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Wonder Auto Technology, Inc. Reports Record Second Quarter 2007 Results

JINZHOU CITY, China, Aug. 7, 2007; Wonder Auto Technology, Inc., (BULLETIN BOARD: WATG) ("Wonder Auto" or the "Company"), a China- based manufacturer of automotive electrical parts, today announced its financial results for the quarter ended June 30, 2007.

  Second Quarter 2007 Highlights

  -- Revenues increased 25.2% year-over-year to a record $23.6 million
  -- Gross margin was 24.0%
  -- Net income was $3.8 million, up 84.2% year-over-year from net income of
  -- $2.1 million in the second quarter of 2006, up 46.4% before government
     grant income of $0.8 million for net income of $3.0 million. Net income
     also reflects the benefit of a $0.4 million tax refund in the quarter
  -- Export sales revenue increased to 11.6% of total revenue

Revenue for the second quarter of 2007 increased to a record $23.6 million, up 25.2% from $18.8 million in the second quarter of 2006. The quarter was favorably impacted by the Company's April acquisition of the remaining 79.6% of Jinzhou Wanyou Mechanical Parts Co., Ltd. ("Wanyou") and its subsequent consolidation with Wonder Auto's financial results, which contributed $1.6 million to revenues during the quarter. Gross profit for the quarter was $5.7 million, up 69.6% from gross profit of $3.3 million in the comparable quarter a year ago. Net income in the second quarter of 2007 increased to $3.8 million, up 84.2%, from $2.1 million in the second quarter of 2006.

Basic and diluted earnings per share for the quarter were $0.16 compared to basic and diluted earnings per share of $0.12 in the same quarter a year ago.

"We are pleased with our results for the second quarter. We continued making good progress in research and development, market expansion, cost control and other key areas. Meanwhile, the Wanyou acquisition began contributing to the overall business. The Wanyou acquisition is contributing to both our top and bottom line results and increasing our penetration into overseas markets," said Chairman and CEO, Mr. Qingjie Zhao.

Wonder Auto's strong revenue growth over the same quarter last year was driven by a combination of increased market demand from new and existing clients and the Wanyou acquisition in April of 2007. Leading customers Beijing Hyundai Motor Company, Harbin Dongan Auto Engine Co., Ltd., and Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd. represented 11.0%, 19.6% and 15.2% of total revenues for the quarter, respectively. Revenues from exports increased to 11.6% of total revenue from 3.6% in the same period a year ago. A significant amount of export sales resulted from the Wanyou acquisition which derived a substantial portion of its revenues from international markets.

For the second quarter of 2007, gross profit was $5.7 million for a year- over-year increase of 69.6% from $3.3 million in the second quarter of 2006. Gross margin increased to 24.0% in the quarter, up from 17.7% in the same period last year. The increase in gross margin is a result of management implementing cost control measures and improved technology that offset increases in the price of copper wire. The Company's gross margin also continues to benefit from the consolidation of Jinzhou Dongwoo, a supplier to Wonder Auto, in November of 2006.

Operating expenses were $1.8 million, or 7.8% of revenue, up 94.4% from $940,843, or 5.0% of revenue, in the second quarter of 2006. The increase in operating expenses was primarily due to higher consulting fees for compliance with Sarbanes-Oxley Act of 2002, salaries for independent directors and insurance for directors and officers.

Income from operations for the second quarter of 2007 was $3.8 million, up 59.9% from $2.4 million in the comparable quarter a year ago. Operating margin increased to 16.2% from 12.7%.

Net income was $3.8 million, up 84.2% from net income of $2.1 million, in the second quarter of 2006. Net income increased to $3.0 million before the inclusion of $0.8 million of government grant income. Taxation for the quarter, a credit of $34,090, benefited from a $426,325 tax refund in respect of capital equipment purchased.

Basic and diluted earnings per share in the second quarter of 2007 were $0.16 compared to basic and diluted earnings per share of $0.12 in the same period a year ago.

Financial Condition

As of June 30, 2007, Wonder Auto had $15.2 million in cash, cash equivalents and restricted cash, working capital of $34.1 million and $16.5 million of long-term debt. Shareholders' equity stood at $45.8 million, up from $38.2 million at December 31, 2006.

Recent Events

On August 3rd, 2007, Wonder Auto was approved to list its common stock on the NASDAQ Global Market. The Company expects to begin trading on or around August 9th, 2007 under the symbol "WATG".

On July 6th, 2007, Wonder Auto filed a registration statement on Form S-1 with the Securities and Exchange Commission for an offering of up to 6.5 million shares of common stock. The company intends to offer 5 million shares of common stock with the additional 1.5 million of common stock offered by an existing stockholder. The total shares outstanding after the offering will be 28,959,994. The Company has also granted the underwriters a 30-day option to purchase up to 975,000 additional shares of common stock to cover over allotments, if any.

