UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
 

 
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K/A
(Amendment No. 1)

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

For the fiscal year endedAnnual Period Ended December 31, 2013.2014

OR

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

For the transition periodTransition Period from ___ to ___
 
Commission file number 001-35002
 
CLEANTECH INNOVATIONS,6D GLOBAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

NevadaDelaware 98-0516425
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
C District, Maoshan Industry Park,
Tieling Economic Development Zone,
Tieling, Liaoning Province, China
112616
(Address of principal executive offices)(ZIP Code)
(86) 0410-6129922
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common stock, par value $.00001 per share

Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes  ¨    No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes  ¨    No  xNumber)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 Yes  ¨    No  x
17 State Street, Suite 2550, New York, NY 10004
(Address of principal executive offices)   (Zip Code)
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  x
Telephone: (646) 681-4900
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes  x    No  o
(Registrant’s telephone number)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitionsdefinition of “large accelerated filer,”filer”, “accelerated filer,”filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨
o
Accelerated filer ¨
o
Non-accelerated filer  ¨ (Do not check if smaller reporting company)
o
Smaller reporting companyx
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes o   No x
 
The aggregate market valueNumber of the voting common equity held by non-affiliates was $3,777,139, based on the closing price of such common equity as of June 30, 2013, the last business day of the registrant’s most recently completed second fiscal quarter.

As of April 4, 2014, there were 24,982,822 shares of the registrant’s common stock, par value $.00001 per share, issued and outstanding.outstanding at March 19, 2015: 78,175,617.
 
DOCUMENTS INCORPORATED BY REFERENCE

NonePortions of the registrant’s definitive proxy statement relating to its 2015 annual meeting of stockholders (the “2015 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. The 2015 Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
 
 
 

EXPLANATORY NOTE
This Amendment No. 1 (this “Amendment”) to 6D Global Technologies Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on March 30, 2015 (the “Original Form 10-K”), is being filed with the limited purpose of amending the Report of Independent Registered Public Accounting Firm on page F-2 of the Original Form 10-K to correct a scrivener’s error with respect to the date thereof. This Amendment does not amend or otherwise update any other information in the Original Form 10-K.  Accordingly, this Amendment should be read in conjunction with the Original Form 10-K.

Part II
Item 8. – Financial Statements and Supplementary Data
 Contents
Page
F-2 to F-3
F-4
F-5
F-6
F-7
F-8
F-9

F-1

 
CLEANTERepCH INNOVATIONS, INC.ort of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
6D Global Technologies, Inc.
New York, New York

We have audited the accompanying consolidated balance sheet of 6D Global Technologies, Inc. as of December 31, 2014 and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the year ended December 31, 2014.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of 6D Global Technologies, Inc. at December 31, 2014, and the results of its operations and its cash flows for the year ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

TABLE OF CONTENTS

Page
PART I
Item 1.
Business
/s/ BDO USA, LLP
2
Item 1A.17
Item 1B.39
Item 2.39
Item 3.40
Item 4.40
PART II
Item 5.41
Item 6.42
Item 7.42
Item 7A.49
Item 8.49
Item 9.49
Item 9A.49
Item 9B.50
PART III
Item 10.51
Item 11.55
Item 12.57
Item 13.57
Item 14.59
PART IV
Item 15.60
F-1
61
New York, New York
March 30, 2015

 


FORWARD-LOOKING STATEMENTS

NOTE ABOUT FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which include, but are not limited to, statements concerning our projected revenues, expenses, gross profit and income, mix of revenue, demand for our products, the benefits and potential applications for our products, the need for additional capital, our ability to obtain and successfully perform additional new contract awards and the related funding and profitability of such awards, the competitive nature of our business and markets and product qualification requirements of our customers. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “hopes,” “estimates,” “should,” “may,” “will,” “with a view to” and variations of these words or similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Such factors include, but are not limited to the following:

·our goals and strategies;
·our expansion plans;
·our future business development, financial conditions and results of operations;
·the expected growth of the market for structural towers for wind turbine products and specialty metal products;
·our expectations regarding demand for our products;
·our expectations regarding keeping and strengthening our relationships with key customers;
·our ability to stay abreast of market trends and technological advances;
·our ability to protect our intellectual property rights effectively and not infringe on the intellectual property rights of others;
·our ability to attract and retain quality employees;
·our ability to pursue strategic acquisitions and alliances;
·competition in our industry in China;
·general economic and business conditions in the regions in which we sell our products;
·relevant government policies and regulations relating to our industry; and
·market acceptance of our products.
Additionally, this report contains statistical data that we obtained from various publicly available government publications and industry-specific third party reports. Statistical data in these publications also include projections based on a number of assumptions. The markets for our products may not grow at the rates projected by market data, or at all. The failure of these markets to grow at the projected rates may have a material adverse effect on our business and the market price of our common stock. In addition, the changing nature of our customers’ industries results in uncertainties in any projections or estimates relating to the growth prospects or future condition of our markets. Furthermore, if any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.

Unless otherwise indicated, information in this report concerning economic conditions and our industry is based on information from independent industry analysts and publications, as well as our estimates. Except where otherwise noted, our estimates are derived from publicly available information released by third party sources, as well as data from our internal research, and are based on such data and our knowledge of our industry, which we believe to be reasonable. None of the market data from independent industry publications cited in this report was prepared on our or our affiliates’ behalf.

Additional information on the various risks and uncertainties potentially affecting our operating results are discussed in this report and other documents we file with the Securities and Exchange Commission, or the SEC, or available upon written request to our corporate secretary at  C District, Maoshan Industry Park, Tieling Economic Development Zone, Tieling, Liaoning Province, China  . We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements.

PART I
Item 1. Business
General
We are a manufacturer of structural towers for megawatt-class wind turbines as well as other highly engineered metal components used in the energy industry and other industries in the PRC. We currently design, manufacture, test and sell structural towers for 1.5 -megawatt, or MW, on-land wind turbines, and have the expertise and manufacturing capacity to provide towers for 1.3, 3 MW and higher-powered on-land and off-shore turbines. We are currently the only wind tower manufacturer within Tieling, Liaoning Province, which we believe provides us with a competitive advantage in supplying towers to the wind-energy-rich northern provinces of China. We also manufacture specialty metal products that require advanced manufacturing and engineering capabilities, including bellows expansion joints and connecting bend pipes used for waste heat recycling in steel production and in ultra-high-voltage electricity transmission grids, as well as industrial pressure vessels. Our products provide solutions for China’s increasing demand for clean energy.
We sell our products exclusively in the PRC domestic market. We produce wind towers, a component of wind turbine installations, but do not compete with wind turbine manufacturers. Our specialty metal products are used by large-scale industrial companies involved mainly in the steel and coke, petrochemical, high-voltage electricity transmission and thermoelectric industries.
We believe that we benefit from the following competitive strengths:
•           Strong relationships with leading utility and industrial companies;
•           Geographical proximity to the multi-gigawatt pipeline of wind development projects in the northern provinces of China;
•           Technically advanced, precision manufacturing expertise demonstrated, in part, by our Class III A2 grade pressure vessel manufacturing license, a key criterion in customer selection of wind tower suppliers;
•           Proprietary product designs and intellectual property; and
•           High-quality manufacturing, stringent testing, timely delivery and customer service.
We may experience payment delays and we do not recognize revenue until our products are delivered, tested and accepted by our customers. Our agreements with our customers generally provide for advance and partial payments of the purchase price to be due at agreed-upon milestones throughout the project duration, with the final 10% of the contractual amount to be paid up to 24 months after customer acceptance. Customer acceptance occurs after the customer receives and puts the product through quality inspection, a process that normally takes one to two weeks. Payments received prior to customer acceptance are recorded as unearned revenue. Payments may be received up to six months after their respective due dates, but we do not anticipate any significant credit risk because the majority of our customers are state-owned and publicly traded utilities and industrial companies in China.
Our headquarters are in Tieling, Liaoning Province, China, where we currently operate  production facilities with  94,473 square meters of combined production space. As of December 31, 2013, we had 75 full-time employees.
Our History
We are a U.S. holding company with no material assets other than the ownership interests of our two wholly owned subsidiaries organized under the laws of the PRC: Creative Bellows and Creative Wind Power. Creative Bellows was incorporated on September 17, 2007, and is our Wholly Foreign Owned Enterprise, or WFOE; Creative Bellows owns 100% of Creative Wind Power, which was incorporated on May 26, 2009. Creative Bellows provides the production expertise, employees and facilities to manufacture our wind towers, bellows expansion joints, pressure vessels and other fabricated metal specialty products. Creative Wind Power markets and sells the wind towers designed and manufactured by Creative Bellows.
2F-2

 
We were incorporated in the StateReport of Nevada on May 9, 2006, under the name Everton Capital Corporation, as an exploration stage company with no revenues and no operations, engaged in the search for mineral deposits or reserves. On June 18, 2010, in anticipation of the Share Exchange Agreement and related transactions described below, we changed our name to CleanTech Innovations, Inc. through a merger with our wholly owned, non-operating subsidiary established solely to change our name pursuant to Nevada law and authorized an 8-for-1 forward split of our common stock effective July 2, 2010. Prior to the forward split, we had 5,501,000 shares of our common stock outstanding, and, after giving effect to the forward split, we had 44,008,000 shares of our common stock outstanding. We authorized the forward stock split to provide a sufficient number of shares to accommodate the trading of our common stock in the OTC marketplace after the acquisition of Creative Bellows as described below.Independent Registered Public Accounting Firm
 
The acquisitionBoard of Creative Bellows was accomplished pursuant toDirectors and Stockholders
6D Global Technologies, Inc.
(Formerly Initial Koncepts, Inc.)

