties shall pay all of his or its costs and expenses (including attorney fees and other legal costs and expenses and accountants’ fees and other accounting costs and expenses) incurred by that party in connection with this Agreement; provided, the Company shall pay Investor such due diligence expenses as described in Section 6.22.

11.2Indemnification. The Investor agrees to indemnify, defend and hold the Company (following the Closing Date) and its officers and directors harmless against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities or damages, including interest, penalties and reasonable attorney’s fees, that it shall incur or suffer, which arise out of or result from any breach of this Agreement by the Investors or failure by the Investors to perform with respect to the representations, warranties or covenants contained in this Agreement or in any exhibit or other instrument furnished or to be furnished under this Agreement. The Company agrees to indemnify, defend and hold the Investors (following the Closing Date) harmless against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities or damages, including interest, penalties and reasonable attorney’s fees, that it shall incur or suffer, which arise out of, result from or relate to any breach of this Agreement or failure by the Company to perform with respect to the representations, warranties or covenants contained in this Agreement or in any exhibit or other instrument furnished or to be furnished under this Agreement. In no event shall the Company or the Investors be entitled to recover consequential or punitive damages resulting from a breach or violation of this Agreement nor shall any party have any liability hereunder in the event of gross negligence or willful misconduct of the indemnified party. In the event of the failure of the Company to issue the Series A Preferred Stock and Warrants in violation of the provisions of this Agreement, the Investors, as their sole remedy, shall be entitled to pursue a remedy of specific performance upon tender into the Court an amount equal to the Purchase Price hereunder. The indemnification by the Investors shall be limited to $50,000.00. This Section 11.2 shall not relate to indemnification under the Registration Rights Agreement.

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11.3Headings. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

11.4Entire Agreement. This Agreement (together with the Schedule, Exhibits, Warrants and documents referred to herein) constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof.

11.5Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the third business day after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:

If to the Company:

China Wind Systems, Inc.

c/o Greenpower Environmental Technologies, Inc.

Qianzhou Town, Wuxi City

Jiangsu, PRC 214181

Attention: Wu Jianhua

E-mail: 13861880987@e172.com

Fax: 86 510 3380099

With a copy to:

Richardson & Patel LLP

10900 Wilshire Boulevard, Suite 500

Los Angeles, CA 90024

Attention: Kevin L. Leung

E-mail: kleung@richardsonpatel.com

Fax: (310) 208-1154

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Sichenzia Ross Friedman Ference LLP

61 Broadway

New York, New York 10006

Attention: Asher S. Levitsky PC

E-mail: alevitsky@srff.com

Fax: (212) 930-9725

If to Barron:

Barron Partners L.P.

c/o Barron Capital Advisors, LLC

730 Fifth Avenue, 25^th Floor

New York, New York 10019

Attn: Andrew Barron Worden

E-mail: abw@barronpartners.com and onf@barronpartners.com

Fax: (212) 359-0222

If to the other Investors, at their addresses set forth on Appendix A.

11.6Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any such term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

11.7Binding Effect. All the terms and provisions of this Agreement whether so expressed or not, shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective administrators, executors, legal representatives, heirs, successors and assignees.

11.8Preparation of Agreement. This Agreement shall not be construed more strongly against any party regardless of who is responsible for its preparation. The parties acknowledge each contributed and is equally responsible for its preparation.In resolving any dispute regarding, or construing any provision in, this Agreement, there shall be no presumption made or inference drawn because of the drafting history of the Agreement, or because of the inclusion of a provision not contained in a prior draft or the deletion or modification of a provision contained in a prior draft.

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11.9Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to applicable principles of conflicts of law.

11.10Jurisdiction; Waiver of Jury Trial. If any action is brought among the parties with respect to this Agreement or otherwise, by way of a claim or counterclaim, the parties agree that in any such action, and on all issues, the parties irrevocably waive their right to a trial by jury. Exclusive jurisdiction and venue for any such action shall be the federal and state courts situated in the City, County and State of New York. In the event suit or action is brought by any party under this Agreement to enforce any of its terms, or in any appeal therefrom, it is agreed that the prevailing party shall be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or appellate court if such party prevails on substantially all issues in dispute.

11.11 Preparation and Filing of Securities and Exchange Commission filings. The Investors shall reasonably assist and cooperate with the Company in the preparation of all filings with the SEC after the Closing Date due after the Closing Date.

11.12Further Assurances, Cooperation. Each party shall, upon reasonable request by the other party, execute and deliver any additional documents necessary or desirable to complete the transactions herein pursuant to and in the manner contemplated by this Agreement. The parties hereto agree to cooperate and use their respective best efforts to consummate the transactions contemplated by this Agreement.

11.13Survival. The representations, warranties, covenants and agreements made herein shall survive the Closing of the transaction contemplated hereby.

11.14Third Parties. Except as disclosed in this Agreement, nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective administrators, executors, legal representatives, heirs, successors and assignees. Nothing in this Agreement is intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement.

11.15Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall nay single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

Amended and Restated Securities Purchase Agreement between China Wind Systems, Inc. and Barron Partners, LP

Page 36

11.16Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. A facsimile transmission of this signed Agreement shall be legal and binding on all parties hereto.

[SIGNATURES ON FOLLOWING PAGE]

Amended and Restated Securities Purchase Agreement between China Wind Systems, Inc. and Barron Partners, LP

Page 37

IN WITNESS WHEREOF, the Investors and the Company have as of the date first written above executed this Agreement.

THE COMPANY:

CHINA WIND SYSTEMS, INC.
By:	/s/ Wu Jianhua
	Wu Jianhua, CEO

INVESTORS:

BARRON PARTNERS LP By: Barron Capital Advisors, LLC, its General Partner
By:	/s/ Andrew Barron Worden
	Andrew Barron Worden, President

EOS HOLDINGS
By:	/s/ Jon R. Carnes
	Jon R.Carnes, President

/s/ Steve Mazur

Steve Mazur

Huayang Dye Machine Co., Ltd. and Huayang Electricity Power Equipment Co., Ltd. hereby agree to the provisions of Section 6.26 of this Agreement.

Huayang Dye Machine Co., Ltd.		Huayang Electricity Power Equipment Co., Ltd.
By:	/s/ Wu Jianhua	By:	/s/ Tang Lihua
Name:	Wu Jianhua	Name:	Tang Lihua
Title:		Title:

The undersigned hereby agrees to be bound by the provisions of Sections 6.16, 6.19 and 6.23 of this Agreement.

/s/ Wu Jianhua	/s/ Tang Lihua	/s/ Ren Yunxia
Wu Jianhua	Tang Lihua	Ren Yunxia

SECURITIES PURCHASE AGREEMENT BETWEEN

CHINA WIND SYSTEMS, INC. AND BARRON PARTNERS LP

SIGNATURE PAGE

Schedule A

Name and Address	Amount of Investment		Principal Amount of Note		Number of Shares of Preferred Stock into Which Note is Convertible		Number of Shares Underlying $0.58 Warrants		Number of Shares Underlying $0.83 Warrants		Number of Shares Underlying $0.92 Warrants
Barron Partners LP 730 Fifth Avenue, 25th Floor New York, New York 10019 Attn: Andrew Barron Worden	$	5,275,000	$	5,275,000		14,118,034		10,670,780		5,335,390		1,971,561
Eos Holdings 2560 Highvale Dr. Las Vegas, NV 89134 Attn: Jon R. Carnes, President	$	150,000	$	150,000		401,461		303,434		151,717		56,063
Steve Mazur 200 Broad Street Apt 2321 Stamford CT  06901	$	100,000	$	100,000		267,640		202,290		101,145		37,376
TOTAL:	$	5,525,000	$	5,525,000		14,787,135		11,176,504		5,588,252		2,065,000

Schedule 4.3.1

China Wind Systems, Inc.

Authorized and Outstanding Capital As of January 31, 2008:

	Number of Shares
Total common stock authorized:		75,000,000 shares
Total common stock issued and outstanding:		36,987,214 shares
Adjustments to reflect sale and issuance of the preferred stock and warrants to Barron investors:
(1) Total common stock to be issued on full conversion of preferred stock (assuming an unadjusted conversion price of $0.374 per share):		14,784,135 shares
(2) Total common stock to be issued on full exercise of warrants (assuming no adjustment for the number of warrant shares and assuming exercise for cash):		18,829,755 shares
Total common stock issued (including adjustments (1) and (2)):		70,604,105 shares
Total preferred stock authorized:		Nil

On November 13, 2007, we issued 247,800 shares of common stock to Synergy Business Consulting, LLC, and 43, 729 shares of common stock to Synergy Law Group Holdings, for services rendered.

Schedule 4.8

Schedule of Brokers

None.

Exhibit A

CHINA WIND SYSTEMS, INC.

Statement of Designations

Section 1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement (as defined below) shall have the meanings given such terms in the Purchase Agreement. For the purposes hereof, the following terms shall have the following meanings:

“4.9% Limitation” shall have the meaning set forth in the Purchase Agreement.

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1.02(s) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof; (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not stayed or dismissed within 90 days after commencement; (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 90 days; (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Closing Date” means the Closing Date, as defined in the Purchase Agreement.

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the Company’s common stock, which is presently designated as the common stock, par value $.00002 per share.  Pursuant to the Restated Certificate, the par value will be changed to $.001 per share.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Conversion Date” shall have the meaning set forth in Section 6(a).

“Conversion Ratio” shall mean the number of shares of Common Stock issuable upon conversion of one share of Series A Preferred Stock. Each share of Series A Preferred Stock shall be convertible into one (1.0) share of Common Stock (the “Conversion Ratio”), subject to adjustment as provided in this Statement of Designations.

“Conversion Price” shall mean $0.374, subject to adjustment as provided in this Statement of Designations.

“Conversion Shares” means, collectively, the shares of Common Stock into which the shares of Series A Preferred Stock are convertible in accordance with the terms hereof.

“Conversion Shares Registration Statement” means a registration statement that meets the requirements of the Registration Rights Agreement and registers the resale of the Conversion Shares by the Holder, who shall be named as a “selling stockholder” thereunder, all as provided in the Registration Rights Agreement.

“Conversion Value” means an amount determined by multiplying the number of Conversion Shares as to which a value is to be determined by the average of the closing prices of the Common Stock on the principal market or exchange on which the Common Stock is traded for the five days prior to the date as of which a Conversion Value is being determined.

“Dilutive Issuance” shall have the meaning set forth in Section 7(b) hereof.

“Effective Date” means the date that the Conversion Shares Registration Statement is declared effective by the Commission.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exempt Issuance” shall have the meaning set forth in the Purchase Agreement.

“Fundamental Transaction” shall have the meaning set forth in Section 7(f)(iv) hereof.

“Holder” shall have the meaning given such term in Section 2 hereof.

“Investors” shall mean the persons named in Schedule A to the Purchase Agreement.

“Original Issue Date” shall mean the date of the first issuance of any shares of the Series A Preferred Stock regardless of the number of transfers of any particular shares of Series A Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series A Preferred Stock.

“Person” means a corporation, an association, a partnership, a limited liability company, a business association, an individual, a trust, a government or political subdivision thereof or a governmental agency.

“Purchase Agreement” means the Securities Purchase Agreement dated as of November 13, 2007, relating to the sale of (a) 14,787,135 shares of the Company’s Series A Preferred Stock, (b) warrants to purchase (i) 11,176,504 shares of Common Stock at $0.58 per share, and (ii) 5,588,252 shares of Common Stock at $0.83 per share, and (iii) 2,065,000 shares of Common Stock at $0.92 per share, as such agreement may be amended, modified or supplemented from time to time, a copy of which is on file at the principal offices of the Company.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Closing Date, to which the Company and the original Holder are parties, as amended, modified or supplemented from time to time.

“Securities” shall have the meaning set forth in Section 1.3.33 of the Purchase Agreement.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Series A Preferred Stock” shall have the meaning set forth in Section 2.

“Subsidiary” shall mean a corporation, limited liability company, partnership, joint venture or other business entity of which the Company owns beneficially or of record more than a majority of the equity interest.

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the primary Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function; (b) if the Common Stock is not then listed or quoted on the Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by a nationally recognized-independent appraiser selected in good faith by Purchasers holding a majority of the principal amount of Series A Preferred Stock then outstanding.

Rank of Series. For purposes of this Statement of Designations, any stock of any series or class of the Corporation shall be deemed to rank:

(a) senior to the shares of Series A Preferred Stock, as to dividends or upon liquidation, dissolution or winding up, as the case may be, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of Series A Preferred Stock;

(b) on a parity with shares of Series A Preferred Stock, as to dividends or upon liquidation, dissolution or winding up, as the case may be, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of Series A Preferred Stock, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of Series A Preferred Stock;

(c) junior to shares of Series A Preferred Stock as to dividends or upon liquidation, dissolution or winding up, as the case may be, if such class shall be Common Stock or if the holders of shares of Series A Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes.

Section 2. Designation and Amount. The series of preferred stock, par value $.001 per share (“Preferred Stock”) consisting of sixty million (60,000,000) shares shall be designated as the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and the number of shares so designated shall be (which shall not be subject to increase without the consent of all of the holders of 75% of the then outstanding shares of Series A Preferred Stock (each a “Holder” and collectively, the “Holders”). In the event that the Company shall change the par value of the Preferred Stock, the par value of the Series A Preferred Stock shall be likewise changed. In the event of the conversion of shares of Series A Preferred Stock into this Company’s Common Stock, pursuant to Section 6 hereof, or in the event that the Company shall otherwise acquire and cancel any shares of Series A Preferred Stock, the shares of Series A Preferred Stock so converted or otherwise acquired and canceled shall have the status of authorized but unissued shares of preferred stock, without designation as to series until such stock is once more designated as part of a particular Series by the Company’s Board of Directors. In addition, if the Company shall not issue the maximum number of shares of Series A Preferred Stock, the Company may, from time to time, by resolution of the Board of Directors and the approval of the holders of a majority of the outstanding shares of Series A Preferred Stock, reduce the number of shares of Series A Preferred Stock authorized, provided, that no such reduction shall reduce the number of authorized shares to a number which is less than the number of shares of Series A Preferred Stock then issued or reserved for issuance. The number of shares by which the Series A Preferred Stock is reduced shall have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such stock is once more designated as part of a particular Series by the Company’s Board of Directors. The Board of Directors shall cause to be filed with the Secretary of State of the State of Nevada such certificate as shall be necessary to reflect any reduction in the number of shares constituting the Series A Preferred Stock.

