WUXI, China, May 15 /Xinhua-PRNewswire-FirstCall/ -- China Wind Systems, Inc. (OTC Bulletin Board: CWSI) ("China Wind Systems" or the "Company"), which through its wholly owned subsidiaries and variable interest entities manufactures and sells industrial machines for use in the textile and energy related industries in the People's Republic of China, today announced its financial results for the first quarter ended March 31, 2008.

    First Quarter 2008 Highlights
     -- Net revenues increased 104.6% year-over-year to $8.4 million
     -- Gross profit increased 103.8% year-over-year to $2.2 million
     -- Net loss allocable to common shareholders, after a $2.9 million
        non-cash deemed preferred dividend, totaled $(4.1) million, or
        $(0.11) per diluted share
     -- Adjusting for non-cash items such as interest expense of
        $2.3 million and a deemed preferred dividend of $2.9 million, non-
        GAAP net income was $1.0 million, or $0.03 per diluted share.
     -- Revenue from the forging of rolled rings, for the wind power and
        other industries grew from $0 in the March Quarter of 2007 to $3.2
        million in the March Quarter of 2008.

"Last quarter we made progress in executing our long term strategy, which is to expand our products to offer products and services for the wind power industry. During 2007, we began to generate revenue from the forging of rolled rings, for the wind power and other industries. These activities accounted for $3,204,266, or 37.9% of total revenue for the three months ended March 31, 2008, of which approximately 30% are used for the wind industry. Wind industries revenues accounted for $1,902,916, or 7.8% of revenues for the year ended December 31, 2007. Management estimates that 25% of rings in 2007 and 30% of rings in the March Quarter of 2008 are for use in the wind industry. We presently only perform forging services relating to rolled rings, but intend to be in a position to manufacture these components internally in the fall of 2008," said Mr. Jianhua Wu, Chairman and CEO of China Wind Systems. Further, he said, "To increase oversight, we elected two new independent members to our board of directors who are serving on our audit and compensation committees."

First Quarter 2008 Results

Total revenue for the first quarter of 2008 totaled $8.4 million, up 104.6% from $4.1 million in the three month period ended March 31, 2007. The increase in total revenue was attributable to increases from both segments: dyeing and finishing equipment and electric power equipment. Revenues from the electric power equipment segment increased to $3.8 million from $0.3 million a year ago. Revenues from dyeing and finishing equipment increased 20% to $4.7 million from $3.9 million a year ago, due to marketing efforts focused on developing new customers and making follow-on sales to existing customers.

Gross profit for the first quarter of 2008 was $2.2 million, an increase of 103.8% from $1.1 million for the three months ended March 31, 2007. Gross margin was 25.7% for the first quarter of 2008, compared to 25.8% for the prior year period. Gross profit for dyeing was $1.2 million for the first quarter 2008 compared to $1.0 million for the same period prior year, representing gross margin of approximately 26.1% and 25.8%, respectively. Gross profit for the electrical power equipment segment was $1.0 million for the first quarter 2008 compared to $0.1 for the same period prior year.

Operating expenses were $0.7 million in the first quarter of 2008, compared to $0.2 million a year ago. Selling, general and administrative expenses for the first quarter of 2008 totaled $0.6 million, compared to $0.1 million a year ago, primarily due to increased professional fees associated with being a public company and higher payroll and related benefits.

Operating income for the first quarter of 2008 totaled $1.5 million, a 66.6% increase from $0.9 million for the same period prior year.

Net loss, including non-cash items such as interest expense related to amortization of debt discount of $2.3 million and a deemed preferred dividend of $2.9 million, for the first quarter of 2008 was ($4.1) million, or ($0.11) per fully diluted share, compared to net income of $0.6 million, or $0.02 per fully diluted share, for the three months ended March 31, 2007. Adjusting net loss for the non-cash items related to the amortization of debt discount to interest expense and the deemed preferred dividend, non-GAAP net income was $1.0 million, or $0.03 per fully diluted share. Earnings per share were calculated using a diluted weighted share count of 37.5 million shares for the first quarter of 2008 and 36.6 million shares for the first quarter of 2007. The increase in weighted average shares includes the impact of the reverse merger transaction and private placement in November 2007 as well as the issuance of common shares for services.

Financial Condition

As of March 31, 2008, the Company had cash and cash equivalents of $2.6 million and working capital of $7.4 million. Accounts receivable were $3.5 million. At March 31, 2008, the Company had $1.0 million in short-term loans payable and stockholders' equity of $26.8 million.