We have audited the termsaccompanying balance sheet of 6D Global Technologies, Inc. (formerly Initial Koncepts, Inc.) (the  “Company”) as of December 31, 2013, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended.  These financial statements are the responsibility of the Share Exchange Agreement dated July 2, 2010, as amended. PursuantCompany’s management.  Our responsibility is to the Share Exchange Agreement,express an opinion on July 2, 2010, we issued 15,122,000 shares ofthese financial statements based on our common stock to the three owners of Creative Bellows and two of their designeesaudit.

We conducted our audit in exchange for their agreement to enter into and consummate a series of transactions, described below, by which we acquired 100% of Creative Bellows. Concurrentlyaccordance with the Share Exchange Agreementstandards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a condition thereof, we entered intobasis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an agreement with Jonathan Woo, our former president and director, pursuant to which he returned 40,000,000 shares of our common stock to us for cancellation in exchange for $40,000. Upon completionopinion on the effectiveness of the foregoing transactions,Company’s internal control over financial reporting.  Accordingly, we had 19,130,000 shares of our common stock issuedexpress no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and outstanding.
On July 15, 2010, the PRC State Administration of Industry and Commerce, or the AIC, issued a Sino-foreign joint venture business license for Creative Bellows, indicating that a capital injection by Wonderful Limited, a British Virgin Islands company, was approved and registering its ownership of a 4.999% equity interest in Creative Bellows. On August 18, 2010, the AIC issued an approval registration of our capital injection of approximately $23.3 million in cash in exchange for approximately 87% of Creative Bellows. Finally, on October 15, 2010, we obtained PRC government approval to acquire the remaining minority interest in Creative Bellows held by its original shareholders and Wonderful Limited for approximately $6 million in cash. Pursuant to the Waiver and Release Agreements dated as of October 27, 2010, the selling minority shareholders of Creative Bellows waived their rights to receive cash for their equity interests in exchange for a mutual release of claims. As a result of these transactions, Creative Bellows became our 100% subsidiary effective as of October 15, 2010. We were required to contribute $8.45 million as additional contribution of capital to Creative Bellows by July 2012 ;  however, we subsequently petitioned for a decrease of contributed capital to our existing contribution of $19.35 million which was approved.
Our organization structure as of the date of this report is set forthdisclosures in the following diagram:
3

Forfinancial statements.  An audit also includes assessing the accounting purposes, the Share Exchange Agreementprinciples used and subsequent transactions described above were treated as a reverse acquisition and recapitalization of Creative Bellows because, prior to the transactions, we were a non-operating public shell and, subsequent to the transactions, the shareholders of Creative Bellows owned a majority of our outstanding common stock and exercise significant influence over the operating and financial policies of the consolidated entity.
Our Industry
Overview
Currently, China’s energy infrastructure is reliant predominantly on coal; however, China has limited fossil fuel reserves. As a result, China’s government has implemented social, economic, environmental, regulatory and government stimulus-related policies to drive demand for technologies that promote renewable energy production, pollution reduction and energy conservation. As described in the Chapter 11, 12 th Five-Year Plan, China has placed a priority on promoting the development of diversified and clean energyestimates made by management, as well as optimizingevaluating the layout of energy development with the goal of  constructing 6 onshore and 2 coastal and offshore large wind power bases, providing additional installed capacity of over 70 million kW.
China adopted its first Renewable Energy Law in 2005, fostering the development of renewable energy such as wind power. In 2007, the National Development and Reform Commission, or the NDRC, released its “Medium and Long-Term Development Plan for Renewable Energy in China,” or the “2007 NDRC Plan,” setting a 15% target for renewable energy consumption by 2020. The growth in wind-generated electricity will also contribute towards China’s goal to cut its carbon dioxide emissions. As announced in November 2009 at Copenhagen UN climate change conference, China’s “Carbon Intensity Goal” is to cut carbon dioxide emissions per unit of GDP by 40% to 45% by 2020 compared to 2005 levels. The 12th Five-Year plan targets non-fossil fuel resources to provide 11.4% of total primary energy consumption. These government policies are intended to help stimulate sustainable wind power and clean technology development and investment.overall financial statement presentation.  We believe these government policiesthat our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue to increase demand for our products, including structural wind towers and fabricated metal specialty components.
Global Wind Power Market
Wind power is the world’s fastest-growing energy sector. We believe wind power is cost-efficient and mature compared to other types of renewable energy technologies. Accordingas a going concern.  As discussed in Note 9 to the Global Wind Energy Council, orfinancial statements, the GWEC, “Global Wind StatisticsCompany had an accumulated deficit at December 31, 2013, a net loss and net cash used in 2013, global annual installed wind capacity decreasedoperating activities for the year then ended.  These factors raise substantial doubt about the Company’s ability to 35,467 MW and China accounted for 45.4% of all newly installed capacity and 28.7% of all worldwide capacity. China continuedcontinue as a going concern.  Management’s plans in regards to be the largest Asian market and added 16,100 MWthese matters are also described in 2013.Note 9.  The following tables illustrate global annual installed capacity cumulative installed capacity and top 10 new installed capacity in 2013.
Source: Global Wind Statistics 2013, Global Wind Energy Council
4


Source: Global Wind Statistics 2013, Global Wind Energy Council
5

China Wind Power Market
The growth experienced by China’s wind industry over the past seven years has been driven mainly by national renewable energy policies as well as its active participation in the UNFCCC’s Clean Development Mechanism. The Chinese wind power market is now beginning to enter a more steady development and refinement stage, according to the GWEC Global “Wind Energy Outlook 2012.”  The National Energy Administration (NEA) released the 12 th Five-Year plan for renewable energy in 2011 targeting 100 GW of wind power by 2015, consisting of 70 GWfinancial statements do not include any adjustments that might result from the large wind base program, 30 GW from smaller projects, and an additional 5 GW from offshore wind.
Since the beginning of the 12th Five-Year Plan period (2011-2015), the NEA has promoted the concept of focusing on both centralized and decentralized development, supported by corresponding administrative measures. As a resultoutcome of this guidance from the central government, inland regions began to plan wind power development projects according to local conditions, thereby opening up opportunities for mid and small-sized wind power investment enterprises. According to the GWEC 2012 China Wind Outlook, the “Three Northern Area” of China features abundant wind energy resources, where the wind power density level is Class 3 and higher, including the regions of Inner Mongolia, Gansu, Xinjiang, Hebei, Jilin, Liaoning, Heilongjiang and Ningxia. In some areas such as Huitengliang in Inner Mongolia, Urad Middle Banner in Bayannur Inner Mongolia and Saihanha in Chifeng Heibei, which are all located near to our manufacturing facilities,  the wind power density level approaches Class 5.
Current guidelines published in the 2007 NDRC Plan mandate that renewable resources, including wind, generate 15% of total energy consumption by 2020. By the end of 2011, China had approximately 1,500 wind power projects in early stage development, totaling approximately 90GW. There are more than 20 provinces where the early stage development pipeline exceeds 1GW, including such provinces and regions as Yunnan, Guizhou, Hunan, Henan and Guangxi, which have more than 1.5GW each. Large wind power bases have been approved by the Central Government and are in early stage development, including the Jiuquan Phase-II GW base in Gansu (3GW), the Urad Middle Banner GW base in Bayannur, Inner Mongolia (1.8GW) and Kumui GW base in Xinjiang (2GW), for a total of 6.8GW. The following map illustrates the electricity delivery plan from the main wind power bases in China.uncertainty.
 