Section 3. Dividends and Other Distributions. No dividends shall be payable with respect to the Series A Preferred Stock. No dividends shall be declared or payable with respect to the Common Stock or the Series B Preferred Stock while the Series A Preferred Stock is outstanding. The Company shall not redeem or purchase any shares of Common Stock or any other class or series of capital stock which is junior to or on a parity with the Series A Preferred Stock while the Series A Preferred Stock is outstanding.

Section 4. Voting Rights. The Series A Preferred Stock shall have no voting rights except as required by law. However, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without the affirmative approval of the Holders of 75% of the shares of the Series A Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend this Statement of Designations, (b) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section 5) senior to or otherwise pari passu with the Series A Preferred Stock, or any of preferred stock possessing greater voting rights or the right to convert at a more favorable price than the Series A Preferred Stock, (c) amend its certificate of incorporation or other charter documents in breach of any of the provisions hereof, (d) increase the authorized number of shares of Series A Preferred Stock or the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to the foregoing. Notwithstanding any other provision of the Statement of Designations; the provisions of Section 6(c) of this Statement of Designations may not be amended or waived.

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series A Preferred Stock an amount equal to thirty eight and 4/10 cents ($0.384) per share of Series A Preferred Stock, which amount is referred to as the “Liquidation Preference,” before any distribution or payment shall be made to the holders of any securities which are junior to the Series A Preferred Stock upon voluntary or involuntary liquidation, dissolution or winding up and after any distributions or payments made to holders of any class or series of securities which are senior to the Series A Preferred Stock upon voluntary or involuntary liquidation, dissolution or winding up, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. In the event the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock upon dissolution, liquidation or winding up of the Company, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section 5, no such distribution shall be made on account of any shares of any other class or series of capital stock of the Company ranking on a parity with the shares of Series A Preferred Stock upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of Series A Preferred Stock, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. At the election of a Holder made by written notice delivered to the Company at least two (2) business days prior to the effective date of the subject transaction, as to the shares of Series A Preferred Stock held by such Holder, a Fundamental Transaction (excluding for purposes of this Section 5 any Fundamental Transaction described in Section 7(f)(iv)(A) or 7(f)(iv)(B)) or Change of Control shall be treated as a Liquidation as to such Holder.

Section 6. Conversion.

(a)Conversions at Option of Holder. Each share of Series A Preferred Stock shall be initially convertible (subject to the limitations set forth in Section 6(c)), into such number of shares of Common Stock based on the Conversion Ratio at the option of the Holders, at any time and from time to time from and after the Original Issue Date; provided, however, that until the Restated Certificate, as defined in the Purchase Agreement, is filed with the Secretary of State of the State of Delaware, the Series A Preferred Stock shall not be convertible into Common Stock to the extent that such conversion would result in the issuance of more than the number of authorized shares of Common Stock. Holders shall effect conversions by providing the Company with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”) as fully and originally executed by the Holder, together with the delivery by the Holder to the Company of the stock certificate(s) representing the number of shares of Series A Preferred Stock so converted, with such stock certificates being duly endorsed in full for transfer to the Company or with an applicable stock power duly executed by the Holder in the manner and form as deemed reasonable by the transfer agent of the Common Stock. Each Notice of Conversion shall specify the number of shares of Series A Preferred Stock to be converted, the number of shares of Series A Preferred Stock owned prior to the conversion at issue, the number of shares of Series A Preferred Stock owned subsequent to the conversion at issue, the stock certificate number and the shares of Series A Preferred Stock represented thereby which are accompanying the Notice of Conversion, and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Notice of Conversion and the applicable stock certificates to the Company by overnight delivery service (the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the Trading Day immediately following the date that such Notice of Conversion and applicable stock certificates are received by the Company. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. Shares of Series A Preferred Stock converted into Common Stock in accordance with the terms hereof shall be canceled and may not be reissued. If the Conversion Price is adjusted pursuant to Section 7 or as otherwise provided in this Statement of Designations, the Conversion Ratio shall likewise be adjusted and the new Conversion Ratio shall determined by multiplying the Conversion Ratio in effect by a fraction, the numerator of which is the Conversion Price in effect before the adjustment and the denominator of which is the new Conversion Price. Thereafter, subject to any further adjustments in the Conversion Price, each share of Series A Preferred Stock shall be initially convertible into Common Stock based on the new Conversion Ratio.

(b)Automatic Conversion Upon Change of Control. Subject to Section 5, all of the outstanding shares of Series A Preferred Stock shall be automatically converted into the Conversion Shares upon the close of business on the business day immediately preceding the date fixed for consummation of any transaction resulting in a Change of Control of the Company (an “Automatic Conversion Event”). A “Change in Control” means a consolidation or merger of the Company with or into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company in a transaction or series of transactions. The Company shall not be obligated to issue certificates evidencing the Conversion Shares unless certificates evidencing the shares of Series A Preferred Stock so converted are either delivered to the Company or its transfer agent or the holder notifies the Company or its transfer agent in writing that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. Upon the conversion of the Series A Preferred Stock pursuant to this Section 6(b), the Company shall promptly send written notice thereof, by hand delivery or by overnight delivery, to the holders of record of all of the Series A Preferred Stock at their addresses then shown on the records of the Company, which notice shall state that certificates evidencing shares of Series A Preferred Stock must be surrendered at the office of the Company (or of its transfer agent for the Common Stock, if applicable).

(c)Beneficial Ownership Limitation. Except as provided in Section 6(b) of this Statement of Designations, which shall apply as stated therein if an Automatic Conversion Event shall occur, the right of the Holder to convert the Series A Preferred Stock shall be subject to the 4.9% Limitation, with the result that Company shall not effect any conversion of the Series A Preferred Stock, and the Holder shall not have the right to convert any portion of the Series A Preferred Stock, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates), as set forth on the applicable Notice of Conversion, would beneficially own in excess of 4.9% of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion.  For the purposes of this Agreement beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act, and Regulation 13d-3 thereunder. For purposes of this Section 6(c), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of the following: (A) the Company’s most recent quarterly reports (Form 10-Q or Form 10-QSB), Annual Reports (Form 10-K or Form 10-KSB), or definitive proxy statement or information statement as filed with the Commission under the Exchange Act, (B) a more recent public announcement by the Company, or (C) any other written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of the Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Series A Preferred Stock, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was publicly reported by the Company. The 4.9% Limitation may be not be waived or amended.

(d)Mechanics of Conversion

(i)Delivery of Certificate Upon Conversion. Except as otherwise set forth herein, not later than three Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver to the Holder (A) a certificate or certificates which, after the Effective Date, shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of shares of Series A Preferred Stock, and (B) a bank check in the amount of accrued and unpaid dividends (if the Company has elected or is required to pay accrued dividends in cash). After the Effective Date, the Company shall, upon request of the Holder, deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Company or another established clearing Company performing similar functions if the Company’s transfer agent has the ability to deliver shares of Common Stock in such manner. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Series A Preferred Stock tendered for conversion.

(ii)Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of Series A Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares. In the event a Holder shall elect to convert any or all of its Series A Preferred Stock, the Company may not refuse conversion based on any claim that such Holder or any one associated or affiliated with the Holder of has been engaged in any violation of law, agreement or for any other reason (other than the inability of the Company to issue shares of Common Stock as a result of the limitation set forth in Section 6(c) hereof) unless an injunction from a court, on notice, restraining and or enjoining conversion of all or part of this Series A Preferred Stock shall have been sought and obtained and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the Conversion Value of Series A Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of an injunction precluding the same, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 6(d)(i) within two Trading Days of the Share Delivery Date applicable to such conversion, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Conversion Value of Series A Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day after three (3) Trading Days and increasing to $200 per Trading Day six (6) Trading Days after such damages begin to accrue) for each Trading Day after the Share Delivery Date until such certificates are delivered. Nothing herein shall limit a Holder’s right to pursue actual damages for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

(iii)Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. If the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 6(d)(i) by a Share Delivery Date, and if after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the price at which the sell order giving rise to such purchase obligation was executed. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Series A Preferred Stock with respect to which the aggregate sale price giving rise to such purchase obligation is $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the shares of Series A Preferred Stock as required pursuant to the terms hereof.

(iv)Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Series A Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of all outstanding shares of Series A Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Conversion Shares Registration Statement is then effective under the Securities Act, registered for public sale in accordance with such Conversion Shares Registration Statement provided that the holder or its broker delivers confirmation to the Company or its transfer agent to the effect that the Conversion Shares have been sold pursuant to such registration statement.

(v)Fractional Shares. Upon a conversion of the Series A Preferred Stock, the Company shall not be required to issue stock certificates representing fractional shares of Common Stock. All fractional shares shall be carried forward and any fractional shares which remain after a Holder converts all of his or her Series A Preferred Stock shall be dropped and eliminated.

(vi)Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of the Series A Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Series A Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(vii)Absolute Obligation. Except as expressly provided herein, no provision of this Statement of Designations shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the liquidated damages (if any) on, the shares of Series A Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

Section 7. Certain Adjustments.

(a)Stock Dividends and Stock Splits. If the Company, at any time subsequent to the Closing Date as long as the Series A Preferred Stock is outstanding: (i) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Series A Preferred Stock), (ii) subdivide outstanding shares of Common Stock into a larger number of shares, (iii) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b)Price Adjustment. From and after the Closing Date and until such time as the Investors hold no Securities, except for (i) Exempt Issuances, (ii) issuances covered by Sections 7(a) and 7(c) hereof or (iii) an issuance of Common Stock upon exercise or upon conversion of warrants, options or other convertible securities for which an adjustment has already been made pursuant to this Section 7, as to all of which this Section 7(b) does not apply, if the Company closes on the sale or issuance of Common Stock at a price, or issues warrants, options, convertible debt or equity securities with a exercise price per share or conversion price which is less than the Conversion Price then in effect (such lower sales price, conversion or exercise price, as the case may be, being referred to as the “Lower Price”), the Conversion Price in effect from and after the date of such transaction shall be reduced to the Lower Price. For purpose of determining the exercise price of warrants issued by the Company, the price, if any, paid per share for the warrants shall be added to the exercise price of the warrants.

(c)Pro Rata Distributions. If the Company, at any time from and after the Closing Date and as long as the Series A Preferred Stock is outstanding, shall distribute to all holders of Common Stock (and not to Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price shall be determined by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

(d)Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its subsidiaries. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares and shares owned by subsidiaries, if any) actually issued and outstanding.

(e)Notice to Holders.

(i)Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any of this Section 7, the Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement), or the lowest possible adjustment price in the case of an MFN Transaction (as defined in the Purchase Agreement).

(ii)Notices of Other Events. If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock or any Fundamental Transaction, (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the Series A Preferred Stock, and shall cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the Company, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification or Fundamental Transaction; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

(f)Exempt Issuance. Notwithstanding the foregoing, no adjustment in the Conversion Price will be made in respect of an Exempt Issuance.

(g)Fundamental Transaction. If, at any time while this Series A Preferred Stock is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then upon any subsequent conversion of this Series A Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series A Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall file a new Statement of Designations with the same terms and conditions and issue to the Holder new preferred stock consistent with the foregoing provisions and evidencing the Holder’s right to convert such preferred stock into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (f)(iv) and insuring that this Series A Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding the foregoing or any other provisions of this Statement of Designations, in the event that the agreement relating to a Fundamental Transaction provides for the conversion or exchange of the Series A Preferred Stock into equity or debt securities, cash or other consideration and the agreement is approved by the holders of a majority of the then-outstanding shares of Series A Preferred Stock, then the holders of the Series A Preferred Stock shall have only the rights set forth in such agreement.

Section 8. Miscellaneous.

(a)Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service, addressed to the Company, at its principal address as reflected in its most recent filing with the Commission. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given when received, and any notice by telecopier shall be effective if confirmation of receipt is given by the party to whom the notice is transmitted.

(b)Lost or Mutilated Preferred Stock Certificate. If a Holder’s Series A Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series A Preferred Stock so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership thereof, and indemnity, if requested, all reasonably satisfactory to the Company.

(c)Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

(d)Headings. The headings contained herein are for convenience only, do not constitute a part of this Statement of Designations and shall not be deemed to limit or affect any of the provisions hereof.

(e)Amendment. This Statement of Designations may be amended with the approval of the Company’s board of directors and the consent of the holders of seventy-five percent (75%) of the outstanding shares of Series A Preferred Stock, except that the 4.9% Limitation may not be waived.

ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF SERIES A PREFERRED STOCK)

The undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Stock indicated below, into shares of common stock, par value $0.001 per share (the “Common Stock”), of China Wind Systems, Inc., a Delaware corporation (the “Company”), according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any.

Conversion calculations:

Date to Effect Conversion: 

Number of shares of Common Stock owned prior to Conversion:

Number of shares of Series A Preferred Stock to be Converted:

Value of shares of Series A Preferred Stock to be Converted:

Number of shares of Common Stock to be Issued:

Certificate Number of Series A Preferred Stock attached hereto:

Number of Shares of Series A Preferred Stock represented by attached certificate:

Number of shares of Series A Preferred Stock subsequent to Conversion:
	[HOLDER]
	By:
		Name:
		Title

EX-99.7

NEITHER THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE UNDERLYING SHARES OF COMMON STOCK HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT, OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO SUCH EXEMPTION.

IN ADDITION, A SECURITIES PURCHASE AGREEMENT DATED AS OF NOVEMBER 13, 2007, AS AMENDED, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS WARRANT.

CHINA WIND SYSTEMS, INC.

COMMON STOCK PURCHASE WARRANT “A”

Number of Shares: 10,670,7801	Holder: Barron Partners LP
	c/o Barron Capital Advisors LLC
Issue Date: November 13, 2007	Managing Partner
	Attn: Andrew Barron Worden
Expiration Date: November 13, 2012	730 Fifth Avenue, 25th Floor
	New York NY 10019
	tel 212-359-0200
Exercise Price per Share: $0.58	fax 212-359-0222

THIS COMMON STOCK PURCHASE WARRANT is issued by CHINA WIND SYSTEMS, INC., a Delaware corporation (the “Company”) pursuant to a Securities Purchase Agreement dated November 13, 2007, as amended (“Purchase Agreement”).