Business Outlook

"In 2008, we expect to significantly increase our revenues generated from our electric power equipment business and our wind power business. We have been evaluating working relationships with leading wind energy companies in China to supply wind components. We are on track to complete the first phase of our expansion plan and expect to manufacture larger forged rolled rings and shafts at our facilities by October 2008," concluded Mr. Jianhua Wu, CEO of China Wind Systems.

In 2008, the Company expects $40.0 million in revenues and $7.0 million in net income after a 25% tax rate, or $0.11 per share based on 62.9 million weighted average diluted share count.

Use of Non-GAAP Financial Measures

GAAP results for the quarter ended March 31, 2008 include a one-time, non- cash interest expense related to the amortization of debt discount in the amount of $2.3 million and a non cash deemed preferred stock dividend in the amount of $2.9 million. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non- GAAP financial information excluding the impact of these items in this release, non-GAAP net income available to common shareholders and diluted earnings per share. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

About China Wind Systems, Inc.

China Wind Systems, through its affiliates, Huayang Dye Machine and Huayang Electrical Power Equipment, manufactures and sells industrial equipment for use in the textile and energy related industries in China. Since August 2007, the Company has shifted its strategy to focus on the growing wind energy industry in China, and has begun to supply high precision rolled rings to companies in the wind power energy industry.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (www.sec.gov). All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward- looking statements.