Source: Chinese Renewable Energy Industries Association
/s/ Li and Company, PC
* CleanTech’s manufacturing facilities
Li and Company, PC
 
Skillman, New Jersey
6

Wind Tower Market Opportunity in China
The “China Wind Power Development Road Map 2050”report, jointly published by the Energy Research Institute of the National Development and Reform Commission and the International Energy Agency, proposed that by 2020,wind power installed capacity should reach 200 GW; By 2040, wind power installed capacity should reach 400GW; By 2050, wind power installed capacity should reach 1,000 GW, or should meet at least 17% of the national electricity demand, based on different scenarios. These objects translate into an annual market of approximately 15GW per year. We believe that the market for wind towers will remain robust through 2020.
Renewable Energy Policy and Regulation in China
National renewable energy policies and a supportive regulatory framework have driven the growth of renewable energy in China. The main legislation for China to develop renewable energy is the “Renewable Energy Law of the People’s Republic of China”. The law was promulgated in 2005 and executed in 2006. It was modified again in 2009. The modified law was executed in April 2010. Several initiatives mandated by China’s Renewable Energy Law such as feed-in tariffs, aggressive targets for renewable energy, priority dispatch and mandatory purchase for wind power, favorable taxation and abolishment of the 70% local content requirement have established the foundation for the rapid development of wind power. The key initiatives are outlined below:
Feed-in tariffs: In 2009, China replaced its centrally controlled bidding pricing system with a wind feed-in tariff ranging from RMB 0.51/kWh to RMB 0.61/kWh in four wind energy resource zones, representing a significant premium to coal power.
Aggressive targets for renewable energy: The 2007 NDRC Plan sets forth a renewable energy consumption target, including energy generated by wind, of at least 15% of China’s energy supply by 2020. Further, the 2007 NDRC Plan sets forth an obligation for larger power-generating companies to have 8% of non-hydro renewable energy in the total power generation mix by 2020.
Priority dispatch and mandatory purchase: Grid operators must give priority to electricity generated from renewable energy projects in their grid areas and must provide grid-connection services and related technical support. The law also requires grid operators to purchase power from qualified wind farms and institute clear and transparent pricing policies for wind-produced electricity that are intended to provide wind farm operators with a more predictable rate of return.
Abolishment of the 70% local content requirement: The 70% local content requirement first introduced in 2004 when most wind turbines in China were imported was abolished in 2009. This has increased competitiveness and helped China become the world’s largest wind market.
According to the GWEC 2012 China Wind Outlook, in order to regulate the wind power industry towards stable and rapid development, the National Energy Administration issued a series of industry management standards and technical requirements intended to strengthen electrical production from wind power which is set forth below.
The "Interim Measures for the Management of Wind Power Development and Construction," strengthen and improve wind power construction management systems and mechanisms, reinforce management of all elements of wind power projects ranging from planning to project early stage tasks, development rights, project approval, engineering construction, completion and operation, regulate and guide nationwide wind power projects to progress on an orderly basis.
7

The "Notice on the Planning and Arrangement of the First Group of Tentatively Approved Wind Power Projects for the ' Twelfth Five-Year Plan' Period" in July 2011, which will be implemented from 2011 to 2015, contains a total scale of 26.83 million kW for tentatively approved wind power projects nationwide, including 12.75 million kW for state-approved projects and 14.08 million kW for locally approved projects. For the four provinces and regions of Hebei, Heilongjiang, Jilin and Inner Mongolia, the Notice had specifically has accelerated the study of regional wind power electricity planning and consumption, and called for the timely completion of outgoing electrical transmission projects, and mandates coordinated development of wind power and power grids.

The "Implementation Rules of the Interim Measures for the Management of Development and Construction of Offshore Wind Power", with regard to the "Interim Measures for the Management of Development and Construction of Offshore Wind Power" was issued in 2010 and provides for specifications and requirements for offshore wind farm planning, a prefeasibility study and feasibility study stages and clearly defines the duties of individual management departments. The Rules specify that offshore wind farms must, in principle, be deployed in sea areas that are no less than 10km from the coast and where the seawater depth is no less than 10m when the tidal flat width is over 10km and that such locations must be suitable for avoiding sea-use conflicts between different industries and reducing development enterprises' investment risks.
"Notice on Decentralized Access Wind Power Development" (Guo Neng Xin Neng #[2011] 226) of In July 2011, requires the energy department of each province (region, city) to investigate and study the wind energy resources required for decentralized wind power and to propose a preliminary plan for near-term decentralized wind power development.
The "Guidance on Development and Construction of Decentralized Access Wind Power Projects" (Guo Neng Xin Neng #[2011] 374) of November 2011, provides specifications for conditions, project site selection, early staget asks and approval, access system technical requirements and operation management, engineering construction and promoted decentralized access wind power projects.The "Interim Measures for the Management of Power Prediction and Forecast at Wind Farms" (Guo Neng Xin Neng #[2011] 177), was issued in June 2011 in order to strengthen and regulate wind farm operation management. The measures  propose that all wind farms must have wind power prediction and forecasting capabilities in line with the guidelines and outlined requirements for operation management, supervision, and examination of the wind farms.
The "Notice on Strengthening Wind Farm Safety Management" (Guo Neng Xin Neng #[2011] 373) was issued in November 2011 and proposed safety requirements and safety management in all elements of wind farm construction and manufacturing.
China Market for Bellows Expansion Joints and Pressure Vessels
The growing demand for energy has increased alongside China’s developing economy, created in part by fiscal stimulus policies to foster industrialization, infrastructure projects and manufacturing in China. According to the U.S. Department of Energy, the largest single environmental issue with steel production is the carburizing of coal into coke for use in iron production. As a result of concerns about pollution and energy recycling, especially in the electric utility, iron and steel industries, China is taking steps to implement more modern production processes designed to improve safety, reduce emissions and conserve energy. In addition, in 2010, China’s Ministry of Industry and Information Technology, or MIIT, announced a mandate for China’s steel industry to promote energy efficiency and emission reductions. In September 2012, the MIIT revised its 2010 regulations.3, 2014