The Company hereby certifies that, for value received, BARRON PARTNERS LP, or registered assigns (the “Warrant Holder”), is entitled, subject to the terms set forth below, to purchase from the Company up to 10,670,780 shares (as adjusted from time to time as provided in Section 7 of this Warrant, the “Warrant Shares”) of common stock, $.001 par value (the “Common Stock”), of the Company at a price of fifty eight cents ($.58) per Warrant Share (as adjusted from time to time as provided in Section 7, the “Exercise Price”), at any time and from time to time from and after the date thereof and through and including 5:00 p.m. New York City time on November 13, 2012 (the “Expiration Date”), and subject to the following terms and conditions:

^{1 The warrants for Eos Holdings will be 303,434 shares and the warrants for Steve Mazur will be 202,290 shares.}

1.Registration of Warrant. The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Warrant Holder hereof from time to time. The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.

2.Investment Representation. The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an affiliate that is an accredited investor which has been identified to and approved by (such approval not to be unreasonably withheld or delayed) for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws. The Warrant Holder acknowledges that the certificates representing any Warrant Shares will bear a legend indicating that they have not been registered under the 1933 Act, and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the 1933 Act and in accordance with federal and state securities laws. If this Warrant was acquired by the Warrant Holder pursuant to the exemption from the registration requirements of the 1933 Act afforded by Regulation S thereunder, the Warrant Holder acknowledges and covenants that this Warrant may not be exercised by or on behalf of a Person during the one year distribution compliance period (as defined in Regulation S) following the date hereof. “Person” means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.

3.Validity of Warrant and Issue of Shares. The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof other than those incurred by the Holder. The Company further warrants and agrees that during the Exercise Period, the Company will at all times have authorized and reserved a sufficient number of Common Stock to provide for the exercise of the rights represented by this Warrant.

4.Registration of Transfers and Exchange of Warrants.

a.Subject to compliance with the federal and state securities laws, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 13. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.

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b.This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 9 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange.

5. Exercise of Warrants.

a.Upon surrender of this Warrant with the Form of Election to Purchase attached hereto duly completed and signed to the Company, at its address set forth in Section 13, and upon payment and delivery of the Exercise Price per Warrant Share multiplied by the number of Warrant Shares that the Warrant Holder intends to purchase hereunder, in lawful money of the United States of America, by wire transfer or by certified or official bank check or checks, to the Company, all as specified by the Warrant Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 7 business days after the Date of Exercise (as defined herein)) issue or cause to be issued and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a certificate for the Warrant Shares issuable upon such exercise, with such restrictive legend as required by the 1933 Act. Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant.

b.A “Date of Exercise” means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased.

c.This Warrant shall be exercisable at any time and from time to time during the Exercise Period for such number of Warrant Shares as is indicated in the attached Form of Election To Purchase. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant.

d.(i) Notwithstanding anything contained herein to the contrary, but subject to Section 5(e) and Section 6, the holder of this Warrant may, at its election exercised in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

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Net Number = (A x (B - C))/B

(ii) For purposes of the foregoing formula:

A = the total number shares with respect to which this Warrant is then being exercised.

B = the last reported sale price (as reported by Bloomberg) of the Common Stock on the trading day immediately preceding the date of the Exercise Notice.

C = the Warrant Exercise Price then in effect at the time of such exercise.

e.The holder of this Warrant shall have the right, in its sole discretion, to receive, in lieu of any or all of the shares of Common Stock determined pursuant to Section 5(d) of this Warrant, such number of shares of Series A Preferred Stock as has a liquidation preference equal to A x (B-C).

f.The holder of this Warrant may not make a Cashless Exercise (i) during the twelve (12) months following the Original Issue Date and (ii) thereafter if the sale by the Holder of the Warrant Shares is covered by an effective registration statement.

6.Maximum Exercise. The Warrant Holder shall not be entitled to exercise this Warrant on a Date of Exercise in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Warrant Holder and its affiliates on the Date of Exercise, and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an Date of Exercise, which would result in beneficial ownership by the Warrant Holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock on such date. This Section 6 may not be waived or amended. As used in this Warrant, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 13d-3 thereunder.

7.Adjustment of Exercise Price and Number of Shares. The character of the shares of stock or other securities at the time issuable upon exercise of this Warrant and the Exercise Price therefore, are subject to adjustment upon the occurrence any of the following events which shall have occurred or which shall occur at any time on or after the Closing Date, as defined in the Purchase Agreement and regardless of whether any Warrants were issued on the Closing Date, and all such adjustments shall be cumulative:

a.Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc. The Exercise Price of this Warrant and the number of shares of Common Stock or other securities at the time issuable upon exercise of this Warrant shall be appropriately adjusted to reflect any stock dividend, stock split, stock distribution, combination of shares, reverse split, reclassification, recapitalization or other similar event affecting the number of outstanding shares of stock or securities.

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b.Adjustment for Reorganization, Consolidation, Merger, Etc. In case of any consolidation or merger of the Company with or into any other corporation, entity or person, or any other corporate reorganization, in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization (any such transaction being hereinafter referred to as a “Reorganization”), then, in each case, the holder of this Warrant, on exercise hereof at any time after the consummation or effective date of such Reorganization (the “Effective Date”), shall receive, in lieu of the shares of stock or other securities at any time issuable upon the exercise of the Warrant issuable on such exercise prior to the Effective Date, the stock and other securities and property (including cash) to which such holder would have been entitled upon the Effective Date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).

c.Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the Board of Directors of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

d.Sales of Common Stock at less than the Exercise Price.From the date hereof until such time as the Investors, as defined in the Purchase Agreement, hold no Securities, as defined in the Purchase Agreement, except for (i) Exempt Issuances, as defined in the Purchase Agreement, (ii) issuances covered by Sections 7(a), 7(b) and 7(e) hereof or (iii) an issuance of Common Stock upon exercise or upon conversion of warrants, options or other convertible securities for which an adjustment has already been made pursuant to this Section 7, as to all of which this Section 7(d) does not apply, if the Company closes on the sale or issuance of Common Stock at a price, or warrants, options, convertible debt or equity securities with an exercise price per share or a conversion price which is less than the Exercise Price then in effect, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares and the number of shares of Common Stock which the aggregate consideration received or receivable for the issuance of such additional shares would purchase at the Exercise Price then in effect, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares (including the exercise or conversion of all options, warrants and other convertible securities). Such adjustment shall be made successively whenever such an issuance is made. An adjustment pursuant to this Section 7(d) shall not result in any change in the number of shares of Common Stock issuable upon exercise of this Warrant.

e.Price Adjustments Based on Pre-Tax Income per Share.

i. In the event the Company’s consolidated Pre-Tax Income, as defined in the Purchase Agreement, for the year ended December 31, 2007 is less than the Target Number per share, as defined in the Purchase Agreement, for 2007, on a fully-diluted basis, then the Exercise Price shall be reduced by the percentage shortfall, up to a maximum reduction of 90%. Thus, if Pre-Tax Income for the year ended December 31, 2007 is 30% per share on a fully-diluted basis less than the Target Number, the Exercise Price shall be reduced by 30%. Such reduction shall be made at the time the Company files its Form 10-KSB for the year ended December 31, 2007, and shall apply to the Warrants which are outstanding on the date the Form 10-KSB is filed, or, if not filed on time, on the date that filing was required, after giving effect to any extension pursuant to Rule 12b-25 of the Exchange Act. In the event that the Form 10-KSB is not filed with the SEC within thirty (30) days after the date that filing was required, the Exercise Price shall automatically be reduced by 90%.

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ii. In the event the Company’s consolidated Pre-Tax Income for the year ended December 31, 2008 is less than the Target Number per share, as defined in the Purchase Agreement, for 2008, on a fully-diluted basis, then the Exercise Price then in effect shall be reduced by the percentage shortfall, up to a maximum reduction of 90%. Thus, if Pre-Tax Income for the year ended December 31, 2008 is 30% per share on a fully-diluted basis less than the Target Number, the Exercise Price shall be reduced by 30%. Such reduction shall be made at the time the Company files its Form 10-KSB for the year ended December 31, 2008, and shall apply to the Warrants which are outstanding on the date the Form 10-KSB is filed, or, if not filed on time, on the date that filing was required, after giving effect to any extension pursuant to Rule 12b-25 of the Exchange Act. In the event that the Form 10-KSB is not filed with the SEC within thirty (30) days after the date that filing was required, the Exercise Price shall automatically be reduced by 90%.

iii. For purpose of determining Pre-Tax Income Per Share on a fully-diluted basis, all shares of Common Stock issuable upon conversion of convertible securities and upon exercise of warrants and options (whether or not vested) shall be deemed to be outstanding, regardless of whether (i) such shares are treated as outstanding for determining diluted earnings per share under GAAP, (ii) such securities are “in the money,” or (iii) such shares may be issued as a result of the 4.9% Limitation; provided, however, that neither the shares of Series A Preferred Stock held in escrow pursuant to Section 6.15 or Section 6.25 of the Purchase Agreement nor the shares of Common Stock issuable upon conversion of such Series A Preferred Stock shall be deemed outstanding for purpose of this Section 7(e) unless such shares were required to have been transferred to the Investors pursuant to the Closing Escrow Agreement, as defined in the Purchase Agreement.

iv. An adjustment pursuant to Sections 7(d) or 7(e) of this Warrant shall not affect the number of shares of Common Stock issuable upon exercise of this Warrant.

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8.Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrants Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 8, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number.

9.Sale or Merger of the Company. Upon a Merger Transaction, the restriction contained in Section 6 shall immediately be released and the Warrant Holder will have the right to exercise this Warrant concurrently with such Merger Transaction. For purposes of this Warrant, the term “Merger Transaction” shall mean a consolidation or merger of the Company into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company.

10.Notice of Intent to Sell or Merge the Company. The Company will give Warrant Holder ten (10) business days notice before any Merger Transaction.

11.Issuance of Substitute Warrant. In the event of a merger, consolidation, recapitalization or reorganization of the Company or a reclassification of Company shares of stock, which results in an adjustment to the number of shares subject to this Warrant and/or the Exercise Price hereunder, the Company agrees to issue to the Warrant Holder a substitute Warrant reflecting the adjusted number of shares and/or Exercise Price upon the surrender of this Warrant to the Company. However, in the event that the Company does not issue a substitute warrant, the number and class of Warrant Shares or other securities and the Exercise Price shall be adjusted as provided in this Warrant, and this Warrant shall relate the adjusted number of Warrant Shares and Exercise Price.

12. Right of Redemption.

                                  a. i. The Company shall have the right at any time, on written notice given not less than forty five (45) days prior to the Redemption Date, to redeem the outstanding Warrants at the Redemption Price of one cent ($.01) per share of Common Stock issuable upon exercise of the Warrants, provided the Market Price of the Common Stock shall equal or exceed the “Target Price” and the “Trading Volume” shall equal or exceed the “Target Volume” on each trading day in the twenty (20) trading days in the period ending on the trading day prior to the date that the Company calls the Warrants for redemption. Notice of redemption shall be mailed by first class mail, postage prepaid, and sent by telecopier and e-mail not later than three (3) business days after the date the Warrants are called for redemption, and shall be deemed given on the date of receipt of the notice by the Holder. All Warrants must be redeemed if any Warrants are redeemed; provided, however, that if the exercise by the Company of its right of redemption pursuant to this Section 12(a)(i) would result in a violation of the 4.9% Limitation, the Company shall not have the right to redeem the Holders’ Warrants to the extent that the exercise of the Warrants as to which the redemption notice is given would result in such a violation. In such event, the Company may subsequently exercise it right to redeem the remaining Warrants held by the Holder on and subject to the provisions of this Section 12(a)(i). 

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ii. As used in this Section 12, the following terms shall have the meanings set forth below:

1. “Redemption Date” shall mean the date on which the Warrants are to be redeemed as set forth in the notice of redemption from the Company to the Holders of the Warrants, as the same may be extended pursuant to Section 12(b)(ii) of this Warrant.

2. “Market Price” shall mean the closing bid price of the Common Stock (as reported by Bloomberg L.P. or, if the Common Stock is traded on the Nasdaq Stock Market or the New York or American Stock Exchange, as reported by such market or exchange).

3. “Target Price” shall mean the greater of (x) one and 16/100 dollars ($1.16), which price shall be subject to adjustment for events described in Section 7(a) of this Warrant, or (y) two hundred percent (200%) of the Exercise Price.

4. “Trading Volume” shall mean the trading volume in the Common Stock (as reported by Bloomberg L.P. or the Nasdaq Stock Market or the New York or American Stock Exchange, as the case may be).

5. “Target Volume” shall mean one thousand (1,000) shares.

b. Notwithstanding any other provision of this Section 12:

i. The Company may only exercise the right of redemption pursuant to Section 12(a)(i) of this Warrant if a registration statement covering the sale by the Holder of the shares of Common Stock issuable upon exercise of this Warrant is current and effective on each day in the period commencing on the first day of the twenty day period and ending sixty (60) days after the Redemption Date.

ii. In the event that, at any time subsequent to the date on which the Warrants are called for redemption and before the Redemption Date, the shares of Common Stock issuable upon exercise or conversion of the Warrants are not subject to a current and effective registration statement, the Company’s right to call the Warrants for redemption shall terminate with respect to all Warrants that have not then been exercised or converted. Nothing in the preceding sentence shall be construed to prohibit or restrict the Company from thereafter calling the Warrants for redemption in the manner provided for, and subject to the provisions of, this Section 12.

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iii. The Redemption Date shall be postponed for two (2) trading days for each day after the Warrants are called for redemption that the Market Price of the Common Stock is less than the Target Price; provided, however, that if the Market Price shall be less than the Target Price for ten (10) consecutive trading days or fifteen (15) trading days during the period from the date the Warrants are called for redemption to the Redemption Date, the Company’s right to redeem any Warrants not theretofore exercised or converted shall terminate, subject to the right of the Company to call the remaining Warrants for redemption pursuant to this Section 12.

c. The notice of redemption shall specify (i) the Redemption Price, (ii) the Redemption Date, (iii) the place where the Warrants shall be delivered and the Redemption Price shall be paid, (iv) the representation required by Section 12(b)(i), (v) the number of Warrants being called for redemption if less than all of the Warrants are being redeemed, and (vi) that the right to exercise the Warrants shall terminate at 5:30 p.m. (New York City time) on the trading day immediately preceding the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Holder (x) to whom notice was not mailed or (y) whose notice was defective. An affidavit of the Chief Financial Officer of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

d. Any right to exercise or convert a Warrant to the extent that the Warrant was called for redemption shall terminate at 5:30 p.m. (New York City time) on the Redemption Date. After such time, Holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant, the Redemption Price without interest, subject to the provisions of applicable laws relating to the treatment of abandoned property.