-Financial Tables Follow-
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                                          For the Three Months Ended
                                                   March 31,
                                               2008         2007
    NET REVENUES                             $8,447,074  $4,129,210
    COST OF SALES                             6,272,826   3,062,119
    GROSS PROFIT                              2,174,248   1,067,091
    OPERATING EXPENSES:
         Depreciation and amortization           78,020      71,804
         Selling, general and administrative    616,568     106,991
            Total Operating Expenses            694,588     178,795
    INCOME FROM OPERATIONS                    1,479,660     888,296
    OTHER INCOME (EXPENSE):
         Interest income                          5,633         101
         Interest expense                    (2,259,694)     (8,048)
         Debt issuance costs                    (21,429)         --
            Total Other Income (Expense)     (2,275,490)     (7,947)
    INCOME (LOSS) BEFORE INCOME TAXES          (795,830)    880,349
    INCOME TAXES                                454,031     298,584
    NET INCOME (LOSS)                        (1,249,861)    581,765
    DEEMED PREFERRED DIVIDEND                (2,884,062)         --
    NET INCOME (LOSS) AVAILABLE TO COMMON
     SHAREHOLDERS                           $(4,133,923)   $581,765
    COMPREHENSIVE INCOME:
          NET INCOME (LOSS)                 $(1,249,861)   $581,765
          OTHER COMPREHENSIVE INCOME:
               Unrealized foreign currency
                translation gain              1,007,245      83,161
          COMPREHENSIVE INCOME (LOSS)         $(242,616)   $664,926
    NET INCOME (LOSS) PER COMMON SHARE:
        Basic                                    $(0.11)      $0.02
        Diluted                                  $(0.11)      $0.02
    WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING:
        Basic                                37,484,504  36,577,704
        Diluted                              37,484,504  36,577,704
                    CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                                   March 31,   December 31,
                                                      2008           2007
                                                  (Unaudited)
                      ASSETS
    CURRENT ASSETS:
        Cash and cash equivalents                  $2,580,723     $5,025,434
        Accounts receivable, net of allowance
         for doubtful accounts                      3,539,495      2,158,412
        Inventories, net of reserve for
         obsolete inventory                         3,171,362      1,929,796
        Advances to suppliers                         649,745        938,331
        Prepaid expenses and other                    412,506        378,429
            Total Current Assets                   10,353,831     10,430,402
    PROPERTY AND EQUIPMENT - Net                    6,638,714      6,525,986
    OTHER ASSETS:
       Deposit on long-term assets - related
        party                                      12,155,472     10,863,706
       Intangible assets, net of accumulated
        amortization                                  520,682        502,634
       Investment in cost method investee                  --         34,181
       Due from related parties                        46,561        139,524
            Total Assets                          $29,715,260    $28,496,433
       LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
        Loans payable                                $996,839       $820,333
        Convertible debt, net of discount on debt          --      3,261,339
        Accounts payable                              688,576      1,845,769
        Accrued expenses                              191,307        198,542
        VAT and service taxes payable                 516,940        434,839
        Advances from customers                        91,613         77,357
        Due to related party                               --         98,541
        Income taxes payable                          463,955        508,407
            Total Current Liabilities               2,949,230      7,245,127
    STOCKHOLDERS' EQUITY:
        Series A convertible preferred ($0.001
         par value; 60,000,000 shares authorized;
         14,787,135 and 0 shares issued and
         outstanding at March 31, 2008 and
         December 31, 2007, respectively)              14,787             --
        Common stock ($0.001 par value;
         150,000,000 shares authorized;
         37,732,295 and 36,577,704 shares
         issued and outstanding at March 31,
         2008 and December 31, 2007,
         respectively)                                 37,733         37,385
        Additional paid-in capital                 12,115,163      3,488,896
        Retained earnings                          11,874,576     16,074,270
        Statutory reserve                             371,243        305,472
        Other comprehensive gain - cumulative
         foreign currency translation adjustment    2,352,528      1,345,283
            Total Stockholders' Equity             26,766,030     21,251,306
            Total Liabilities and Stockholders'
             Equity                               $29,715,260    $28,496,433
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                   For the Three Months Ended
                                                             March 31,
                                                       2008             2007
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income (loss)                          $(1,249,861)        $581,765
      Adjustments to reconcile net income
       (loss) from operations to net cash
        provided by (used in) operating
        activities:
        Depreciation and amortization                161,846          148,861
        Amortization of debt discount to
         interest expense                          2,263,661               --
        Amortization of debt offering costs           21,429               --
        Stock based compensation expense              45,000               --
      Changes in assets and liabilities:
        Accounts receivable                       (1,263,740)      (1,818,385)
        Inventories                               (1,136,507)         806,749
        Prepaid and other current assets             (49,696)          42,988
        Advanced to suppliers                        320,583            2,173
        Accounts payable                          (1,225,962)         487,098
        Accrued expenses                               7,150           47,042
        VAT and service taxes payable                 62,655          287,500
        Income taxes payable                         (64,183)         275,060
        Advances from customers                       10,804          380,041
    NET CASH PROVIDED BY (USED IN)
     OPERATING ACTIVITIES                         (2,096,821)       1,240,892
    CASH FLOWS FROM INVESTING ACTIVITIES:
        Decrease in due from related
         parties                                      96,650           (1,009)
        Proceeds from sale of cost-method
         investee                                     34,840               --
        Deposit on long-term assets -
         related party                              (822,212)        (316,319)
        Purchase of property and equipment            (3,907)          (3,337)
    NET CASH USED IN INVESTING ACTIVITIES           (694,629)        (320,665)
    CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from (payments on) loans
         payable                                     139,360          386,033
        Proceeds from exercise of warrants           187,340               --
        Proceeds from (payments on) related
         party advances                             (100,441)              --
    NET CASH PROVIDED BY FINANCING
     ACTIVITIES                                      226,259          386,033
    EFFECT OF EXCHANGE RATE ON CASH                  120,480            9,311
    NET INCREASE (DECREASE) IN CASH               (2,444,711)       1,315,571
    CASH  - beginning of year                      5,025,434          421,390
    CASH - end of period                          $2,580,723       $1,736,961
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
      Cash paid for:
          Interest                                   $16,752           $8,048
          Income taxes                              $518,214           $1,345
    NON-CASH INVESTING AND FINANCING
     ACTIVITIES:
      Deemed preferred dividend reflected
       in paid-in capital                         $2,884,062              $--
      Convertible debt converted to series
       A preferred stock                          $5,525,000              $--
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
AND DILUTED EPS
                                           For the Quarter Ended March 31,
                                              2008                 2007
                                          Net      Diluted    Net    Diluted
                                         Income      EPS     Income    EPS
    Adjusted Amount of Net Income
     available to Common
     Shareholders                       $1,031,262   $0.03  $581,765  $0.02
    Adjustment
        Interest expenses related
         to amortization of
         conversion of convertible
         debt to common stock (1)       (2,259,694)  (0.06)       --     --
        Amortization of debt
         issuance costs (2)                (21,429)
        Deemed preferred dividend (3)   (2,884,062)  (0.08)
    Amount per consolidated
     statement of operations           $(4,133,923) $(0.11) $581,765  $0.02
     (1) One-time, non-cash interest expenses related to amortization of
         debt discount to interest expense, Q1 2008
     (2) Amortization related to debt issuance
     (3) One-time non-cash deemed preferred dividend related to issuance of
         stock warrants upon conversion of convertible debt to series A
         preferred stock
         Weighted average diluted shares, 37,484,504 for Q1 2008 and
         36,577,704 for Q1 2007
    For more information, please contact:
    CCG Elite Investor Relations
     Mr. Crocker Coulson, President
     Phone: +1-646-213-1915 (New York)
     Email: crocker.coulson@ccgir.com
     URL:   http://www.ccgelite.com