 
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The NDRC has encouraged the iron and steel industries to utilize a widely adopted energy saving process used in the production of iron, called Coke Dry Quenching, or CDQ, to promote energy conservation, reduce pollution and expand steel industry production. The CDQ process cools coke in an enclosed heat exchange system, which reduces harmful emissions and wastewater runoff while reclaiming energy for hot water or electricity generation, versus the conventional process using water to drench the coke. In addition, China’s MIIT mandated a consolidation of the iron and steel industries in order to reduce the number of small, inefficient iron and steel mills that do not have the resources to adapt to the new policies encouraging efficiency and pollution reduction. Bellows expansion joints are key components in the CDQ process, a prevalent technology used by the steel industries in Japan, Taiwan, Germany, Brazil and Finland. The primary markets for CDQ high temperature bellows expansion joints are new iron and steel mills in the PRC domestic market, the modernization of existing mills and regular replacement of CDQ high temperature bellows expansion joints, which we estimate have useful life expectancies of approximately two years. Connecting bend pipes, another type of expansion joint, are used in piping systems to carry gas away from coke ovens used in iron and steel mills. Connecting bend pipes are safer than rigid expansion joints and are also easier to install and replace than rigid metal pipe expansion joints, thereby reducing the cost of maintaining systems, which need replacement approximately every two years. The primary market for connecting bend pipes are iron and steel mills in the process of being modernized and upgraded for safety.
China is also in the process of upgrading its electricity grid to ultra-high-voltage transmission systems, which allow for a more efficient transportation of electricity and a reduction in energy lost during transmission over long distances. The upgrading of the grid is tied directly to the growth in renewables, especially wind power, in order to deliver electricity more efficiently from distant generation locations to population load centers. Disk spring sleeve bellows expansion joints are used in ultra-high-voltage Gas Insulated Switchgear, or GIS, to reduce safety issues caused by conventional bellows used in GIS by better accommodating the unique gas pressure movements within the switchgear. GIS are key safety devices in these ultra-high-voltage transmission systems. GIS work as a circuit breaker to isolate electrical equipment and balance electrical loads. The primary market for disk spring sleeve bellows expansion joints is provincial and municipal power companies that are upgrading their transmission systems.
A pressure vessel is a container designed to hold liquid or gas at significantly higher or lower pressures than at normal sea level. Pressure vessels are used for many industrial manufacturing purposes, including as storage tanks, compressed gas receivers and separators, in the petrochemical, electrical, steel, aerospace and metallurgical industries. Pressure vessels must be carefully designed, manufactured and operated properly in order to avoid explosions. The engineering specifications for pressure vessels are heavily regulated and vary from country to country. Pressure vessels may be made of steel or carbon composite materials. Spherical pressure vessels require forged parts constructed from high quality steel and welded together using highly sophisticated welding techniques.
Products
Each of our product lines – wind towers, bellows expansion joints and pressure vessels – are highly engineered metal components purchased by major electrical utilities and large-scale industrial companies. The manufacturing process for each of our products consists principally of the rolling and welding of raw steel materials into finished components, and makes use of the same pool of production workers and engineering talent for design, fabrication, assembly and testing. Our products are characterized and marketed by their ability to withstand temperature, pressure, structural load and other environmental factors critical to their performance in the wind power, steel and coke production, petrochemical, high voltage electricity transmission and thermoelectric industries. Our sales force sells our products directly to our customers, which are responsible for installing and integrating our component products into their finished products. We perform all manufacturing at our facilities in Tieling, Liaoning Province, China.
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Wind Towers
We design and manufacture structural towers for wind turbines. A typical wind turbine installation consists of a tower; the nacelle, which houses the generator, gearbox and control systems; and the blade and rotor system. A freestanding, utility-scale wind tower is composed of rolled steel sections that we design and fabricate for sale to our customers, which, in turn, assemble and install the tower at wind farm sites.
Wind turbine installationSubsection of wind tower in production
We produce our wind towers in multiple subsections, which we then weld and bolt together into four main sections and the tower base for transport to the customer’s project site. After inspecting and treating the steel raw materials, we produce each tower subsection by rolling steel and then welding the rolled form together along its vertical axis to produce the final cylindrical piece. Each tower is manufactured to customer specifications and tolerances based on tower height, wind turbine size and unique installation site requirements. The height of the wind tower affects the ultimate yield of the turbine, as taller towers generally provide access to stronger winds and greater wind flow. This leads to greater power output and also helps to enable the use of higher-powered turbines. Increasing the height of the tower generally requires increasing its base diameter and wall thickness, thereby increasing the amount of raw material needed for production. We construct our towers using quality materials capable of enduring high-cycle fatigue stress, and they are designed to exceed the expected life of the wind turbine, typically 20 years.
We currently produce towers for 1.5 MW on-land wind turbines, with the expertise and manufacturing capacity to provide wind towers for 1, 3 MW and higher-powered on-land and off-shore wind turbines. The following table illustrates the general dimensions of wind towers for on-land and off-shore installations by turbine MW.
Wind Tower Sizes
On-land Wind TurbinesOff-shore Wind Turbines
Turbine Capacity1MW1.5MW3MW5MW3MW5MW
Tower Height68m72m75m75m75m75m
Tower Wall Thickness10-20mm14-32mm16-50mm16-60mm16-50mm16-60mm
Our manufacturing facilities are located in one of the top wind power production regions of China, thereby lowering transportation costs for delivery of our wind towers. We currently are the only wind tower manufacturer in Tieling, Liaoning Province. Our welding experience, Class III A2 grade pressure vessel manufacturing license and location provide us with competitive advantages when bidding on new wind tower contracts. Our wind tower customers include the wind power operating subsidiaries of two of the largest state-owned utilities – China Guodian Corporation and China Huaneng Group.
During the fiscal year ended December 31, 2013, We shipped 7 wind towers. The major customer of our wind tower products in 2013 is Huaneng Tongyu Xinhua Wind Power Co., Ltd. We plan to supply 33 more units of wind towers to Huaneng Tongyu Xinhua Wind Power Co., Ltd., and 22 more units to China Huaneng Group Panjin Co., Ltd. under existing contracts. As of December 31, 2013, we had a backlog of 2 orders for wind towers in the amount of RMB $9.54 million. As of December 31, 2013, we had altogether 33 orders for wind towers valued at RMB $51.97 million since 2011. We did not ship any wind towers in the fiscal year of 2012.
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Bellows Expansion Joints
We design and manufacture specialty bellows expansion joints, which are used to absorb the expansion, contraction and movement of piping system components resulting from extreme temperature changes, vibrations, high pressure and other mechanical forces common to large industrial production systems. The “bellows” is the flexible portion that permits movement in the expansion joint and is made of specialty steel or rubber. Bellows expansion joints absorb axial, lateral and angular motions, vibrations, thermal expansions and contractions.
Large industrial production piping systems are an integral part of the manufacturing process in iron and steel production, refining, heat recycling and ultra-high-voltage transmission systems. Expansion joints must be made of high quality materials and manufactured to withstand extreme pressure, changes in temperature and vibrations. Even high quality expansion joints must be replaced on a regular basis in order to properly maintain complex manufacturing systems. Historically, our customers have imported these products from Japan due to the precision manufacturing and engineering requirements of the products.
Our bellows expansion joints accounted for approximately 13.27% of our net sales for the year ended December 31, 2013, compared to 17% of our net sales for the year ended December 31, 2012.
Our key bellows expansion joint products include:
CDQ High Temperature Bellows Expansion Joints – expansion joints are used in coke dry quenching systems, a more environmentally friendly and efficient process for the production of coke being adopted by the iron and steel industries in China. We believe that we were the first manufacturer of CDQ high temperature bellows expansion joints in China when we first introduced this product in June 2009.
CDQ High Temperature Bellows Expansion Joint
Disk Spring Sleeve Bellows Expansion Joints – a key component in ultra-high-voltage electrical switching systems used by large electric utilities in China to upgrade and modernize the national electrical grid. Our products, first introduced in March 2009, reduce safety issues caused by conventional bellows used in Gas Insulated Switchgear by better accommodating the unique gas pressure movements within the switchgear.
Disk Spring Sleeve Bellows Expansion Joints
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Connecting Bend Pipes – unique flexible expansion joints that reduce flammable gas leaks from coal ovens used to make coke in iron and steel mills. We are one of the few manufacturers of connecting bend pipes for the steel and coke industries in China, having first introduced our product in March 2009.
Connecting Bend Pipes
Pressure Vessels
We design and manufacture highly engineered pressure vessels used within heat exchangers and industrial reactors by the petrochemical, electrical, steel, aerospace and metallurgical industries. Our pressure vessels are also used as storage tanks and separators in manufacturing and electrical production processes. We manufacture pressure vessels to customer specifications from carbon or stainless steel to withstand high temperatures, high pressures and resist corrosion. Our pressure vessels are subject to stringent testing standards and are put through a battery of examinations using radiological (x-ray), ultrasonic, pneumatic and hydraulic testing to ensure quality control. We have received the necessary licensing from the State General Administration of the PRC for Quality Supervision and Inspection and Quarantine to manufacture pressure vessels of Class III A2 grade – the highest rating in China. Management estimates that our pressure vessels have an average life expectancy of 10 years. We first introduced our pressure vessels in February 2009.
Pressure vessels accounted for 52.06% of our net sales for the year ended December 31, 2013, compared to 74% of our net sales for the year ended December 31, 2012.
Pressure Vessel
Sales and Marketing
As of December 31, 2013, we employed 15 sales professionals who sell and market our products directly to customers. We currently sell exclusively to large-scale utilities and industrial companies and have developed an extensive network of relationships with the utilities that are the principal developers of wind farms, large-scale steel mills and state electric grid operators within China. Our wind towers are sold primarily into wind farms being developed within 500 miles of our Tieling manufacturing facilities, leveraging our regional strength as the only wind tower manufacturer in Tieling, Liaoning Province and our transportation cost advantage.
Utilities award contracts for wind towers on a competitive basis. As a precursor to bidding, suppliers like us generally must have an existing relationship with the utility and a license to manufacture Class III A2 grade pressure vessels, which is often a specific requirement to bid on wind tower contracts. We generally become aware of upcoming projects by region as disclosed in annual NDRC wind development plans and through our customer relationships. Utilities disclose specific requests for proposals publicly via the Internet when they are prepared to accept bids. Requests for proposals are typically disclosed in the first, second and fourth calendar quarters for product delivery in the subsequent third, fourth and second calendar quarters.
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A substantial deposit based upon contract amount, typically around $125,000, is required for each bid on a wind tower contract, and is returned to the bidder approximately three months after bid submission. This process is designed to ensure that only companies with sufficient manufacturing capacity and capitalization bid on projects. It is our experience that typically three to six companies bid per contract. Contract price per tower varies based on customer specifications, location requirements of the wind farm and turbine MW.
Production
We conduct all manufacturing in our facilities in the city of Tieling, Liaoning Province, China. We base our production schedule on customer orders and schedule deliveries on a just-in-time basis. We use advanced manufacturing equipment in our production process. We received ISO 9001:2008 Quality Management System certification in October 2009, which certification recognizes our adherence to formalized business processes and implementation of a quality management system that demonstrates our ability to consistently produce products meeting customer and applicable statutory and regulatory requirements. We currently operate two production facilities with 17,246 square meters of combined production space.
Product Safety and Quality Control
We have implemented multiple, comprehensive quality control procedures throughout our manufacturing and assembly process that are designed to ensure product quality and safety beginning from the receipt of raw materials to the final product inspection prior to shipment. Our manufacturing protocols establish stringent requirements and specifications that our products must meet before they are allowed to move into the next phase of the manufacturing process, ensuring that each individual piece of work in progress meets strict technical standards. Our pressure vessel manufacturing received PRC government certification. We perform non-destructive tests on our products for defect detection using our in-house radiological (x-ray) and ultrasonic testing. We use specialized pneumatic and hydraulic tests on pressure vessels and bellows expansion joints for conformance with specifications, and gas leakage tests on GIS bellows expansion joints. For some of our products, such as wind towers, production and testing is monitored throughout the production process by both customer and government on-site inspectors in addition to our own quality assurance supervisors. Our quality control procedures also include quality assurance of raw materials used in the production of our products, which includes an evaluation and selection of established and reputable suppliers.
We offer a warranty to our customers on all products for up to 24 months, depending on the terms negotiated with each customer, following the date of customer acceptance. During the warranty period, we will repair or replace defective products free of charge.
Suppliers and Raw Materials
Our major raw material purchases include stainless steel, carbon steel and component parts, including disk springs and flanges. We operate a multiple-sourcing strategy, sourcing our raw materials through various suppliers located throughout China. We do not engage in hedging transactions to protect against raw material price fluctuations; instead, we attempt to mitigate the short-term risk of price swings on raw materials by obtaining pricing commitments from suppliers in advance for inclusion in our bids for large sales contracts. This process helps to fix our raw material costs at the time of bidding, thereby locking in our margins on large sales of wind towers and other fabricated metal specialty components. We have been able to source our steel purchases directly from steel producers instead of through steel distributors, further reducing our costs. We typically place component orders after we have received firm orders for our products and have received prepayments in order to minimize our inventory.
We do not generally have long-term supply agreements with any of our raw materials suppliers. We believe we will be able to obtain an adequate supply of steel and other raw materials to meet our manufacturing requirements, and we maintain a good business relationship with all of our suppliers. Our principal suppliers are Shengbang Gongmao Industrial Trading Co., Ltd., Shengyang Haosen Trading Co., Ltd., Dongfang Kunlun Stainless Steel Co., Ltd.and Fushan Jiaye Machinery Manufacturing Co., Ltd.
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Customers
Our customers include major electrical utilities and large-scale industrial companies in China specializing in heavy industry, such as the wind power, steel and coke production, petrochemical, high voltage electricity transmission and thermoelectric industries.
The majority of our business for fabricated metal specialty components is by customer purchase order made in the ordinary course of business. Installation of our component products is the responsibility of the customer. We provide a standard warranty to our customers on our products to repair or replace defective components for up to 24 months from customer acceptance depending upon the terms negotiated with each customer. Our major customer of our wind tower products in 2013 is Huaneng Tongyu Xinhua Wind Power Co., Ltd. accounting for 18% of our net sales. Our largest customer for pressure vessels in 2013, Datangh International Fuxin Coal Gas Industry Co., Ltd., accounted for approximately 36% of our net sales for the year ended December 31, 2013. And our largest customer for bellows expansion joints in 2013, ACRE Coking & Refractirt Engineering Corporation, MCC accounted for approximately 5.08% of our net sales for the year ended December 31, 2013. Xinzhong Heavy Industrial Equipment Co., Ltd accounted 18% of our net sales for the year ended December 31, 2013.
The majority of our business is affected by seasonality. We sell products that are installed outdoors. Consequently, demand for these fabricated metal specialty components can be affected by weather conditions. We typically experience stronger third and fourth calendar quarters and weaker first and second calendar quarters due to seasonal fluctuations in sales volumes. Our wind tower customers typically place requests for proposals in the fourth and first calendar quarters because of their internal operational schedules and annual budget requirements. In order to satisfy delivery schedules, we manufacture most of our wind tower products during the second and third calendar quarters for delivery in the second, third and fourth calendar quarters when weather conditions in the northern provinces of China, where our customers’ wind farms are located, are more favorable for installation by the customer.
Intellectual Property
We and our subsidiaries rely on the patent and trade secret protection laws in China, along with confidentiality procedures and contractual provisions, to protect our intellectual property and maintain our competitive position in the marketplace. We have two design patents in China for a connecting bend pipe, which expires in August 2015, and an enclosed compensator, which expires in March 2020. We have two utility patents in China related to our disk spring sleeve bellows expansion joint, which expires in March 2020, and our CDQ high temperature bellows expansion joint, which expires in May 2020. We intend to apply for more patents in China to protect our core technologies. We have been granted an exclusive license to use a production method patent for lead-free soft solder with mischmetal from the Shenyang Industry University until December 31, 2016. Under the terms of the license, we will pay Shenyang Industry University royalties based on our sales associated with our use of the patent of no more than RMB 100,000 ($15,200) each quarter.
Research and Development
We spent $179,745 on research and development in 2013, and $387,486 in 2012. We continue to evaluate opportunities to develop new products and will increase expenditures for research and development accordingly. We may increase future investments in research and development based on our growth and available capital.