13.Notice. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the date of delivery after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:

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If to the Company:

China Wind Systems, Inc.

c/o Greenpower Environmental Technologies, Inc.

Qianzhou Town, Wuxi City

Jiangsu, PRC 214181

Attention: Wu Jian-Hua

With a copy to:

Richardson & Patel LLP

10900 Wilshire Boulevard, Suite 500

Los Angeles, CA 90024

Attn: Kevin K. Leung, Esq.

E-mail: kleung@richardsonpatel.com

Fax: (310) 208-1154

and

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32 Floor

New York, New York 10006

Attention: Asher S. Levitsky PC

E-mail: alevitsky@srff.com

Fax: (212) 930-9725

If to the Warrant Holder:

at the address or telecopier number and to the attention of the person shown on the Company’s warrant register.

14. Miscellaneous.

a.This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only by a writing signed by the Company and the Warrant Holder.

b.Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.

c.This Warrant shall be governed by, construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof.

d.The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

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e.In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonably substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

f.The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a stockholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by the authorized officer as of the date first above stated.

Date: ________________	CHINA WIND SYSTEMS, INC.
	By:
		Name: Wu Jian-Hua
		Title: Chief Executive Officer

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FORM OF ELECTION TO PURCHASE

(To be executed by the Warrant Holder to exercise the right to purchase shares of

Common Stock under the foregoing Warrant)

To: China Wind Systems, Inc.:

In accordance with the COMMON STOCK WARRANT enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ______________ shares of Common Stock (“Common Stock”), $.001 par value, of China Wind Systems, Inc. and encloses the warrant and $____ for each Warrant Share being purchased or an aggregate of $________________ in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) together with any applicable taxes payable by the undersigned pursuant to the Warrant.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

(Please print name and address)

(Please insert Social Security or Tax Identification Number)

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

(Please print name and address)

Dated:   Name of Warrant Holder:  

(Print)

(By:)

(Name:)

(Title:)

(Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant)

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EX-99.8

NEITHER THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE UNDERLYING SHARES OF COMMON STOCK HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT, OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO SUCH EXEMPTION.

IN ADDITION, A SECURITIES PURCHASE AGREEMENT DATED AS OF NOVEMBER 13, 2007, AS AMENDED, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS WARRANT.

CHINA WIND SYSTEMS, INC.

COMMON STOCK PURCHASE WARRANT “B”

Number of Shares: 5,335,3901	Holder: Barron Partners LP
	c/o Barron Capital Advisors LLC
Issue Date: November 13, 2007	Managing Partner
	Attn: Andrew Barron Worden
Expiration Date: November 13, 2012	730 Fifth Avenue, 25th Floor
	New York NY 10019
	tel 212-359-0200
Exercise Price per Share: $0.83	fax 212-359-0222

THIS COMMON STOCK PURCHASE WARRANT is issued by CHINA WIND SYSTEMS, INC., a Delaware corporation (the “Company”) pursuant to a Securities Purchase Agreement dated November 13, 2007, as amended (“Purchase Agreement”).

The Company hereby certifies that, for value received, BARRON PARTNERS LP, or registered assigns (the “Warrant Holder”), is entitled, subject to the terms set forth below, to purchase from the Company up to 5,335,390 shares (as adjusted from time to time as provided in Section 7 of this Warrant, the “Warrant Shares”) of common stock, $.001 par value (the “Common Stock”), of the Company at a price of eighty three cents ($.83) per Warrant Share (as adjusted from time to time as provided in Section 7, the “Exercise Price”), at any time and from time to time from and after the date thereof and through and including 5:00 p.m. New York City time on November 13, 2012 (the “Expiration Date”), and subject to the following terms and conditions:

^{1 The warrants for Eos Holdings will be 151,717 shares and the warrants for Steve Mazur will be 101,145 shares.}

1.Registration of Warrant. The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Warrant Holder hereof from time to time. The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.

2.Investment Representation. The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an affiliate that is an accredited investor which has been identified to and approved by (such approval not to be unreasonably withheld or delayed) for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws. The Warrant Holder acknowledges that the certificates representing any Warrant Shares will bear a legend indicating that they have not been registered under the 1933 Act, and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the 1933 Act and in accordance with federal and state securities laws. If this Warrant was acquired by the Warrant Holder pursuant to the exemption from the registration requirements of the 1933 Act afforded by Regulation S thereunder, the Warrant Holder acknowledges and covenants that this Warrant may not be exercised by or on behalf of a Person during the one year distribution compliance period (as defined in Regulation S) following the date hereof. “Person” means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.

3.Validity of Warrant and Issue of Shares. The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof other than those incurred by the Holder. The Company further warrants and agrees that during the Exercise Period, the Company will at all times have authorized and reserved a sufficient number of Common Stock to provide for the exercise of the rights represented by this Warrant.

4.Registration of Transfers and Exchange of Warrants.

a.Subject to compliance with the federal and state securities laws, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 13. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.

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b.This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 9 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange.

5. Exercise of Warrants.

a.Upon surrender of this Warrant with the Form of Election to Purchase attached hereto duly completed and signed to the Company, at its address set forth in Section 13, and upon payment and delivery of the Exercise Price per Warrant Share multiplied by the number of Warrant Shares that the Warrant Holder intends to purchase hereunder, in lawful money of the United States of America, by wire transfer or by certified or official bank check or checks, to the Company, all as specified by the Warrant Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 7 business days after the Date of Exercise (as defined herein)) issue or cause to be issued and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a certificate for the Warrant Shares issuable upon such exercise, with such restrictive legend as required by the 1933 Act. Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant.

b.A “Date of Exercise” means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased.

c.This Warrant shall be exercisable at any time and from time to time during the Exercise Period for such number of Warrant Shares as is indicated in the attached Form of Election To Purchase. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant.

d.(i)Notwithstanding anything contained herein to the contrary, but subject to Section 5(e) and Section 6, the holder of this Warrant may, at its election exercised in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

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Net Number = (A x (B - C))/B

(ii) For purposes of the foregoing formula:

A = the total number shares with respect to which this Warrant is then being exercised.

B = the last reported sale price (as reported by Bloomberg) of the Common Stock on the trading day immediately preceding the date of the Exercise Notice.

C = the Warrant Exercise Price then in effect at the time of such exercise.

e.The holder of this Warrant shall have the right, in its sole discretion, to receive, in lieu of any or all of the shares of Common Stock determined pursuant to Section 5(d) of this Warrant, such number of shares of Series A Preferred Stock as has a liquidation preference equal to A x (B-C).

f.The holder of this Warrant may not make a Cashless Exercise (i) during the eighteen (18) months following the Original Issue Date and (ii) thereafter if the sale by the Holder of the Warrant Shares is covered by an effective registration statement.

6.Maximum Exercise. The Warrant Holder shall not be entitled to exercise thisWarrant on a Date of Exercise in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Warrant Holder and its affiliates on the Date of Exercise, and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an Date of Exercise, which would result in beneficial ownership by the Warrant Holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock on such date. This Section 6 may not be waived or amended. As used in this Warrant, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 13d-3 thereunder.

7.Adjustment of Exercise Price and Number of Shares. The character of the shares of stock or other securities at the time issuable upon exercise of this Warrant and the Exercise Price therefore, are subject to adjustment upon the occurrence any of the following events which shall have occurred or which shall occur at any time on or after the Closing Date, as defined in the Purchase Agreement and regardless of whether any Warrants were issued on the Closing Date, and all such adjustments shall be cumulative:

a.Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc. The Exercise Price of this Warrant and the number of shares of Common Stock or other securities at the time issuable upon exercise of this Warrant shall be appropriately adjusted to reflect any stock dividend, stock split, stock distribution, combination of shares, reverse split, reclassification, recapitalization or other similar event affecting the number of outstanding shares of stock or securities.

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b.Adjustment for Reorganization, Consolidation, Merger, Etc. In case of any consolidation or merger of the Company with or into any other corporation, entity or person, or any other corporate reorganization, in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization (any such transaction being hereinafter referred to as a “Reorganization”), then, in each case, the holder of this Warrant, on exercise hereof at any time after the consummation or effective date of such Reorganization (the “Effective Date”), shall receive, in lieu of the shares of stock or other securities at any time issuable upon the exercise of the Warrant issuable on such exercise prior to the Effective Date, the stock and other securities and property (including cash) to which such holder would have been entitled upon the Effective Date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).

c.Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the Board of Directors of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

d.Sales of Common Stock at less than the Exercise Price.From the date hereof until such time as the Investors, as defined in the Purchase Agreement, hold no Securities, as defined in the Purchase Agreement, except for (i) Exempt Issuances, as defined in the Purchase Agreement, (ii) issuances covered by Sections 7(a), 7(b) and 7(e) hereof or (iii) an issuance of Common Stock upon exercise or upon conversion of warrants, options or other convertible securities for which an adjustment has already been made pursuant to this Section 7, as to all of which this Section 7(d) does not apply, if the Company closes on the sale or issuance of Common Stock at a price, or warrants, options, convertible debt or equity securities with an exercise price per share or a conversion price which is less than the Exercise Price then in effect (such price being referred to as a “Lower Price”), the Exercise Price shall be adjusted immediately thereafter so that it shall equal the Lower Price. An adjustment pursuant to this Section 7(d) shall not result in any change in the number of shares of Common Stock issuable upon exercise of this Warrant.

e.Price Adjustments Based on Pre-Tax Income per Share.

i. In the event the Company’s consolidated Pre-Tax Income, as defined in the Purchase Agreement, for the year ended December 31, 2007 is less than the Target Number per share, as defined in the Purchase Agreement, for 2007, on a fully-diluted basis, then the Exercise Price shall be reduced by the percentage shortfall, up to a maximum reduction of 90%. Thus, if Pre-Tax Income for the year ended December 31, 2007 is 30% per share on a fully-diluted basis less than the Target Number, the Exercise Price shall be reduced by 30%. Such reduction shall be made at the time the Company files its Form 10-KSB for the year ended December 31, 2007, and shall apply to the Warrants which are outstanding on the date the Form 10-KSB is filed, or, if not filed on time, on the date that filing was required, after giving effect to any extension pursuant to Rule 12b-25 of the Exchange Act. In the event that the Form 10-KSB is not filed with the SEC within thirty (30) days after the date that filing was required, the Exercise Price shall automatically be reduced by 90%.

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ii. In the event the Company’s consolidated Pre-Tax Income for the year ended December 31, 2008 is less than the Target Number per share, as defined in the Purchase Agreement, for 2008, on a fully-diluted basis, then the Exercise Price then in effect shall be reduced by the percentage shortfall, up to a maximum reduction of 90%. Thus, if Pre-Tax Income for the year ended December 31, 2008 is 30% per share on a fully-diluted basis less than the Target Number, the Exercise Price shall be reduced by 30%. Such reduction shall be made at the time the Company files its Form 10-KSB for the year ended December 31, 2008, and shall apply to the Warrants which are outstanding on the date the Form 10-KSB is filed, or, if not filed on time, on the date that filing was required, after giving effect to any extension pursuant to Rule 12b-25 of the Exchange Act. In the event that the Form 10-KSB is not filed with the SEC within thirty (30) days after the date that filing was required, the Exercise Price shall automatically be reduced by 90%.

iii. For purpose of determining Pre-Tax Income Per Share on a fully-diluted basis, all shares of Common Stock issuable upon conversion of convertible securities and upon exercise of warrants and options (whether or not vested) shall be deemed to be outstanding, regardless of whether (i) such shares are treated as outstanding for determining diluted earnings per share under GAAP, (ii) such securities are “in the money,” or (iii) such shares may be issued as a result of the 4.9% Limitation; provided, however, that neither the shares of Series A Preferred Stock held in escrow pursuant to Section 6.15 or Section 6.25 of the Purchase Agreement nor the shares of Common Stock issuable upon conversion of such Series A Preferred Stock shall be deemed outstanding for purpose of this Section 7(e) unless such shares were required to have been transferred to the Investors pursuant to the Closing Escrow Agreement, as defined in the Purchase Agreement.

iv. An adjustment pursuant to Sections 7(d) or 7(e) of this Warrant shall not affect the number of shares of Common Stock issuable upon exercise of this Warrant.

8.Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrants Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 8, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number.

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9.Sale or Merger of the Company. Upon a Merger Transaction, the restriction contained in Section 6 shall immediately be released and the Warrant Holder will have the right to exercise this Warrant concurrently with such Merger Transaction. For purposes of this Warrant, the term “Merger Transaction” shall mean a consolidation or merger of the Company into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company.

10.Notice of Intent to Sell or Merge the Company. The Company will give Warrant Holder ten (10) business days notice before any Merger Transaction.

11.Issuance of Substitute Warrant. In the event of a merger, consolidation, recapitalization or reorganization of the Company or a reclassification of Company shares of stock, which results in an adjustment to the number of shares subject to this Warrant and/or the Exercise Price hereunder, the Company agrees to issue to the Warrant Holder a substitute Warrant reflecting the adjusted number of shares and/or Exercise Price upon the surrender of this Warrant to the Company. However, in the event that the Company does not issue a substitute warrant, the number and class of Warrant Shares or other securities and the Exercise Price shall be adjusted as provided in this Warrant, and this Warrant shall relate the adjusted number of Warrant Shares and Exercise Price.

12. Right of Redemption.

                        a. i.  The Company shall have the right at any time, on written notice given not less than forty five (45) days prior to the Redemption Date, to redeem the outstanding Warrants at the Redemption Price of one cent ($.01) per share of Common Stock issuable upon exercise of the Warrants, provided the Market Price of the Common Stock shall equal or exceed the “Target Price” and the “Trading Volume” shall equal or exceed the “Target Volume” on each trading day in the twenty (20) trading days in the period ending on the trading day prior to the date that the Company calls the Warrants for redemption. Notice of redemption shall be mailed by first class mail, postage prepaid, and sent by telecopier and e-mail not later than three (3) business days after the date the Warrants are called for redemption, and shall be deemed given on the date of receipt of the notice by the Holder. All Warrants must be redeemed if any Warrants are redeemed; provided, however, that if the exercise by the Company of its right of redemption pursuant to this Section 12(a)(i) would result in a violation of the 4.9% Limitation, the Company shall not have the right to redeem the Holders’ Warrants to the extent that the exercise of the Warrants as to which the redemption notice is given would result in such a violation. In such event, the Company may subsequently exercise it right to redeem the remaining Warrants held by the Holder on and subject to the provisions of this Section 12(a)(i). 