Business Outlook

Added Mr. Zhao, "During the quarter, we reached close to full capacity with our alternator and starter production lines as a result of the growth we have experienced. We are alleviating our capacity constraints with new production lines that will start in the third quarter and look forward to being able to fulfill the current demand we are experiencing for our products."

Wonder Auto completed the installation of its new production lines in July 2007. The Company is in the final stages of testing the lines before it begins full production in the third quarter of 2007. The additional production lines will bring total capacity for alternators and starters to approximately 1.7 million and 1.8 million units, respectively.

Wonder Auto reaffirms its previous guidance for the full year of revenues of $100 million and net income of $13.5 million.

About Wonder Auto Technology, Inc.

Wonder Auto Technology, Inc., through its Chinese subsidiaries, designs, develops, manufactures and sells automotive electrical parts. The Company was ranked second in sales revenue in the China market for automotive alternators and starters in 2006. Its products are suitable for various types of automobiles and most of its products are used in passenger cars with smaller engines having displacement below 1.6 liters. Wonder Auto's customers include Beijing Hyundai Motor Company, Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., Harbin Harbin Dongan Automotive Engine Manufacturing Co., Ltd., and Tianjin FAW Xiali Automobile Co., Ltd. Wonder Auto Technology, Inc. is a Nevada corporation with its manufacturing subsidiaries and its corporate headquarters located in Jinzhou City, Liaoning Province, China.

  
                          Financial Tables Below

                       Wonder Auto Technology, Inc.

   Condensed Consolidated Statements of Income and Comprehensive Income
            For the three months ended June 30, 2007 and 2006
                          (Stated in US Dollars)

                                      Three months ended June 30
                                             (unaudited)
                                            2007          2006
  Net sales                          $23,555,638   $18,813,107
  Cost of sales                       17,899,115    15,478,235

  Gross profit                         5,656,523     3,334,872
  Operating expenses
  Administrative expenses                910,106       297,160
  Research and development costs         214,174        99,327
  Selling expenses                       704,999       544,356

                                       1,829,279       940,843

  Income from operations               3,827,244     2,394,029
  Interest income                         38,068         8,487
  Other income                            15,531       116,684
  Government grant                       786,154             -
  Finance costs                         (592,890)     (195,593)

  Income before income taxes           4,074,107     2,323,607
  Income taxes                            34,090      (243,534)
  Minority interests                    (276,706)            -

  Net income                          $3,831,491    $2,080,073

  Other comprehensive income
  Foreign currency translation
    Adjustments                          709,413        78,529

  Comprehensive income                $4,540,904    $2,158,602

  Earnings per share: basic and
   diluted                                 $0.16         $0.12

  Weighted average number of
   shares outstanding:
  basic and diluted                   23,959,994    17,893,079

                       Wonder Auto Technology, Inc.

                  Condensed Consolidated Balance Sheets
                As of June 30, 2007 and December 31, 2006
                          (Stated in US Dollars)

                                       June 30,  December 31,
                                          2007          2006
                                    (Unaudited)     (Audited)

  ASSETS
      Current assets
          Cash and cash equivalents  $9,719,619     $8,203,699

          Restricted cash             5,437,191      4,876,879

          Trade receivables (net of
          allowance of doubtful
          accounts  of $42,124
          in 2007 and
          $32,150 in 2006)           29,207,840     24,696,982

          Bills receivable           10,042,945      3,098,314

          Other receivables,
           prepayments and deposits     1,575,212    1,254,209
          Inventories                  14,590,021   13,689,374
          Amount due from a related
           company                         71,508       69,561
          Deferred taxes                  278,169      237,570

      Total current assets             70,922,505   56,126,588
      Intangible assets                 9,634,218    4,250,800
      Property, plant and equipment,
       net                             15,585,589   13,945,846
      Land use right                   1,210, 766   1,203,256

      Deposit for acquisition of
       property, plant and equipment    3,978,828    1,740,548
      Investment in an unconsolidated
       affiliate                          -            527,627
      Deferred taxes                      232,424      205,475

  TOTAL ASSETS                       $101,564,330  $78,000,140

                       Wonder Auto Technology, Inc.
              Condensed Consolidated Balance Sheets (Cont'd)
                As of June 30, 2007 and December 31, 2006
                          (Stated in US Dollars)

                                                    June 30,    December 31,
                                                       2007        2006
                                                   (Unaudited)   (Audited)
  LIABILITIES AND STOCKHOLDERS' EQUITY

  LIABILITIES
      Current liabilities
          Trade payables                            $11,479,345  $9,631,537
          Bills payable                               9,731,000   8,628,078
          Other payables and accrued expenses         4,706,964   3,121,533
          Provision for warranty                        972,641   1,049,344
          Income tax payable                             99,425     398,768
          Amount due to an unconsolidated affiliate           -      37,492
          Dividend payable to minority stockholders     366,664           -
          Secured short-term bank loans               9,448,275  14,326,831