Governmental and Environmental Regulation
Our Creative Bellows and Creative Wind Power subsidiaries and manufacturing facilities are located in Liaoning, Tieling Province, China, and subject to the national and local laws of the PRC. Any company that conducts business in the PRC must have a business license that covers a particular type of work. The business licenses of our PRC subsidiaries cover their present business activities. Prior to expanding our PRC subsidiaries’ business beyond that of their business license, we are required to apply and receive approval from the PRC government. Our business and company registrations for Creative Bellows and Creative Wind Power are in compliance in all material respects with the laws and regulations of the municipal and provincial authorities of Liaoning Province and China.
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The manufacturing of pressure vessels requires a special license issued by the State General Administration of the PRC for Quality Supervision and Inspection and Quarantine. We received a license to manufacture pressure vessels of Class III A2 grade on January 8, 2009, which expires on January 7, 2013. We then successfully applied for a renewal of this manufacturing license. The license is effective from July 2013 to July 2017.
Our nondestructive radiological testing of products includes the use of x-rays for defect detection. In December 2008, the Department Of Environmental Protection Of Liaoning Province determined that the design and construction of our radiological (x-ray) defect detection room was in compliance with PRC Ministry of Health standards for radiological protection standards for industrial x-rays.
Environmental Regulations
We are subject to the national environmental regulations of the PRC as well as local laws regarding pollutant discharge, air, water and noise pollution, including the Environmental Protection Law of the PRC, the Environmental Impact Appraisal Law of the PRC, the Law of the PRC on the Prevention and Control of Water Pollution, the Law of the PRC on Prevention and Control of Environmental Pollution Caused by Solid Waste, the Law of the PRC on Prevention and Control of Air Pollution and the Law of the PRC on Prevention and Control of Environmental Noise Pollution. The Environmental Protection Law of the PRC sets out the legal framework for environmental protection in the PRC. The Ministry of Environmental Protection of the PRC, or the MEP, is primarily responsible for the supervision and administration of environmental protection work nationwide and formulating national waste discharge limits and standards. Local environmental protection authorities at the county level and above are responsible for environmental protection in their jurisdictions. Companies that discharge contaminants must report and register with the MEP or the relevant local environmental protection authorities. Companies discharging contaminants in excess of the discharge limits prescribed by the central or local authorities must pay discharge fees for the excess in accordance with applicable regulations and are also responsible for the treatment of the excessive discharge. Companies that directly or indirectly discharge industrial wastewater into the water or are required by law to obtain the pollutant discharge permit before discharging wastewater or sewage shall also obtain the pollutant discharge permit.
Labor Protection Regulations
The Labor Contract Law of the PRC, effective on January 1, 2008, governs the establishment of employment relationships between employers and employees, and the conclusion, performance, termination of, and the amendment to employment contracts. To establish an employment relationship, a written employment contract must be signed by the employer and employee. In the event that no written employment contract was signed at the time of establishment of an employment relationship, a written employment contract must be signed within one month after the date on which the employer first engaged the employee. We believe that we are in material compliance with such requirement.
On June 29, 2002, the Work Safety Law of the PRC was adopted by the Standing Committee of the 9th National People’s Congress and came into effect on November 1, 2002, as amended on August 27, 2009. The Work Safety Law provides general work safety requirements for entities engaging in manufacturing and business activities within the PRC. We believe we are in material compliance with all applicable laws and regulations related to work safety.
Foreign Currency Regulations
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations promulgated by the State Council, as amended on August 5, 2008, or the Foreign Exchange Regulations. Under the Foreign Exchange Regulations, RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made.
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On October 21, 2005, the SAFE issued Circular 75, which became effective as of November 1, 2005. SAFE further promulgated Circular on issuing the operational rules concerning foreign exchange administration of company financing and round tripping investments via overseas special purpose companies by residents in china [Huifa (2011) No. 19] (“Circular 19”)] on May 17 2011. Circular 19 further clarifies issues in Circular 75 and simplifies the operational procedures for Circular 75. Circular 19 took effect on July 1, 2011. Please refer to “Risk Factors – Risks Related to Business in China – PRC regulations relating to the registration requirements for PRC resident shareholders owning shares in off-shore companies as well as registration requirements of employee stock ownership plans or share option plans may subject our PRC resident shareholders to personal liability and limit our ability to acquire companies in China or to inject capital into our operating subsidiaries in China, limit our subsidiaries’ ability to distribute profits to us or otherwise materially and adversely affect our business” for a discussion of Circular 75.
On August 29, 2008, the SAFE promulgated Circular 142 regulating the conversion by a foreign-invested company of foreign currency into RMB by restricting how the converted RMB may be used. Please refer to “Risk Factors – Risks Related to Business in China – Restrictions on currency exchange may limit our ability to receive and use our revenues effectively” for a discussion of Circular 142.
Dividend Distribution
Our ability to pay dividends may be affected by the complex currency and capital transfer regulations in China that restrict the payment of dividends to us by our subsidiaries in China. PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. We also are required to set aside at least 10% of our net income after taxes based on China’s accounting standards each year to statutory surplus reserves until the cumulative amount of such reserves reaches 50% of registered capital. These reserves are not distributable as cash dividends. Our subsidiaries also may allocate a portion of their after-tax profits to their staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. If our subsidiaries incur debt, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.
Taxation
Under the EIT Law and its implementing rules, which became effective on January 1, 2008, foreign-invested enterprises and PRC domestic companies are subject to a uniform tax rate of 25%.
Competition
Our products compete presently only in the PRC domestic market. The general manufacturing industry for fabricated metal components in China is fragmented and diverse, has low barriers to entry and is highly competitive. We compete with PRC domestic private companies, state-owned companies and international manufacturers. Many of our competitors are more established and have substantially greater manufacturing, marketing and financial resources than we do, including state backing for some companies.
Management believes that our welding quality, manufacturing experience and plant capacity for the production of large tower sections are key considerations in the awarding of contracts for wind tower components in China. Our principal competitors in the wind tower market are Engineering Company Ltd. (a subsidiary of the China Gezhouba Water & Power Group), Gansu Keyan Electricity Co., Ltd. and Qingdao Tianneng Electricity Engineering Machinery Co., Ltd. We sell wind towers directly to state-owned utilities and collaborate with wind turbine manufacturers to supply components for wind power project installations; we do not compete with wind turbine manufacturers.
Our principal competitor for high temperature bellows expansion joints for CDQ systems and connecting bend pipes in coking systems is NanJing ChenGuang. Our principal competitors in the disk spring sleeve bellows expansion joint market are Shanghai Huqiang Bellows Manufacture Co., Ltd., Shenyang Instrument Science Institution and Shenyang Aerosun-Futai Expansion Joint Co., Ltd. Our principal competitors in the pressure vessel market are Fushun Petroleum Machinery Factory, Lanzhou Petroleum Equipment Factory.
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Seasonality
The majority of our business is affected by seasonality. We sell products that are installed outdoors. Consequently, demand for these fabricated metal specialty components can be affected by weather conditions. We typically experience stronger third and fourth calendar quarters and weaker first and second calendar quarters due to seasonal fluctuations in sales volumes. Our wind tower customers typically place requests for proposals in the fourth and first calendar quarters because of their internal operational schedules and annual budget requirements. In order to satisfy delivery schedules, we manufacture most of our wind tower products during the second and third calendar quarters for delivery in the second, third and fourth calendar quarters when weather conditions in the northern provinces of China, where our customers’ wind farms are located, are more favorable for installation by the customer.
Employees
As of December 31, 2013, we had 75 full time employees, and 60 part time or seasonal employees all of whom are in China. We believe that relations with our employees are satisfactory. We enter into standard labor contracts with our employees as required by the PRC government and adhere to state and provincial employment regulations. We provide our employees with all social insurance as required by state and provincial regulations, including pension, unemployment, basic medical and workplace injury insurance. We have no collective bargaining agreements with our employees.
Item 1A. Risk Factors