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ii. As used in this Section 12, the following terms shall have the meanings set forth below:

1. “Redemption Date” shall mean the date on which the Warrants are to be redeemed as set forth in the notice of redemption from the Company to the Holders of the Warrants, as the same may be extended pursuant to Section 12(b)(ii) of this Warrant.

2. “Market Price” shall mean the closing bid price of the Common Stock (as reported by Bloomberg L.P. or, if the Common Stock is traded on the Nasdaq Stock Market or the New York or American Stock Exchange, as reported by such market or exchange).

3. “Target Price” shall mean the greater of (x) one and 66/100 dollars ($1.66), which price shall be subject to adjustment for events described in Section 7(a) of this Warrant, or (y) two hundred percent (200%) of the Exercise Price.

4. “Trading Volume” shall mean the trading volume in the Common Stock (as reported by Bloomberg L.P. or the Nasdaq Stock Market or the New York or American Stock Exchange, as the case may be).

5. “Target Volume” shall mean one thousand (1,000) shares.

b. Notwithstanding any other provision of this Section 12:

i. The Company may only exercise the right of redemption pursuant to Section 12(a)(i) of this Warrant if a registration statement covering the sale by the Holder of the shares of Common Stock issuable upon exercise of this Warrant is current and effective on each day in the period commencing on the first day of the twenty day period and ending sixty (60) days after the Redemption Date.

ii. In the event that, at any time subsequent to the date on which the Warrants are called for redemption and before the Redemption Date, the shares of Common Stock issuable upon exercise or conversion of the Warrants are not subject to a current and effective registration statement, the Company’s right to call the Warrants for redemption shall terminate with respect to all Warrants that have not then been exercised or converted. Nothing in the preceding sentence shall be construed to prohibit or restrict the Company from thereafter calling the Warrants for redemption in the manner provided for, and subject to the provisions of, this Section 12.

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iii. The Redemption Date shall be postponed for two (2) trading days for each day after the Warrants are called for redemption that the Market Price of the Common Stock is less than the Target Price; provided, however, that if the Market Price shall be less than the Target Price for ten (10) consecutive trading days or fifteen (15) trading days during the period from the date the Warrants are called for redemption to the Redemption Date, the Company’s right to redeem any Warrants not theretofore exercised or converted shall terminate, subject to the right of the Company to call the remaining Warrants for redemption pursuant to this Section 12.

c. The notice of redemption shall specify (i) the Redemption Price, (ii) the Redemption Date, (iii) the place where the Warrants shall be delivered and the Redemption Price shall be paid, (iv) the representation required by Section 12(b)(i), (v) the number of Warrants being called for redemption if less than all of the Warrants are being redeemed, and (vi) that the right to exercise the Warrants shall terminate at 5:30 p.m. (New York City time) on the trading day immediately preceding the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Holder (x) to whom notice was not mailed or (y) whose notice was defective. An affidavit of the Chief Financial Officer of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

d. Any right to exercise or convert a Warrant to the extent that the Warrant was called for redemption shall terminate at 5:30 p.m. (New York City time) on the Redemption Date. After such time, Holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant, the Redemption Price without interest, subject to the provisions of applicable laws relating to the treatment of abandoned property.

13.Notice. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the date of delivery after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:

If to the Company:

China Wind Systems, Inc.

c/o Greenpower Environmental Technologies, Inc.

Qianzhou Town, Wuxi City

Jiangsu, PRC 214181

Attention: Wu Jian-Hua

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With a copy to:

Richardson & Patel LLP

10900 Wilshire Boulevard, Suite 500

Los Angeles, CA 90024

Attn: Kevin K. Leung, Esq.

E-mail: kleung@richardsonpatel.com

Fax: (310) 208-1154

and

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32 Floor

New York, New York 10006

Attention: Asher S. Levitsky PC

E-mail: alevitsky@srff.com

Fax: (212) 930-9725

If to the Warrant Holder:

at the address or telecopier number and to the attention of the person shown on the Company’s warrant register.

14. Miscellaneous.

a.This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only by a writing signed by the Company and the Warrant Holder.

b.Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.

c.This Warrant shall be governed by, construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof.

d.The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

e.In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonably substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

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f.The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a stockholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by the authorized officer as of the date first above stated.

Date: ________________	CHINA WIND SYSTEMS, INC.
	By:
		Name: Wu Jian-Hua
		Title: Chief Executive Officer

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FORM OF ELECTION TO PURCHASE

(To be executed by the Warrant Holder to exercise the right to purchase shares of

Common Stock under the foregoing Warrant)

To: China Wind Systems, Inc.:

In accordance with the COMMON STOCK WARRANT enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ______________ shares of Common Stock (“Common Stock”), $.001 par value, of China Wind Systems, Inc. and encloses the warrant and $____ for each Warrant Share being purchased or an aggregate of $________________ in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) together with any applicable taxes payable by the undersigned pursuant to the Warrant.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

(Please print name and address)

(Please insert Social Security or Tax Identification Number)

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

(Please print name and address)

Dated:   Name of Warrant Holder: 

(Print)

(By:)  

(Name:)  

(Title:)  

(Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant)

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EX-99.9

NEITHER THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE UNDERLYING SHARES OF COMMON STOCK HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT, OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO SUCH EXEMPTION.

IN ADDITION, A SECURITIES PURCHASE AGREEMENT DATED AS OF NOVEMBER 13, 2007, AS AMENDED, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS WARRANT.

CHINA WIND SYSTEMS, INC.

COMMON STOCK PURCHASE WARRANT “C”

Number of Shares: 1,971,5611	Holder: Barron Partners LP
	c/o Barron Capital Advisors LLC
Issue Date: November 13, 2007	Managing Partner
	Attn: Andrew Barron Worden
Expiration Date: November 13, 2012	730 Fifth Avenue, 25th Floor
	New York NY 10019
	tel 212-359-0200
Exercise Price per Share: $0.92	fax 212-359-0222

THIS COMMON STOCK PURCHASE WARRANT is issued by CHINA WIND SYSTEMS, INC., a Delaware corporation (the “Company”) pursuant to a Securities Purchase Agreement dated November 13, 2007, as amended (“Purchase Agreement”).

The Company hereby certifies that, for value received, BARRON PARTNERS LP, or registered assigns (the “Warrant Holder”), is entitled, subject to the terms set forth below, to purchase from the Company up to 1,971,561 shares (as adjusted from time to time as provided in Section 7 of this Warrant, the “Warrant Shares”) of common stock, $.001 par value (the “Common Stock”), of the Company at a price of ninety two cents ($.92) per Warrant Share (as adjusted from time to time as provided in Section 7, the “Exercise Price”), at any time and from time to time from and after the first to occur of (i) September 1, 2008 or (ii) such earlier date as the Company determines by giving notice to each holder of Warrants and through and including 5:00 p.m. New York City time on November 13, 2012 (the “Expiration Date”), and subject to the following terms and conditions:

^{1 The warrants for Eos Holdings will be 56,063 shares and the warrants for Steve Mazur will be 37,376 shares.}

1.Registration of Warrant. The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Warrant Holder hereof from time to time. The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.

2.Investment Representation. The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an affiliate that is an accredited investor which has been identified to and approved by (such approval not to be unreasonably withheld or delayed) for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws. The Warrant Holder acknowledges that the certificates representing any Warrant Shares will bear a legend indicating that they have not been registered under the 1933 Act, and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the 1933 Act and in accordance with federal and state securities laws. If this Warrant was acquired by the Warrant Holder pursuant to the exemption from the registration requirements of the 1933 Act afforded by Regulation S thereunder, the Warrant Holder acknowledges and covenants that this Warrant may not be exercised by or on behalf of a Person during the one year distribution compliance period (as defined in Regulation S) following the date hereof. “Person” means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.

3.Validity of Warrant and Issue of Shares. The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof other than those incurred by the Holder. The Company further warrants and agrees that during the Exercise Period, the Company will at all times have authorized and reserved a sufficient number of Common Stock to provide for the exercise of the rights represented by this Warrant.

4.Registration of Transfers and Exchange of Warrants.

a.Subject to compliance with the federal and state securities laws, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 13. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.

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b.This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 9 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange.

5. Exercise of Warrants.

a.Upon surrender of this Warrant with the Form of Election to Purchase attached hereto duly completed and signed to the Company, at its address set forth in Section 13, and upon payment and delivery of the Exercise Price per Warrant Share multiplied by the number of Warrant Shares that the Warrant Holder intends to purchase hereunder, in lawful money of the United States of America, by wire transfer or by certified or official bank check or checks, to the Company, all as specified by the Warrant Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 7 business days after the Date of Exercise (as defined herein)) issue or cause to be issued and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a certificate for the Warrant Shares issuable upon such exercise, with such restrictive legend as required by the 1933 Act. Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant.

b.A “Date of Exercise” means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased.

c.This Warrant shall be exercisable at any time and from time to time during the Exercise Period for such number of Warrant Shares as is indicated in the attached Form of Election To Purchase. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant.

d.(i)Notwithstanding anything contained herein to the contrary, but subject to Section 5(e) and Section 6, the holder of this Warrant may, at its election exercised in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

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(ii) For purposes of the foregoing formula:

A = the total number shares with respect to which this Warrant is then being exercised.

B = the last reported sale price (as reported by Bloomberg) of the Common Stock on the trading day immediately preceding the date of the Exercise Notice.

C = the Warrant Exercise Price then in effect at the time of such exercise.

e.The holder of this Warrant shall have the right, in its sole discretion, to receive, in lieu of any or all of the shares of Common Stock determined pursuant to Section 5(d) of this Warrant, such number of shares of Series A Preferred Stock as has a liquidation preference equal to A x (B-C).

f.The holder of this Warrant may not make a Cashless Exercise (i) during the eighteen (18) months following the Original Issue Date and (ii) thereafter if the sale by the Holder of the Warrant Shares is covered by an effective registration statement.

6.Maximum Exercise. The Warrant Holder shall not be entitled to exercise thisWarrant on a Date of Exercise in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Warrant Holder and its affiliates on the Date of Exercise, and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an Date of Exercise, which would result in beneficial ownership by the Warrant Holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock on such date. This Section 6 may not be waived or amended. As used in this Warrant, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 13d-3 thereunder.

7.Adjustment of Exercise Price and Number of Shares. The character of the shares of stock or other securities at the time issuable upon exercise of this Warrant and the Exercise Price therefore, are subject to adjustment upon the occurrence any of the following events which shall have occurred or which shall occur at any time on or after the Closing Date, as defined in the Purchase Agreement and regardless of whether any Warrants were issued on the Closing Date, and all such adjustments shall be cumulative:

a.Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc. The Exercise Price of this Warrant and the number of shares of Common Stock or other securities at the time issuable upon exercise of this Warrant shall be appropriately adjusted to reflect any stock dividend, stock split, stock distribution, combination of shares, reverse split, reclassification, recapitalization or other similar event affecting the number of outstanding shares of stock or securities.

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b.Adjustment for Reorganization, Consolidation, Merger, Etc. In case of any consolidation or merger of the Company with or into any other corporation, entity or person, or any other corporate reorganization, in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization (any such transaction being hereinafter referred to as a “Reorganization”), then, in each case, the holder of this Warrant, on exercise hereof at any time after the consummation or effective date of such Reorganization (the “Effective Date”), shall receive, in lieu of the shares of stock or other securities at any time issuable upon the exercise of the Warrant issuable on such exercise prior to the Effective Date, the stock and other securities and property (including cash) to which such holder would have been entitled upon the Effective Date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).

c.Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the Board of Directors of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

d.Sales of Common Stock at less than the Exercise Price.From the date hereof until such time as the Investors, as defined in the Purchase Agreement, hold no Securities, as defined in the Purchase Agreement, except for (i) Exempt Issuances, as defined in the Purchase Agreement, (ii) issuances covered by Sections 7(a), 7(b) and 7(e) hereof or (iii) an issuance of Common Stock upon exercise or upon conversion of warrants, options or other convertible securities for which an adjustment has already been made pursuant to this Section 7, as to all of which this Section 7(d) does not apply, if the Company closes on the sale or issuance of Common Stock at a price, or warrants, options, convertible debt or equity securities with an exercise price per share or a conversion price which is less than the Exercise Price then in effect (such price being referred to as a “Lower Price”), the Exercise Price shall be adjusted immediately thereafter so that it shall equal the Lower Price. An adjustment pursuant to this Section 7(d) shall not result in any change in the number of shares of Common Stock issuable upon exercise of this Warrant.

e.Price Adjustments Based on Pre-Tax Income per Share.

i. In the event the Company’s consolidated Pre-Tax Income, as defined in the Purchase Agreement, for the year ended December 31, 2007 is less than the Target Number per share, as defined in the Purchase Agreement, for 2007, on a fully-diluted basis, then the Exercise Price shall be reduced by the percentage shortfall, up to a maximum reduction of 90%. Thus, if Pre-Tax Income for the year ended December 31, 2007 is 30% per share on a fully-diluted basis less than the Target Number, the Exercise Price shall be reduced by 30%. Such reduction shall be made at the time the Company files its Form 10-KSB for the year ended December 31, 2007, and shall apply to the Warrants which are outstanding on the date the Form 10-KSB is filed, or, if not filed on time, on the date that filing was required, after giving effect to any extension pursuant to Rule 12b-25 of the Exchange Act. In the event that the Form 10-KSB is not filed with the SEC within thirty (30) days after the date that filing was required, the Exercise Price shall automatically be reduced by 90%.