      Total current liabilities                      36,804,314  37,193,583

      Secured long-term bank loans                   16,474,321           -

  TOTAL LIABILITIES                                  53,278,635  37,193,583

  COMMITMENTS AND CONTINGENCIES

  MINORITY INTERESTS                                  2,438,025   2,579,572

  STOCKHOLDERS' EQUITY
      Preferred stock: par value $0.0001 per share;
       authorized 10,000,000 shares, none issued and
           outstanding                                       -           -
      Common stock: par value $0.0001 per share;
       authorized 90,000,000 shares, issued
       and outstanding 23,959,994
       shares in 2007 and 2006                           2,396       2,396
      Additional paid-in capital                    22,140,143  22,140,143
      Statutory and other reserves                   3,148,265   3,148,265
      Accumulated other comprehensive income         2,528,880   1,452,138
      Retained earnings                             18,027,986  11,484,043

  TOTAL STOCKHOLDERS' EQUITY                        45,847,670  38,226,985

  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $101,564,330 $78,000,140

                       Wonder Auto Technology, Inc.
             Condensed Consolidated Statements of Cash Flows
             For the six months ended June 30, 2007 and 2006
                          (Stated in US Dollars)

                                                  Six months ended June 30
                                                         (Unaudited)
                                                       2007         2006
  Cash flows from operating activities
      Net income                                  $6,543,943    $3,489,306

      Adjustments to reconcile net income to net
       cash provided by
          (used in) operating activities:
              Depreciation                           929,352       664,243
              Amortization of trademarks and
               patents                                   707           185
              Amortization of land use right          25,793        13,391
              Deferred taxes                         (56,238)        5,457
              Gain on disposal of property, plant
               and equipment                          15,636             -
              Provision for doubtful debts             8,923             -
              Recovery of obsolete inventories       (57,493)      (79,990)
              Exchange loss on translation of
               monetary assets and liabilities       100,764             -
              Equity net income of an
               unconsolidated affiliate              (34,147)            -
              Minority interests                     486,077             -
      Changes in operating assets and liabilities:
          Trade receivables                       (3,214,204)   (4,527,526)
          Bills receivable                        (6,669,000)   (1,653,822)
          Other receivables, prepayments and
           deposits                                  (94,889)      (72,138)
          Inventories
                                                    (195,332)   (2,556,444)
          Trade payables                           1,881,863     3,206,449
          Bills payable                              880,741       858,294
          Other payables and accrued expenses        454,752        77,167
          Provision for warranty                    (104,142)      366,729
          Income tax payable                        (308,489)      (14,150)

  Net cash flows provided by (used in) operating
   activities                                        594,617      (222,849)

  Cash flows from investing activities
      Payments to acquire trademarks and patents        (326)       (1,244)
      Payments to acquire and for deposit for
       acquisition of
       property, plant and equipment              (3,247,305)     (797,301)

      Proceeds from sales of property, plant and
       equipment                                      11,171             -
      Installment payment to acquire Jinzhou
       Dongwoo                                    (2,420,000)            -
      (Increase)/decrease in restricted cash        (560,312)      347,860
      Proceeds from sales of marketable securities         -        37,317
      Net cash paid to acquire Jinzhou Wanyou     (3,426,485)            -
      Cash acquired from the RTO                           -           419

  Net cash flows used in investing activities    $(9,643,257)    $(412,949)

                       Wonder Auto Technology, Inc.
         Condensed Consolidated Statements of Cash Flows (Cont'd)
             For the six months ended June 30, 2007 and 2006
                          (Stated in US Dollars)

                                                    Six months ended June 30
                                                           (Unaudited)
                                                        2007         2006

  Cash flows from financing activities
      Dividend paid to stockholders                       $-    $(1,706,516)

      Dividend paid to minority stockholders        (357,280)             -
      Dividend paid to Winning                      (343,934)             -
      New bank loans                              18,939,379              -
      Repayment of bank loans                     (7,977,971)             -

      Repayment to stockholders                            -         (5,149)
      Net proceeds from issuance of shares                 -     10,142,020

      Advance from a related company                       -         64,480

  Net cash flows provided by financing activities 10,260,194      8,494,835

  Effect of foreign currency translation on cash
   and cash equivalents                              304,366         54,248

  Net increase in cash and cash equivalents        1,515,920      7,913,285

  Cash and cash equivalents - beginning of period  8,203,699      4,368,757

  Cash and cash equivalents - end of period       $9,719,619    $12,282,042

  Supplemental disclosures for cash flow
   information:
      Non-cash investing and financing
       activities:
      Acquisition of Jinzhou Wanyou               $2,840,317            $-

      Cash paid for:
          Interest                                  $750,402      $434,868
          Income taxes                              $493,508      $470,878