Our business and an investment in our securities are subject to a variety of risks. The following risk factors describe the most significant events, facts or circumstances that could have a material adverse effect upon our business, financial condition, results of operations, ability to implement our business plan and the market price for our securities. Many of these events are outside of our control. If any of these risks actually occurs, our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment.

Risks Related to Our Business

Our ability to develop our wind tower business is dependent upon our ability to raise funds in the U.S. capital market which we cannot provide any assurances can be accomplished given our history, the current regulatory environment and market sentiment toward U.S. public holding companies with Chinese operating subsidiaries.

During the fiscal year ended December 31, 2012, we were unable successfully bid on wind tower projects due to our inability to make the deposits required to bid on contracts. We failed to raise sufficient capital in 2011 and 2012 due to the decision by NASDAQ Listing Qualifications to delist the Company’s common stock in 2011. However, on July 11, 2013, the Securities Exchange Commission (“SEC”) reversed the 2011 delisting of the Company’s stock on the NASDAQ Stock Market, LLC.   As of the filing date of  this 10-K, the Company is attempting to meet the NASDAQ listing standards in order to gain meaningful access to the U.S. capital markets to fund future wind tower manufacturing.  While management remains optimistic that with additional funding from the U.S. capital markets, the wind tower business may expand, we can provide no assurances that we will be able to qualify or remain listed on NASDAQ or to attract sufficient capital to develop our wind tower business.
We Are Not Currently Profitable And May Not Become Profitable .

We incurred a net loss of $16.43 million for the year ended December 31, 2013. In addition, we had loans of $2.26 million and promissory notes of $10 million and $50,000 that are past due. Through a new Line of Credit Agreement entered with the same lender on August 17, 2013, the default promissory note of $10 million became payable upon Note-holder’s request (See Note 14).  As of December 31, 2013, we had an outstanding balance of $645,348 including accrued interest under this credit line and $442,827 under short term payable currently in default. The Company has been unable to raise funds from the U.S. markets to pay off these obligations. These conditions raise a substantial doubt as to whether the Company may continue as a going concern. The Company is seeking to obtain additional financing from local banks in the PRC.  The Company will also seek to improve its cash flows from operations by implementing cost control measures and reducing inventory purchases.
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Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations, and our limited revenues may affect our future profitability.

We and our subsidiaries began operations for the production of fabricated metal specialty components in September 2007 and introduced our bellows expansion joints products and pressure vessels in the first quarter of 2009 and our wind tower products in the first quarter of 2010. Our limited history of designing and manufacturing these fabricated metal specialty components may not provide a meaningful basis on which to evaluate our business. Moreover, we have limited revenues and we cannot assure you we will be able to expand our business and gross revenue with sufficient speed to return to profitability. We will continue to encounter risks and difficulties frequently experienced by companies at an early stage of development, including our potential failure to:
·expand our product offerings and maintain the high quality of our products;

·manage our expanding operations, including the integration of any future acquisitions;

·obtain sufficient working capital to support our expansion and to fill customers’ orders in time;

·maintain adequate control of our expenses;

·maintain our proprietary technology;

·implement our product development, marketing, sales, and acquisition strategies and adapt and modify them as needed; and

·anticipate and adapt to changing conditions in the wind power, steel, petrochemical and thermoelectric industries as well as the impact of any changes in government regulation, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.
Our inability to manage successfully any or all of these risks may materially and adversely affect our business.

Our plans for growth rely on an increasing emphasis on the wind power industry; this sector faces many challenges, which may limit our potential for growth in this new market.

Our principal plan for growth is to manufacture wind towers for the PRC domestic wind power industry. The wind tower products were 24% of sales for the year ended December 31, 2013. Our success depends on receiving a majority of our future revenues and earnings from sales of wind towers for the wind power industry in China.
The wind power industry sector in China faces many challenges as it expands, including a reliance on continued PRC government environmental and energy conservation policies and incentive programs, which are one of the industry’s major growth drivers. Wind power currently accounts for a small percentage of the power generated in China, and the existing power grid and transmission system lags behind existing and planned wind power plant construction. Furthermore, the wind power industry is generally not competitive without government incentive programs and initiatives because of the relatively high generation costs for wind power compared to most other energy sources. The current government incentive programs and initiatives include a feed-in tariff paid to wind power producers by grid utility companies, a mandatory obligation for grid utility companies to purchase all the electricity generated by renewable energy projects within its grid coverage, preferential tax treatment and government spending and grants for renewable energy programs. Most of our customers are highly dependent on these government incentives, initiatives and other favorable policies to support their operations. There can be no assurance that PRC government support of the wind power industry will continue at its current level or at all, and any decrease or elimination of government incentives currently available to industry participants may result in increased operating costs incurred by our current customers or discourage our potential customers from purchasing our products.

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Our ability to market to this industry segment is dependent upon both an increased acceptance of wind power as an energy source in China and the industry’s acceptance of our products. We cannot assure you that we will be able to develop this business successfully, however, and our failure to develop the business further will have a material adverse effect on our overall financial condition and the results of our operations. Additionally, any uncertainties or adverse changes in government incentives, initiatives or policies relating to the wind power industry will materially and adversely affect the investment plans of our customers and consequently our growth.
Contracts for wind power projects in China are awarded through competitive public bids and there is no assurance that we will be asked to bid on new projects or that we will win these bids.

Utilities in China award contracts for wind towers on a competitive basis. We generally become aware of upcoming projects by region as disclosed in annual NDRC wind development plans and through our customer relationships. Utilities disclose specific requests for proposals publicly via the Internet when they are prepared to accept bids. As a precursor to bidding, suppliers like us generally must have an existing relationship with the utility, which is often a specific requirement to bid on wind tower contracts. A substantial deposit based upon contract amount, typically around $125,000, is required for each bid, and is returned to the bidder approximately three months following bid submission. This process is designed to ensure that only companies with sufficient manufacturing capacity and capitalization bid on projects. It is our experience that typically three to six companies bid per contract. Competitive factors on wind tower bids include price, geographical proximity of the manufacturer to the wind power project, prior purchaser experience with the manufacturer and manufacturer reputation for quality and on-time delivery.

We may not be successful in future bids and may fail to obtain new projects as a result. We believe we remain competitive in our pricing and delivery schedules for wind towers, but we cannot assure you our competitors will not underbid us. If we are unable to maintain good relationships with the utilities, we may not be allowed to participate in the bidding process on new projects. Furthermore, we must maintain sufficient capital for the deposits made in connection with our bids, which may limit our ability to use our working capital. To the extent we are unsuccessful in our bids to provide wind towers to new wind power projects, our future growth may be materially and adversely affected.