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ii. In the event the Company’s consolidated Pre-Tax Income for the year ended December 31, 2008 is less than the Target Number per share, as defined in the Purchase Agreement, for 2008, on a fully-diluted basis, then the Exercise Price then in effect shall be reduced by the percentage shortfall, up to a maximum reduction of 90%. Thus, if Pre-Tax Income for the year ended December 31, 2008 is 30% per share on a fully-diluted basis less than the Target Number, the Exercise Price shall be reduced by 30%. Such reduction shall be made at the time the Company files its Form 10-KSB for the year ended December 31, 2008, and shall apply to the Warrants which are outstanding on the date the Form 10-KSB is filed, or, if not filed on time, on the date that filing was required, after giving effect to any extension pursuant to Rule 12b-25 of the Exchange Act. In the event that the Form 10-KSB is not filed with the SEC within thirty (30) days after the date that filing was required, the Exercise Price shall automatically be reduced by 90%.

iii. For purpose of determining Pre-Tax Income Per Share on a fully-diluted basis, all shares of Common Stock issuable upon conversion of convertible securities and upon exercise of warrants and options (whether or not vested) shall be deemed to be outstanding, regardless of whether (i) such shares are treated as outstanding for determining diluted earnings per share under GAAP, (ii) such securities are “in the money,” or (iii) such shares may be issued as a result of the 4.9% Limitation; provided, however, that neither the shares of Series A Preferred Stock held in escrow pursuant to Section 6.15 or Section 6.25 of the Purchase Agreement nor the shares of Common Stock issuable upon conversion of such Series A Preferred Stock shall be deemed outstanding for purpose of this Section 7(e) unless such shares were required to have been transferred to the Investors pursuant to the Closing Escrow Agreement, as defined in the Purchase Agreement.

iv. An adjustment pursuant to Sections 7(d) or 7(e) of this Warrant shall not affect the number of shares of Common Stock issuable upon exercise of this Warrant.

8.Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrants Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 8, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number.

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9.Sale or Merger of the Company. Upon a Merger Transaction, the restriction contained in Section 6 shall immediately be released and the Warrant Holder will have the right to exercise this Warrant concurrently with such Merger Transaction. For purposes of this Warrant, the term “Merger Transaction” shall mean a consolidation or merger of the Company into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company.

10.Notice of Intent to Sell or Merge the Company. The Company will give Warrant Holder ten (10) business days notice before any Merger Transaction.

11.Issuance of Substitute Warrant. In the event of a merger, consolidation, recapitalization or reorganization of the Company or a reclassification of Company shares of stock, which results in an adjustment to the number of shares subject to this Warrant and/or the Exercise Price hereunder, the Company agrees to issue to the Warrant Holder a substitute Warrant reflecting the adjusted number of shares and/or Exercise Price upon the surrender of this Warrant to the Company. However, in the event that the Company does not issue a substitute warrant, the number and class of Warrant Shares or other securities and the Exercise Price shall be adjusted as provided in this Warrant, and this Warrant shall relate the adjusted number of Warrant Shares and Exercise Price.

12. Right of Redemption.

                        a.  i.  The Company shall have the right at any time, on written notice given not less than forty five (45) days prior to the Redemption Date, to redeem the outstanding Warrants at the Redemption Price of one cent ($.01) per share of Common Stock issuable upon exercise of the Warrants, provided the Market Price of the Common Stock shall equal or exceed the “Target Price” and the “Trading Volume” shall equal or exceed the “Target Volume” on each trading day in the twenty (20) trading days in the period ending on the trading day prior to the date that the Company calls the Warrants for redemption. Notice of redemption shall be mailed by first class mail, postage prepaid, and sent by telecopier and e-mail not later than three (3) business days after the date the Warrants are called for redemption, and shall be deemed given on the date of receipt of the notice by the Holder. All Warrants must be redeemed if any Warrants are redeemed; provided, however, that if the exercise by the Company of its right of redemption pursuant to this Section 12(a)(i) would result in a violation of the 4.9% Limitation, the Company shall not have the right to redeem the Holders’ Warrants to the extent that the exercise of the Warrants as to which the redemption notice is given would result in such a violation. In such event, the Company may subsequently exercise it right to redeem the remaining Warrants held by the Holder on and subject to the provisions of this Section 12(a)(i). 

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ii. As used in this Section 12, the following terms shall have the meanings set forth below:

1. “Redemption Date” shall mean the date on which the Warrants are to be redeemed as set forth in the notice of redemption from the Company to the Holders of the Warrants, as the same may be extended pursuant to Section 12(b)(ii) of this Warrant.

2. “Market Price” shall mean the closing bid price of the Common Stock (as reported by Bloomberg L.P. or, if the Common Stock is traded on the Nasdaq Stock Market or the New York or American Stock Exchange, as reported by such market or exchange).

3. “Target Price” shall mean the greater of (x) one and 84/100 dollars ($1.84), which price shall be subject to adjustment for events described in Section 7(a) of this Warrant, or (y) two hundred percent (200%) of the Exercise Price.

4. “Trading Volume” shall mean the trading volume in the Common Stock (as reported by Bloomberg L.P. or the Nasdaq Stock Market or the New York or American Stock Exchange, as the case may be).

5. “Target Volume” shall mean one thousand (1,000) shares.

b. Notwithstanding any other provision of this Section 12:

i. The Company may only exercise the right of redemption pursuant to Section 12(a)(i) of this Warrant if a registration statement covering the sale by the Holder of the shares of Common Stock issuable upon exercise of this Warrant is current and effective on each day in the period commencing on the first day of the twenty day period and ending sixty (60) days after the Redemption Date.

ii. In the event that, at any time subsequent to the date on which the Warrants are called for redemption and before the Redemption Date, the shares of Common Stock issuable upon exercise or conversion of the Warrants are not subject to a current and effective registration statement, the Company’s right to call the Warrants for redemption shall terminate with respect to all Warrants that have not then been exercised or converted. Nothing in the preceding sentence shall be construed to prohibit or restrict the Company from thereafter calling the Warrants for redemption in the manner provided for, and subject to the provisions of, this Section 12.

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iii. The Redemption Date shall be postponed for two (2) trading days for each day after the Warrants are called for redemption that the Market Price of the Common Stock is less than the Target Price; provided, however, that if the Market Price shall be less than the Target Price for ten (10) consecutive trading days or fifteen (15) trading days during the period from the date the Warrants are called for redemption to the Redemption Date, the Company’s right to redeem any Warrants not theretofore exercised or converted shall terminate, subject to the right of the Company to call the remaining Warrants for redemption pursuant to this Section 12.

c. The notice of redemption shall specify (i) the Redemption Price, (ii) the Redemption Date, (iii) the place where the Warrants shall be delivered and the Redemption Price shall be paid, (iv) the representation required by Section 12(b)(i), (v) the number of Warrants being called for redemption if less than all of the Warrants are being redeemed, and (vi) that the right to exercise the Warrants shall terminate at 5:30 p.m. (New York City time) on the trading day immediately preceding the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Holder (x) to whom notice was not mailed or (y) whose notice was defective. An affidavit of the Chief Financial Officer of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

d. Any right to exercise or convert a Warrant to the extent that the Warrant was called for redemption shall terminate at 5:30 p.m. (New York City time) on the Redemption Date. After such time, Holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant, the Redemption Price without interest, subject to the provisions of applicable laws relating to the treatment of abandoned property.

13.Notice. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the date of delivery after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:

If to the Company:

China Wind Systems, Inc.

c/o Greenpower Environmental Technologies, Inc.

Qianzhou Town, Wuxi City

Jiangsu, PRC 214181

Attention: Wu Jian-Hua

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With a copy to:

Richardson & Patel LLP

10900 Wilshire Boulevard, Suite 500

Los Angeles, CA 90024

Attn: Kevin K. Leung, Esq.

E-mail: kleung@richardsonpatel.com

Fax: (310) 208-1154

and

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32 Floor

New York, New York 10006

Attention: Asher S. Levitsky PC

E-mail: alevitsky@srff.com

Fax: (212) 930-9725

If to the Warrant Holder:

at the address or telecopier number and to the attention of the person shown on the Company’s warrant register.

14. Miscellaneous.

a.This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only by a writing signed by the Company and the Warrant Holder.

b.Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.

c.This Warrant shall be governed by, construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof.

d.The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

e.In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonably substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

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f.The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a stockholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by the authorized officer as of the date first above stated.

Date: ________________	CHINA WIND SYSTEMS, INC.
	By:
		Name: Wu Jian-Hua
		Title: Chief Executive Officer

-11-

FORM OF ELECTION TO PURCHASE

(To be executed by the Warrant Holder to exercise the right to purchase shares of

Common Stock under the foregoing Warrant)

To: China Wind Systems, Inc.:

In accordance with the COMMON STOCK WARRANT enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ______________ shares of Common Stock (“Common Stock”), $.001 par value, of China Wind Systems, Inc. and encloses the warrant and $____ for each Warrant Share being purchased or an aggregate of $________________ in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) together with any applicable taxes payable by the undersigned pursuant to the Warrant.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

(Please print name and address)

(Please insert Social Security or Tax Identification Number) 

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

(Please print name and address)

Dated:   Name of Warrant Holder: 

(Print)

(By:)

(Name:)

(Title:)

(Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant)

-12-

EX-99.23

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

INDEX TO UNAUDITED CONSOLDIATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

CONTENTS

Consolidated Financial Statements:
Consolidated Balance Sheet - As of September 30, 2007 (Unaudited)	F-2
Consolidated Statements of Operations -
For the Three and Nine Months Ended September 30, 2007 and 2006
(Unaudited)	F-3
Consolidated Statements of Cash Flows -
For the Nine Months Ended September 30, 2007 and 2006 (Unaudited)	F-4
Notes to Unaudited Consolidated Financial Statements	F-5 to F-16

F-1

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

September 30, 2007

(Unaudited)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	600,745
Accounts receivable, net of allowance for doubtful accounts of $413,385		4,842,458
Inventories, net of reserve for obsolete inventory of $267,939		1,045,841
Advances to suppliers		1,749,226
Prepaid expenses and other		17,743
Total Current Assets		8,256,013
PROPERTY AND EQUIPMENT - Net		6,510,616
OTHER ASSETS:
Deposit on long-term assets		5,913,886
Intangible assets, net of accumulated amortization		491,686
Investments in cost and equity method investees		99,766
Due from related parties		1,593,297
Total Assets	$	22,865,264

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Loan payable	$	665,106
Accounts payable		1,830,645
Accrued expenses		170,990
VAT and service taxes payable		14,666
Advances from customers		2,055,634
Income taxes payable		22,410
Total Current Liabilities		4,759,451
STOCKHOLDERS' EQUITY:
Common stock ($0.001 par value; 75,000,000 shares authorized;
36,577,704 shares issued and outstanding)		36,578
Additional paid-in capital		1,737,392
Retained earnings		15,476,309
Other comprehensive gain - cumulative foreign currency translation adjustment		855,534
Total Stockholders' Equity		18,105,813
Total Liabilities and Stockholders' Equity	$	22,865,264

 

See notes to unaudited consolidated financial statements

F-2

 

CONSOLIDATED STATEMENTS OF OPERATIONS

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

(Unaudited)

		For the Three Months Ended						For the Nine Months Ended
		September 30,						September 30,
		2007			2006			2007			2006
NET REVENUES	$	8,000,293		$	5,868,385		$	16,589,475		$	12,344,395
COST OF SALES		5,633,977			3,994,955			11,831,546			8,830,941
GROSS PROFIT		2,366,316			1,873,430			4,757,929			3,513,454
OPERATING EXPENSES:
Depreciation and amortization expense		68,607			91,224			207,875			223,432
Selling, general and administrative		223,164			322,829			566,106			545,524
Total Operating Expenses		291,771			414,053			773,981			768,956
INCOME FROM OPERATIONS		2,074,545			1,459,377			3,983,948			2,744,498
OTHER INCOME (EXPENSE):
Interest income		91			3,347			372			7,959
Interest expense		(9,946	)		(2,723	)		(31,360	)		(13,474	)
Other income from forgiveness of income and VAT taxes		6,771,442			-			6,771,442			-
Total Other Income (Expense)		6,761,587			624			6,740,454			(5,515	)
INCOME BEFORE INCOME TAXES		8,836,132			1,460,001			10,724,402			2,738,983
INCOME TAXES		714,840			463,071			1,315,094			913,397
NET INCOME	$	8,121,292		$	996,930		$	9,409,308		$	1,825,586
COMPREHENSIVE INCOME:
NET INCOME	$	8,121,292		$	996,930		$	9,409,308		$	1,825,586
OTHER COMPREHENSIVE INCOME:
Unrealized foreign currency translation gain		299,690			183,521			523,986			226,670
COMPREHENSIVE INCOME	$	8,420,982		$	1,180,451		$	9,933,294		$	2,052,256
NET INCOME PER COMMON SHARE:
Basic	$	0.22		$	0.03		$	0.26		$	0.05
Diluted	$	0.22		$	0.03		$	0.26		$	0.05
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		36,577,704			36,577,704			36,577,704			36,577,704
Diluted		36,577,704			36,577,704			36,577,704			36,577,704

See notes to unaudited consolidated financial statements

F-3

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		For the Nine Months Ended
		September 30,
		2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	9,409,308		$	1,825,586
Adjustments to reconcile net income from operations to net cash
provided by (used in) operating activities:
Depreciation and amortization		441,590			428,232
Increase in allowance for doubtful accounts		182,882			253,567
Increase in reserve for inventory obsolescence		106,942			24,382
Other income from forgiveness of income and VAT taxes		(6,771,442	)		-
Changes in assets and liabilities:
Accounts receivable		(2,538,272	)		(1,717,524	)
Inventories		426,386			(420,986	)
Prepaid and other current assets		72,686			(2,019	)
Advanced to suppliers		(127,886	)		(87,155	)
Accounts payable		1,161,510			(189,035	)
Accrued expenses		22,058			(1,829,448	)
VAT and service taxes payable		1,011,064			639,286
Income taxes payable		957,899			889,897
Advances from customers		1,830,260			(514,002	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		6,184,985			(699,219	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in due from related parties		(486,032	)		636,238
Deposit on long-term assets		(5,792,030	)		-
Purchase of property and equipment		(8,290	)		(25,593	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(6,286,352	)		610,645
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable		260,561			(455,209	)
Repayments of related party advances		-			484,663
NET CASH PROVIDED BY FINANCING ACTIVITIES		260,561			29,454
EFFECT OF EXCHANGE RATE ON CASH		20,161			3,798
NET INCREASE (DECREASE) IN CASH		179,355			(55,322	)
CASH - beginning of year		421,390			230,179
CASH - end of period	$	600,745		$	174,857
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	31,360		$	13,474
Income taxes	$	-		$	-

 

See notes to unaudited combined financial statements.

F-4

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

China Winds Systems, Inc. (the “Company”) was incorporated in Delaware on June 24, 1987 under the name of Malex, Inc. On December 18, 2007, the Company’s corporate name was changed to China Wind Systems, Inc.