We derive a substantial part of our revenues from several significant customers. If we lose any of these customers or they reduce the amount of business they do with us, our revenues may be adversely affected.
We generate significant revenues from a limited number of customers. Our four largest customers accounted for approximately 85.26% of net sales for the year ended December 31, 2013. These customers may not maintain the same volume of business with us in the future. If we lose any of these customers or they reduce the amount of business they do with us, our revenues and profitability may be adversely affected. We do not foresee relying on these same customers for revenue generation as we introduce new product lines and new generations of existing product lines because we expect our customers to change with each large-scale project. We cannot assure you, however, that we will be able to introduce successfully new products for large-scale projects in the future.
Additionally, many customers of our bellows expansion joints and pressure vessels purchase these products as part of their capital budget. As a result, we are dependent upon receiving orders for these products from companies that are either expanding their business, commencing a new business, upgrading their capital equipment or otherwise require capital equipment. Our business for our bellows expansion joint and pressure vessel products is therefore dependent upon both the economic health of our customers’ industries and our ability to offer products that meet regulatory requirements, including environmental requirements, of such industries and are cost justifiable, based on potential regulatory compliance and cost savings in using our equipment in contrast to existing equipment or equipment offered by others. Any economic slowdown can affect all purchasers and manufacturers of capital equipment, and we cannot assure you that our business will not be significantly impaired as a result.
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If we lose our key personnel, or are unable to attract and retain additional qualified personnel, the quality of our services may decline and our business may be adversely affected.

We rely heavily on the expertise, experience and continued service of our senior management, including our Chief Executive Officer, Bei Lv. Loss of her services could adversely affect our ability to achieve our business objectives. Ms. Lv is a key factor in our success at establishing relationships with the major utility and industrial companies using our products because of her industry experience and reputation. The continued development of our business depends upon the continued employment of Ms. Lv. We currently do not have an employment agreement with Ms. Lv, and her standard labor contract does not include provisions for non-competition or confidentiality. Ms. Lv, who owns approximately 37.5% of our outstanding common stock as of December 31, 2012, has entered into a lockup agreement with us prohibiting her sale to the general public of all shares of our common stock held currently or acquired in the future until December 15, 2013, except in the event of a change of control or sale of our company.

We believe our future success will depend upon our ability to retain key employees and our ability to attract and retain other skilled personnel. The rapid growth of the economy in China has caused intense competition for qualified personnel. We cannot guarantee that any employee will remain employed by us for any period of time or that we will be able to attract, train or retain qualified personnel in the future. Such loss of personnel could have a material adverse effect on our business and company. Furthermore, we need to employ additional personnel to expand our business. Qualified employees are in great demand and may be unavailable in the time frame required to satisfy our customers’ requirements. There is no assurance we will be able to attract and retain sufficient numbers of highly skilled employees in the future. The loss of personnel or our inability to hire or retain sufficient personnel at competitive rates could impair the growth of our business.

We may not be able to keep pace with competition in our industry.

Our business is subject to risks associated with competition from new or existing industry participants who may have more resources and better access to capital. Many of our competitors and potential competitors may have substantially greater financial and government support, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships in the industry than we do. Among other things, these industry participants compete with us based upon price, quality, location and available capacity. We cannot be sure we will have the resources or expertise to compete successfully in the future. Some of our competitors may also be able to provide customers with additional benefits at lower overall costs to increase market share. We cannot be sure that we will be able to match cost reductions by our competitors or that we will be able to succeed in the face of current or future competition. In addition, some of our customers are also performing more manufacturing services themselves. We may face competition from our customers as they seek to become more vertically integrated.

We currently are the only wind tower manufacturer in Tieling, Liaoning Province. Our competitive advantage in the region based on location would be harmed if a competitor established wind tower manufacturing facilities in or around Tieling.

We will face different market dynamics and competition as we develop new products to expand our target markets. In some markets, our future competitors would have greater brand recognition and broader distribution than we currently enjoy. We may not be as successful as our competitors in generating revenues in those markets due to the lack of recognition of our brand, lack of customer acceptance, lack of product quality history and other factors. As a result, any new expansion efforts could be more costly and less profitable than our efforts in our existing markets.

If we are not as successful as our competitors are in our target markets, our sales could decline, our margins could be impacted negatively and we could lose market share, any of which could materially harm our business.

Our products may contain defects, which could adversely affect our reputation and cause us to incur significant costs.

Despite testing by us, defects may be found in existing or new products. Any such defects could cause us to incur significant return, exchange and re-engineering costs, divert the attention of our engineering personnel from product development efforts, and cause significant customer relations and business reputation problems. Any such defects could force us to undertake a product recall program, which could cause us to incur significant expenses and could harm our reputation and that of our products. If we deliver defective products, our credibility and the market acceptance and sales of our products could be harmed.

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

Material failure of any of our wind towers, bellows expansion joints or pressure vessels would have a material adverse effect on our business. 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 perform testing on our products prior to delivery, we cannot be certain our products will be free from defects. Our wind towers are designed to exceed the entire expected life of their wind turbine installation, typically 20 years, but we cannot assure you of the operational life of our wind towers or their medium to long-term performance and operational reliability.

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. While we have not yet experienced any product liability claims against us, as a result of our limited operating history, we cannot predict whether product liability claims will be brought against us in the future or the impact of any resulting negative publicity on our business. The successful assertion of product liability claims against us could result in potentially significant monetary damages and require us to make significant payments.

We do not accrue any warranty reserve on our bellows expansion joints or pressure vessels products. Moreover, we have no historical basis on which to establish a reserve because of our limited operating history and lack of warranty expense since we began production.
We offer a warranty on our products to each of our customers to repair or replace any defective product during the warranty term, which is a negotiated term of up to 12 months from the customer acceptance date, but currently we record no reserve for warranty claims on our bellows expansion joints or pressure vessels products, only for our wind tower products. Warranty expense accrual is a company estimate of future warranty claims based primarily on testing and quality control procedures with consideration also given to the history of prior warranty claims and our abbreviated operating history. We maintain a warranty reserve of 0.5% of net sales of our wind tower products. Although we have not and do not currently intend to accrue warranty expense for our bellows expansion joints and pressure vessels products, if we incur warranty claims in the future, we would be required to make a reserve for warranty expense.

Certain raw materials used to manufacture our products make up a significant portion of the cost of those products, and price changes for these commodities may adversely affect our profitability.

Our largest raw material purchases consist of stainless steel and carbon steel. As such, fluctuations in the price of steel in the PRC domestic market will have an impact on our operating costs and related profits. International and PRC domestic steel prices have steadily increased since 2009 along with the general economic recovery in China. The iron ore import price in China has also steadily increased since 2009, which will impact the price and volume of steel produced by the PRC domestic steel industry.

Our profitability depends in part upon the margin between the cost to us of raw materials and our fabrication costs associated with converting such raw materials into assembled products, as compared to the selling price of our products. We do not engage in hedging transactions to protect against raw material price fluctuations. It is our intention to base the selling prices of our products in part upon the associated raw material costs to us. However, we may not be able to pass through to our customers all increases in raw material costs and ancillary acquisition costs associated with taking possession of the raw materials. Although we are currently able to obtain adequate supplies of raw materials, it is impossible to predict future availability or pricing. Our inability to offset price increases of raw materials with sufficient product price increases, or our inability to obtain raw materials, would have a material adverse effect on our consolidated financial condition, results of operations and cash flows.

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Our business is seasonal and will become more seasonal as the wind power industry becomes a larger part of our business.

Our business is subject to seasonal fluctuations in sales volumes because we sell products that are installed outdoors and, consequently, weather conditions may affect demand for our products. Sales of our wind towers to the wind power industry in the northern provinces of China are affected by seasonal variations in both weather and customer operations. Customers generally request delivery during the second, third and fourth calendar quarters when the weather conditions in the northern provinces of China, where our manufacturing facilities and our customers’ wind farms are located, are more favorable for the installation of wind towers by the customer. Utilities typically place requests for proposals for new wind tower contracts in the fourth and first calendar quarters according to their internal operational schedules and annual budget requirements. In order to satisfy delivery schedules under these contracts, we manufacture most of our wind towers during the second and third calendar quarters for delivery in the second, third and fourth calendar quarters. As we expect the majority of our future revenues and earnings will be from the sale of wind towers to the wind power industry in China, our business will become more affected by the industry’s seasonal variations.

We shall need additional capital to execute our business plan and fund operations and may not be able to obtain such capital on acceptable terms or at all.

In order to expand and continue to develop our business, we expect to incur significant capital and operational expenses. However, if available funds are not sufficient to meet our plans for expansion, current operating expenses and loan obligations as they come due, our plans include considering pursuing alternative financing arrangements. Our ability to obtain additional capital on acceptable terms, or at all, is subject to a variety of uncertainties, including:
·investors’ perceptions of, and demand for, companies in our industry;

·investors’ perceptions of, and demand for, companies operating in China;

·conditions in the United States and other capital markets in which we may seek to raise funds;

·our future results of operations, financial condition and cash flows;

·governmental regulation of foreign investment in companies in particular countries;

·economic, political and other conditions in the United States, China and other countries; and

·governmental policies relating to foreign currency borrowings.
We may be required to pursue sources of additional capital through various means, including joint venture projects and debt or equity financings. There is no assurance we will be successful in locating a suitable financing transaction in a timely fashion or at all. In addition, there is no assurance we will obtain the capital we require by any other means. Future financings through equity investments are likely to be dilutive to our existing shareholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences or superior voting rights, be combined with the issuance of warrants or other derivative securities, or be the issuances of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Furthermore, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.