On November 13, 2007, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) among Fulland Limited, a Cayman Islands corporation (“Fulland”), the stockholders of Fulland, and Synergy Business Consulting,LLC (“Synergy”), the then principal stockholder of the Company, pursuant to which, simultaneously with the financing described in Note 10, (i) the Company issued 36,577,704 shares of common stock to the former stockholders of Fulland and (ii) purchased 8,006,490 shares of common stock from Synergy for $625,000 and cancelled such shares. The $625,000 payment was made from the proceeds of the financing. At the time of the closing under the Exchange Agreement and the financing, the Company was not engaged in any business activity and was considered a blank check shell.

The Company is the sole stockholder of Fulland. Fulland owns 100% of Green Power Environment Technology (Shanghai) Co., Ltd. (“Green Power”), which is a wholly foreign-owned enterprise (“WFOE”) organized under the laws of the Peoples’ Republic of China (“PRC” or “China”). Green Power is a party to a series of contractual arrangements (as fully described below) dated October 12, 2007 with Wuxi Huayang Dye Machine Co., Ltd. (“Huayang Dye Machine”) and Wuxi Huayang Electrical Power Equipment Co., Ltd. (“Huayang Electrical Power Equipment”, and together with Huayang Dye Machines, sometimes collectively referred to as the “Huayang Companies”), both of which are limited liability companies headquartered in, and organized under the laws of, the PRC.

Fulland is a limited liability company incorporated under the laws of the Cayman Islands on May 9, 2007, which was formed by the owners of the Huayang Companies as a special purpose vehicle for purposes of raising capital, in accordance with requirements of the PRC State Administration of Foreign Exchange (“SAFE”). Specifically, on May 31, 2007, SAFE issued an official notice known as Hi Zhong Fa [2007] No. 106 (“Circular 106”), which requires the owners of any Chinese company to obtain SAFE’s approval before establishing any offshore holding company structure for foreign financing as well as subsequent acquisition matters in China. Accordingly, the owners of the Huayang Companies, Mr. Jianhua Wu and Ms. Lihua Tang, submitted their application to SAFE in early September 2007. On October 11, 2007, SAFE approved their application, permitting these Chinese citizens to establish an offshore company, Fulland, as a special purpose vehicle for any foreign ownership and capital raising activities by the Huayang Group.

As of September 30, 2007, the Company has recapitalized the Company to give effect to the share exchange agreement discussed above. Under generally accepted accounting principles, the acquisition by the Company of Fulland is considered to be capital transactions in substance, rather than a business combination. That is, the acquisition is equivalent, in the acquisition by Fulland of the Company, then known as Malex, Inc., with the issuance of stock by Fulland for the net monetary assets of the Company. This transaction is accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition, except that no goodwill is recorded. Under reverse takeover accounting, the comparative historical financial statements of the Company, as the legal acquirer, are those of the accounting acquirer, Fulland. Since Fulland and Greenpower did not have any business activities, the Company’s financial statements prior to the closing on the reverse acquisition, reflect only business of the Huayang Companies. The accompanying financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented. Thus, the 36,577,704 shares of common stock issued to the former Fulland stockholders are deemed to be outstanding from December 31, 2004.

F-5

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Wuxi Huayang Dyeing Machinery Co., Ltd.

Wuxi Huayang Dyeing Machinery Co., Ltd. (“Dyeing”) is a Chinese limited liability company and was formed under laws of the People’s Republic of China on August 17, 1995. Dyeing produces a variety of high and low temperature dyeing and finishing machinery.

Wuxi Huayang Electrical Equipment Co., Ltd.

Wuxi Huayang Electrical Equipment Co., Ltd. (“Electric”) a Chinese limited liability company and was formed under laws of the People’s Republic of China on May 21, 2004. Electric is a manufacturer of electric power auxiliary apparatuses (including coking equipment) and a provider of relevant engineering services. Electric equipment products mainly include various auxiliary equipment of power stations, chemical equipment, dust removal and environmental protection equipment, and metallurgy non- standard equipment. Additionally, Electric currently distributes large-scaled rolled rings to companies in the wind power industry, as well as to railway companies and heavy vehicle manufacturers.

As a result of the transaction effected by the Exchange Agreement, the Company’s business has become the business of the Huayang Companies.

Contemporaneously with the closing under the Exchange Agreement, the Company sold its 3% Convertible Notes in the principal amount of $5,525,000 to an investor group. The Company has agreed to amend its certificate of incorporation which will include the authorization of a class of preferred stock. The notes will be automatically converted into 14,118,034 shares of series A convertible preferred stock (“series A preferred stock”) and warrants to purchase a total of 18,829,755 shares of common stock upon the filing of the restated certificate of incorporation and a certificate of designation setting forth the rights, preferences, privileges and limitation of the holders of the series A preferred stock.

Basis of presentation

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The Company’s consolidated financial statements include the financial statements of its wholly owned subsidiaries, Fulland and Greenpower, as well as Dyeing and Electric, which are variable interest entities whose financial statements are consolidated with those of the Company pursuant to FASB Interpretation No. 46R “Consolidation of Variable Interest Entities” (“FIN 46R”), an Interpretation of Accounting Research Bulletin No. 51. All significant intercompany accounts and transactions have been eliminated in the combination.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying consolidated financial statements for the interim periods are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2006 and notes thereto contained on elsewhere this Form 8-K. The results of operations for the nine months ended September 30, 2007 are not necessarily indicative of the results for the full fiscal year ending December 31, 2007.

The Company uses FASB Interpretation No. 46R "Consolidation of Variable Interest Entities" ("FIN 46R"), an Interpretation of Accounting Research Bulletin No. 51. FIN 46R requires a Variable Interest Entity (VIE) to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE's residual returns. VIEs are those entities in which the Company, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with ownership of the entities, and therefore the Company is the primary beneficiary of these entities. Dyeing and Electric are VIEs.

F-6

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates in 2007 include the allowance for doubtful accounts, the allowance for obsolete inventory, the useful life of property and equipment and intangible assets, and accruals for taxes due.

Fair value of financial instruments

The carrying amounts reported in the balance sheet for cash, accounts receivable, loans payable, accounts payable and accrued expenses, customer advances, and amounts due from related parties approximate their fair market value based on the short-term maturity of these instruments.

Cash and cash equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.

Accounts receivable

The Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. At September 30, 2007, the Company has established, based on a review of its outstanding balances, an allowance for doubtful accounts in the amount of $413,385.

Inventories

Inventories, consisting of raw materials and finished goods related to the Company’s products are stated at the lower of cost or market utilizing the weighted average method. An allowance is established when management determines that certain inventories may not be saleable. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the market value. These reserves are recorded based on estimates. The Company recorded an inventory reserve of $267,939 at September 30, 2007.

Property and equipment

Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

F-7

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Investment in non-marketable equity securities

Certain securities that the Company may invest in can be determined to be non-marketable. Non-marketable securities where the Company owns less than 20% of the investee are accounted for at cost pursuant to APB No. 18, “The Equity Method of Accounting for Investments in Common Stock” (“APB 18”). At September 30, 2007, the Company has a 5% membership interest in Wuxi Huayang Yingran Machinery Co. Ltd. (“Yingran”) amounting to $33,255 which is reflected on the accompanying consolidated balance sheet as investments in cost and equity method investees.

The Company has a 33% member interest in Wuxi Huayang Boiler Company, Ltd. (“Boiler”) that it exerts significant influence over its operations, but does not control. Accordingly, the Company is applying the equity method of accounting for this investment. At September 30, 2006, the Company’s investment in Boiler amounted to $66,511 which is reflected on the accompanying consolidated balance sheet as investments in cost and equity method investees.

The Company monitors its investment in non-marketable securities and will recognize, if ever existing, a loss in value which is deemed to be other than temporary.

Impairment of long-lived assets

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the nine months ended September 30, 2007.

Advances from customers

Advances from customers at September 30, 2007 of $2,055,634 consist of prepayments from third party customers to the Company for merchandise that had not yet shipped. The Company will recognize the deposits as revenue as customers take delivery of the goods, in compliance with its revenue recognition policy.

Income taxes

The Company is governed by the Income Tax Law of the People’s Republic of China and the United States. Income taxes are accounted for under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns.

F-8

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue recognition

Product sales

Product sales are generally recognized when title to the product has transferred to customers in accordance with the terms of the sale. The Company recognizes revenue in accordance with the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements” as amended by SAB No. 104 (together, “SAB 104”), and Statement of Financial Accounting Standards (SFAS) No. 48 “Revenue Recognition When Right of Return Exists.” SAB 104 states that revenue should not be recognized until it is realized or realizable and earned. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. 

SFAS No. 48 states that revenue from sales transactions where the buyer has the right to return the product shall be recognized at the time of sale only if the seller’s price to the buyer is substantially fixed or determinable at the date of sale, the buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product, the buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product, the buyer acquiring the product for resale has economic substance apart from that provided by the seller, the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and the amount of future returns can be reasonably estimated.

The Company accounts for sales returns in accordance with Statements of Financial Accounting Standards (SFAS) No. 48, Revenue Recognition When Right of Return Exists, by establishing an accrual in an amount equal to its estimate of sales recorded for which the related products are expected to be returned. The Company determines the estimate of the sales return accrual primarily based on historical experience regarding sales return, but also by considering other factors that could impact sales returns. These factors include levels of inventory in the distribution channel, estimated shelf life, product discontinuances, price changes of competitive products, introductions of generic products and introductions of competitive new products.

Concentrations of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the People’s Republic of China of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. A significant portion of the Company's sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.

Shipping costs

Shipping costs are included in cost of sales and totaled $664 and $54,851 for the nine months ended September 30, 2007 and 2006, respectively.

F-9

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Advertising

Advertising is expensed as incurred. Advertising expenses amounted to $0 and $1,621 for the nine months ended September 30, 2007 and 2006, respectively.

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 using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. The cumulative translation adjustment and effect of exchange rate changes on cash at September 30, 2007 was $20,161.

Research and development

Research and development costs are expensed as incurred. For the nine months ended September 30, 2007 and 2006, research and development costs were not material.

Accumulated other comprehensive income

Accumulated other comprehensive income consisted of unrealized gains on currency translation adjustments from the translation of financial statements from Chinese RMB to US dollars. For the nine months ended September 30, 2007, accumulated other comprehensive income was $523,986.

Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,”an interpretation of FASB Statement No. 109 (“SFAS 109”). The interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS 109, “Accounting for Income Taxes.” It prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact, if any, of FIN 48 on its financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157), which provides guidance for how companies should measure fair value when required to use a fair value measurement for recognition or disclosure purposes under generally accepted accounting principle (GAAP). SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact, if any, the adoption of SFAS 157 will have on its financial statements.

In December 2006, FASB Staff Position No. EITF 00-19-2, “Accounting for Registration Payment Arrangements,”was issued. The FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, “Accounting for Contingencies.” The Company believes that its current accounting is consistent with the FSP. Accordingly, adoption of the FSP had no effect on its financial statements.

F-10

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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”, under which entities will now be permitted to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. The Company is currently assessing the impact, if any, the adoption of SFAS 159 will have on its financial statements.

NOTE 2 - INVENTORIES

At September 30, 2007, inventories consisted of the following:

Raw materials	$	1,313,780
Less: Reserve for obsolete inventory		(267,939	)
	$	1,045,841

NOTE 3 - PROPERTY AND EQUIPMENT

At September 30, 2007, property and equipment consist of the following:

	Useful Life
Office equipment and furniture	5-8 Years	$	73,028
Manufacturing equipment	10 - 15 Years		3,422,428
Vehicles	5 Years		61,230
Building and building improvements	20 - 40 Years		5,476,819
			9,033,505
Less: accumulated depreciation			(2,522,889	)
		$	6,510,616

For the nine months ended September 30, 2007 and 2006, depreciation expense amounted to $433,785 and $420,753, of which $225,910 and $197,321 is included in cost of sales, respectively.

F-11

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 4 - INTANGIBLE ASSETS

The Company has land use rights pursuant to an agreement with the Chinese government. The land use rights are valued at a fixed amount RMB 3,995,995, fluctuated by the exchange rate. At September 30, 2007, the land use rights are valued at $524,079. Under the terms of the agreement, the Company has rights to use certain land until October 30, 2053. The Company amortizes these land use rights over the term of the land use right, which is the 50 year period beginning November 1, 2003. For the nine months ended September 30, 2007 and 2006, amortization expense amounted to $7,805 and $7,479, respectively.

			2007
Land Use Rights	Estimated Life 50 year	$	531,552
Less: Accumulated Amortization			(39,866	)
		$	491,686

Amortization expense attributable to future periods is as follows:

Year ending December 31:
2007	$	2,658
2008		10,631
2009		10,631
2010		10,631
Thereafter		457,135
	$	491,686

NOTE 5 - LOAN PAYABLE

At September 30, 2007, the Company had loans with two banks in the amount of $665,106. The loans bear interest at rates ranging from 6.633% to 6.9345% per annum. Of the $665,106 that was outstanding at September 30, 2007, $266,042 was due and paid back in December 2007 and remaining $399,064 is due in February 2008 (See Note 11).

NOTE 6 - RELATED PARTY TRANSACTIONS

Due from related parties

From time to time, the Company advanced funds to companies partially owned by the Company for working capital purposes. These advances are non interest bearing, unsecured and payable on demand. At September 30, 2007, the Company had a receivable from affiliated entities partially owned by the Company of $377,860. Through monthly payments, the affiliated companies intend to repay these advances. At September 30, 2007, due from related parties was due from the following;

Name	Relationship			Amount
Wuxi Huayang Yingran Machinery Co. Ltd.	5% cost method investee		$	171,864
Wuxi Huayang Boiler Company Ltd. (“Boiler”)	33.33% equity method investee and common ownership	(A)		205,996
			$	377,860

The spouse of the Company’s chief executive officer has two bank accounts in her name that have been assigned to the Company and are being used by the Company in its operations. At September 30, 2007, the balance in these bank accounts amounted to $1,215,437 and has been reflected as due from related parties on the accompanying consolidated balance sheet.

(A) The remaining 66.67% are owned by Lihua Tang (40%), a director and wife of the Company’s CEO, and Haoyang Wu (26.67%), the son of the Company’s CEO and a shareholder.

F-12

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 6 - RELATED PARTY TRANSACTIONS (continued)

In July 2007, the Company agreed to acquire long-term assets from Boiler. As of September 30, 2007, payments totaling $5,913,886 have been made to Boiler and have been reflected on the accompanying consolidiated balance sheet as Deposits on Long-term Assets. Based on the contract, the remaining balance of $5,963,109 will be paid in the first quarter of fiscal year 2008.

NOTE 7 - INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, ‘‘Accounting for Income Taxes’’ (‘‘SFAS 109’’). SFAS 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. SFAS 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets are dependent upon future earnings, if any, of which the timing and amount are uncertain.

The operations of the Company are in China and are governed by the Income Tax Law of the People's Republic of China and local income tax laws (the "PRC Income Tax Law"). Pursuant to the PRC Income Tax Law, the Company is subject to tax at a statutory rate of 33% (30% state income tax plus 3% local income tax).

Business Taxand Value Added Tax

The Company is subject to value added tax (“VAT”) for manufacturing products and business tax for services provided. The applicable VAT tax rate is 17% for products sold in the PRC, and the business tax rate is 5% for services provided in PRC. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice of the PRC, the Company paidvalue added taxes (“VAT”) and business tax based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued. In the event that the PRC tax authorities dispute the date of which revenue is recognized for tax purposes, the PRC tax office has the right to assess a penalty, which can range from zero to five times the amount of the taxes which are determined to be late or deficient. In the event that a tax penalty is assessed on late or deficient payments, the penalty will be expensed as a period expense if and when a determination has been made by the taxing authorities that a penalty is due. At September 30, 2007, the Company has accrued $14,666 of value-added and service taxes.

The Chinese local government granted the Huayang Companies a special tax waiver to exempt and release any additional corporate income tax and value added tax liabilities and any related penalties as of September 30, 2007 and for all periods prior to September 30, 2007. Total tax exemption for the nine months ended September 30, 2007 is summarized as follows:

VAT tax exemption	$	2,527,183
Income tax exemption		4,206,021
Others		38,238
Total	$	6,771,442

The Company is not subject to US taxation since no operations are conducted in the US and no revenue was generated in the US and for the periods covered, the Company was not a US entity.

F-13

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 8 - SEGMENT INFORMATION

The following information is presented in accordance with SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information. For the nine months ended September 30, 2007 and 2006, the Company operated in two reportable business segments - (1) the manufacture of dyeing & finishing equipment and (2) the manufacture of electrical and wind equipment. The Company's reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations.

Information with respect to these reportable business segments for the nine months ended September 30, 2007 and 2006 is as follows:

		Manufacture of Dyeing & Finishing Equipment			Manufacture of Electrical & Wind Equipment			Total
2007
Net Revenues	$	14,487,221		$	2, 102,254		$	16,589,475
Cost of Sales (excluding depreciation)		10,259,754			1,571,792			11,831,546
Operating expenses (excluding depreciation and amortization)		463,571			102,535			566,106
Depreciation and Amortization		207,624			251			207,875
Interest Income		(372	)		-			(372	)
Interest Expense		-			31,360			31,360
Other Income		(5,918,301	)		(853,141	)		(6,771,442	)
Income Tax Expense		1,137,797			177,297			1,315,094
Net Income	$	8,337,148		$	1,072,160		$	9,409,308
Total Assets	$	17,494,718		$	5,370,546		$	22,865,264

		Manufacture of Dyeing & Finishing Equipment			Manufacture of Electrical Equipment			Total
2006
Net Revenues	$	12,159,238		$	185,157		$	12,344,395
Cost of Sales (excluding depreciation)		8,653,159			177,782			8,830,941
Operating expenses (excluding depreciation and amortization)		525,486			20,038			545,524
Depreciation and Amortization		220,748			2,684			223,432
Interest Income		(7,804	)		(155	)		(7,959	)
Interest Expense		13,474			-			13,474
Income Tax Expense		908,878			4,519			913,397
Net Income (Loss)	$	1,845,297		$	(19,711	)	$	1,825,586
Total Assets	$	11,922,778		$	2,650,455		$	14,573,233

Asset information by reportable segment is not reported to or reviewed by the chief operating decision maker and, therefore, the Company has not disclosed asset information for each reportable segment. All of the Company’s assets are located in China.

F-14

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 9 - OPERATING RISK

(a) Country risk

Currently, the Company’s revenues are primarily derived from the sale of machinery to customers in the Peoples Republic of China (PRC). The Company hopes to expand its operations to countries outside the PRC, however, such expansion has not been commenced and there are no assurances that the Company will be able to achieve such an expansion successfully. Therefore, a downturn or stagnation in the economic environment of the PRC could have a material adverse effect on the Company’s financial condition.

(b) Products risk

In addition to competing with other manufacturers of machinery, the Company competes with larger Chinese companies who may have greater funds available for expansion, marketing, research and development and the ability to attract more qualified personnel. These Chinese companies may be able to offer products at a lower price. There can be no assurance that the Company will remain competitive should this occur.

NOTE 10 - STATUTORY RESERVES

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the People’s Republic of China (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital or members’ equity. Appropriations to the statutory public welfare fund are at a minimum of 5% of the after tax net income determined in accordance with PRC GAAP. Commencing on January 1, 2006, the new PRC regulations waived the requirement for appropriating retained earnings to a welfare fund. As of December 31, 2006, the Company appropriated 50% of its registered capital to statutory reserves for Dyeing. For the nine months ended September 30, 2007, statutory reserve activity is as follows and is included in retained earnings.

		Dyeing		Electric		Total
Balance - December 31, 2006	$	72,407	$	58,762	$	131,169
Additional to statutory reserves		-		107,216		107,216
Balance - September 30, 2007	$	72,407	$	165,978	$	238,385

NOTE 11 - SUBSEQUENT EVENTS

(a)On November 13, 2007, the Company executed and consummated the transactions contemplated by the “Exchange Agreement.”. At the closing of this transaction, the Company issued 36,577,704 shares of common stock to the Fulland Shareholders in exchange for 100% of the common stock of Fulland. Concurrently, Synergy, which was then the Company’s majority stockholder, received $625,000, for which it transferred 8,006,490 shares of common stock to the Company which shares were then cancelled by the Company. Immediately after the closing, the Company had a total of 36,987.214 shares of common stock outstanding, with Fulland Shareholders (and their assignees) owning approximately 99% of the outstanding shares of common stock. The balance held by those who held China Wind’s common stock prior to the Closing.

F-15

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 11 - SUBSEQUENT EVENTS (continued)

On November 13, 2007, concurrently with the closing, the Company entered into a securities purchase agreement with three accredited investors including Barron Partners LP (the “Investors”). Pursuant to the agreement, the Company issued and sold to the Investors, for $5,525,000, the Company’s 3% convertible subordinated notes in the principal amount of $5,525,000. The notes are automatically converted into an aggregate of (i) 14,787,135 shares of series A preferred stock and (ii) warrants to purchase 11,176,504 shares of Common Stock at $0.58 per share, 5,588,252 shares of Common Stock at $0.83 per share, and 2,065,000 shares at $0.92 per share upon the filing of the Restated Certificate, as described in the following paragraph, with the Secretary of State of Delaware and the creation of the series A preferred stock. Until the Restated Certificate is filed, the notes may be converted into an aggregate of (i) 14,787,135 shares of the common stock, subject to adjustment, and (ii) warrants to purchase 11,176,504 shares of Common Stock at $0.58 per share, 5,588,252 shares of Common Stock at $0.83 per share, and 2,065,000 shares at $0.92 per share; provided, that if the Company does not file a Restated Certificate and certificate of designation for the series A preferred stock as required by the note and the securities purchase agreement, the notes may be converted into 33,616,891 shares of common stock. The notes bear interest at the rate of 3% per annum; however, the conversion of the notes is based on the principal of the notes and no adjustment is made for the interest. The initial conversion price of the notes is $0.374 per share.

On November 13, 2007, the Company’s board of directors unanimously adopted, and the holders of a majority of the issued and outstanding common stock approved a restated certificate of incorporation (the “Restated Certificate”) to increase the number of authorized shares of capital stock from 75,000,000 to 210,000,000 shares, of which (i) 150,000,000 shares shall be designated as common stock with a par value of $.001 per share, and (ii) 60,000,000 shares shall be designated as preferred stock with a par value of $.001 per share. The board of directors also approved, upon the filing of the Restated Certificate, the creation of a series of preferred stock, designated as the series A preferred stock. The Company has filed an information statement with the Securities and Exchange Commission. The Company may file the Restated Certificate 20 days after the information statement is mailed to stockholders.

Pursuant to the purchase agreement, in addition to the foregoing:

·   The Company agreed to have appointed such number of independent directors that would result in a majority of its directors being independent directors, that the audit committee would be composed solely of independent directors and the compensation committee would have a majority of independent directors within 90 days after the closing, which would be February 11, 2008. Failure to meet this date will result in liquidated damages commencing February 12, 2008, until the date on which the requirement is satisfied. Thereafter, if the Company does not meet these requirements for a period of 60 days for an excused reason, as defined in the Purchase Agreement, or 75 days for a reason which is not an excused reason, this would result in the imposition of liquidated damages.

·   The Company agreed to have a qualified chief financial officer who may be a part-time chief financial officer until February 13, 2008. If the Company cannot hire a qualified chief financial officer promptly upon the resignation or termination of employment of a former chief financial officer, the Company may engage an accountant or accounting firm to perform the duties of the chief financial officer. In no event shall the Company either (i) fail to file an annual, quarter or other report in a timely manner because of the absence of a qualified chief financial officer, or (ii) not have a person who can make the statements and sign the certifications required to be filed in an annual or quarterly report under the Securities Exchange Act of 1934..

·   No later than February 11, 2008, the Company will have an audit committee comprised solely of not less than three independent directors and a compensation committee comprised of at least three directors, a majority of which shall be independent directors.

F-16

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 11 - SUBSEQUENT EVENTS (continued)

·   Liquidated damages for failure to comply with the preceding three covenants are computed in an amount equal to 12% per annum of the purchase price, up to a maximum of 12% of the purchase price, which is $663,000, which is payable in cash or series A preferred stock, at the election of the investors.

·   The Company and the investors entered into a registration rights agreement pursuant to which the Company agreed to file, by January 12, 2008, a registration statement covering the common stock issuable upon conversion of the series A preferred stock and exercise of the warrants and to have the registration statement declared effective by June 11, 2008. The failure of the Company to have the registration statement declared effective by June 11, 2008 and other timetables provided in the registration rights agreement would result in the imposition of liquidated damages, which are payable through the issuance of additional shares of series A preferred stock at the rate of 4,860 shares of series A preferred stock for each day, based on the proposed registration of all of the underlying shares of common stock, with a maximum of 1,770,000 shares. The number of shares issuable per day is subject to adjustment if the Company cannot register all of the required shares as a result of the Securities and Exchange Commission’s interpretation of Rule 415. The registration rights agreement also provides for additional demand registration rights in the event that the investors are not able to register all of the shares in the initial registration statement.

·   The Investors have a right of first refusal on future financings.

·   Until the earlier of November 13, 2011 or such time as the Investors shall have sold all of the underlying shares of common stock, the Company is restricted from issuing convertible debt or preferred stock.

·   Until the earlier of November 13, 2010 or such time as the Investors have sold 90% of the underlying shares of common stock, the Company’s debt cannot exceed twice the preceding four quarters earnings before interest, taxes, depreciation and amortization.

·   The Company’s officers and directors agreed, with certain limited exceptions, not to publicly sell shares of common stock for 27 months or such earlier date as all of the convertible securities and warrants have been converted or exercised and the underlying shares of common stock have been sold.

·   The Company paid Barron Partners $30,000 for its due diligence expenses.

·   The Company entered into an escrow agreement pursuant to which the Company issued its 3% convertible promissory note due March 31, 2008 in the principal amount of $3,000,000. Upon the filing of the Restated Certificate and the certificate of designation relating to the series A preferred stock, this note will be automatically converted into 24,787,135 shares of series A preferred stock. The note and the series A preferred stock issuable upon conversion of the note are to be held in escrow subject to the following.

o   14,787,135 shares are held pursuant to the following provisions. If, for either the year ended December 31, 2007 or 2008, the Company’s pre-tax earnings per share are less than the target numbers, all or a portion of such shares are to be delivered to the Investors. If, for either year, the pre-tax earnings are less then 50% of the target, all of the shares are to be delivered to the Investors. If the shortfall is less than 50%, the number of shares to be delivered to the Investors is determined on a formula basis.

o   The target number for 2007 is $0.08316 per share, and the target number for 2008 is $0.13131 per share. The per share numbers are based on all shares that are outstanding or are issuable upon exercise or conversion of all warrants or options, regardless of whether such shares would be used in computing diluted earnings per share under GAAP.

F-17

CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

NOTE 11 - SUBSEQUENT EVENTS (continued)

o   If the Company does not file its Form 10-KSB for either 2007 or 2008 within 30 days after the filing is required, after giving effect to any extension permitted by Rule 12b-25 under the Securities Exchange Act of 1934, any shares remaining in escrow shall be delivered to the Investors.

o   The remaining 10,000,000 shares of series A preferred stock are to be delivered to the Investors in the event that, based on the Company’s audited financial statements for 2007 or 2008 the Company or certain affiliated companies owes any taxes to the PRC government or any authority or taxing agency of the PRC. For each $1.00 of such tax liability, four shares of series A preferred stock are to be delivered to the Investors.

·   With certain exceptions, until the Investors have sold all of the underlying shares of Common Stock, if the Company sells common stock or issues convertible securities with a conversion or exercise price which is less than the conversion price of the preferred stock, the conversion price of the series A preferred stock and the exercise price of the warrants is reduced to the lower price.

·   The warrants have a term of five years, and expire on November 13, 2012. The warrants provide a cashless exercise feature; however, the holders of the warrants may not make a cashless exercise during the twelve months commencing on November 13, 2007 in the case of the $0.58 warrants, and during the eighteen (18) period commencing on November 13, 2007 in the case of the $0.83 warrants and $0.92 warrants, and after these respective periods only if the underlying shares are not covered by an effective registration statement.

·   The warrants provide that the exercise price of the warrants may be reduced by up to 90% if the Company’s pre-tax income per share of common stock, on a fully-diluted basis as described above, is less than $0.08316 per share for 2007 and $0.13131 per share for 2008.

(b)In December 2007, the Company paid and borrowed approximately $266,000 from a financial institution. The note bears interest ranging from 6.633% to 6.9345% per annum and is due in June 2008.

F-18