If we cannot raise additional funds on favorable terms or at all, we may not be able to carry out all or part of our strategy to grow and to fund our operations. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may be required to reduce or cease operations.
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Our accounts receivable remain outstanding for a significant period of time, which has a negative impact on our cash flow and liquidity.

Our agreements with customers of our wind towers generally provide that 10% of the purchase price is due upon our deposit of restricted cash into a bank account as a contract guarantee, 20% upon our purchase of raw material for the order, 10% upon delivery of the base ring component of the wind towers, 30% upon delivery of the wind tower tube sections and 20% upon customer inspection and acceptance of the product. We account for payments received from customers prior to customer acceptance of the product as unearned revenue. Customer acceptance occurs after the customer puts the product through a quality inspection, which our customers normally complete within one to two weeks from their receipt of the product. As a common practice in the manufacturing business in China, payment of the final 10% of the purchase price is due no later than the termination date of our warranty period, which is a negotiated term of up to 12 months from the customer acceptance date. Payment terms for our bellows expansion joints and pressure vessels are negotiated on a case-by-case basis and these payment percentages and terms may differ for each customer. We may experience payment delays from time to time of up to six months from the due date, as payment delays are very common in the manufacturing industry in China. Any customer delays in payment may have a negative impact on our cash flow and liquidity.

We are required to maintain various licenses and permits related to our business, and the loss of or failure to renew any or all of these licenses and permits may require the temporary or permanent suspension of some or all of our operations.

In accordance with the laws and regulations of the PRC, we are required to maintain various licenses and permits in order to operate our manufacturing business. We must maintain a business license, organization code certificate and a Certificate of Approval for the Establishment for Enterprises with Foreign Investment in the PRC for each of our PRC operating subsidiaries, Creative Bellows and Creative Wind Power. The business license permits us to operate our manufacturing business and to sell our products in China. Our operating subsidiaries in China each maintain a current business license, organization code and Certificate of Approval for Establishment for Enterprises with Foreign Investment. Furthermore, we are required to acquire a manufacturing license for specialized equipment from the State General Administration of the PRC for Quality Supervision and Inspection and Quarantine in order to manufacture pressure vessels of the Class III A2 grade. Many utilities and large-scale industrial companies in China require manufacturers like us to have this Class III A2 grade pressure vessel manufacturing license before allowing for the submission of bids on contracts for fabricated metal specialty components such as wind towers. Our radiological testing of products includes the use of x-rays for defect detection and we are required to maintain our defect detection room in compliance with PRC Ministry of Health standards for radiological protection standards for industrial x-rays. Failure to maintain these standards, or the loss of or failure to renew such licenses and production permits, could result in the temporary or permanent suspension of some or all of our manufacturing or distribution operations and could adversely affect our revenues and profitability.
We may experience material disruptions to our manufacturing operations.

While we seek to operate our facilities in compliance with applicable rules and regulations and take measures to minimize the risks of disruption at our facilities, a material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales and negatively impact our financial results. Any of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including: prolonged power failures; equipment failures; disruptions in the transportation infrastructure including roads, bridges, railroad tracks; and fires, floods, earthquakes, acts of war, or other catastrophes.
We cannot be certain that we will be successful in developing and marketing new products and improving our existing products.

We believe our past performance has been based on, and our future success will depend, in part, upon our ability to continue to improve our existing products through product innovation and to develop, market and produce new products. We cannot assure you that we will be successful in introducing, marketing and producing any new products or product innovations, or that we will develop and introduce in a timely manner innovations in our existing products that satisfy customer needs or achieve market acceptance. Our failure to develop new products and introduce them successfully and in a timely manner could harm our ability to grow our business and could have a material adverse effect on our business, results of operations and financial condition.
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The technology used in our products may not satisfy the changing needs of our customers.

We believe that 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. We cannot assure you we will be able to keep pace with technological developments and market demands in our target industries and markets. Although certain technologies in the industries we occupy are well established, with any technology, including the technology of our current and proposed products, there are risks that the technology may not address successfully all of our customers’ needs. Moreover, our customers’ needs may change or vary. This may affect the ability of our present or proposed products to address all of our customers’ ultimate technology needs in an economically feasible manner, which could have a material adverse effect on our business.

We face risks associated with managing operations in China.

All of our operations are conducted in China. There are a number of risks inherent in doing business in China, including the following:
·unfavorable political or economical factors;

·fluctuations in foreign currency exchange rates;

·potentially adverse tax consequences;

·unexpected legal or regulatory changes;

·lack of sufficient protection for intellectual property rights;

·difficulties in recruiting and retaining personnel, and managing international operations; and

·less developed infrastructure.
Our inability to manage successfully these risks could adversely affect our business. Furthermore, we can provide no assurances that any new market expansion will be successful because of the risks associated with conducting such operations, including the risks listed above.

We may not be able to obtain regulatory approvals for our products.

The PRC and local provincial governments regulate the manufacture and sale of our products in China. Although our licenses and regulatory filings are up to date, the uncertain legal environment in China and our industry may be vulnerable to local government agencies or other parties who wish to renegotiate the terms and conditions or terminate their agreements or other understandings with us. Failure to obtain or maintain, or any delay in obtaining, any of these licenses and regulatory filings may subject us to fines, penalties or business interruption, and therefore could have a material and adverse effect on our business and prospects.
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Our insurance coverage may be inadequate to protect us from potential losses.

We do not maintain business interruption insurance. The insurance industry in China is in its early stage of development and the business interruption insurance and the product liability insurance available currently in China offers limited coverage compared to that offered in many other countries, especially in the United States. Any business disruption or natural disaster could result in substantial costs and a diversion of resources, which would have a material and adverse effect on our business and results of operations. Our business operations, particularly our production facilities, involve risks and hazards that could result in damage to, or destruction of, property and machinery, personal injury, business interruption and possible legal liability. In addition, we do not have product liability insurance covering bodily injuries and property damage caused by the products we sell. Therefore, we are exposed to risks associated with product liability claims and may need to bear the litigation cost if the use of our products results in bodily injury or property damage. We do not carry key-man life insurance, and if we lose the services of any senior management and key personnel, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new personnel, which could severely disrupt our business and prospects. Furthermore, we do not have property insurance, and we are exposed to risks associated with losses in values of our equipment, facilities and inventory due to fire, earthquake, flood and a wide range of natural disasters. We do not have personal injury insurance and accidental medical care insurance. Although we require that the third-party transportation companies we engage maintain insurance policies with respect to inland transit risks for our products, the coverage may be inadequate to protect us from potential claims against us and the losses that may result. The occurrence of a significant event for which we are not fully insured or indemnified, or the failure of a party to meet its underwriting or indemnification obligations, could materially and adversely affect our operations and financial condition. Moreover, no assurance can be given that we will be able to maintain adequate insurance in the future at rates we consider reasonable.

Our bank accounts are not insured or protected against loss.

We maintain our cash with various national banks located in China. Our cash accounts are not insured or otherwise protected against loss. Should any bank holding our cash deposits become insolvent, or if we are otherwise unable to withdraw funds, we would lose the cash on deposit with that particular bank.

We may not be able to protect our technology and other proprietary rights adequately.

Our success will depend in part on our ability to obtain and protect our products, methods, processes and other technologies, to preserve our trade secrets, and to operate without infringing on the proprietary rights of third parties, both domestically and abroad. Despite our efforts, any of the following may reduce the value of our owned and used intellectual property:
·issued patents and trademarks that we own or have the right to use may not provide us with any competitive advantages;

·our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology or that of those from whom we license our rights to use;

·our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we use or develop; or

·another party may obtain a blocking patent and we or our licensors would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products.
Effective protection of intellectual property rights may be unavailable or limited in China or certain other countries. If we are unable to protect our proprietary rights adequately, it would have a negative impact on our operations.

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We, or the owners of the intellectual property rights licensed to us, may be subject to claims that we or such licensors have infringed the proprietary rights of others, which could require us and our licensors to obtain a license or change designs.

Although we do not believe any of our products infringe upon the proprietary rights of others, there is no assurance that infringement or invalidity claims (or claims for indemnification resulting from infringement claims) will not be asserted or prosecuted against us or those from whom we have licenses or that any such assertions or prosecutions will not have a material adverse effect on our business. Regardless of whether any such claims are valid or can be asserted successfully, defending against such claims could cause us to incur significant costs and could divert resources away from our other activities. In addition, assertion of infringement claims could result in injunctions that prevent us from distributing our products. If any claims or actions are asserted against us or those from whom we have licenses, we may seek to obtain a license to the intellectual property rights that are in dispute. Such a license may not be available on reasonable terms, or at all, which could force us to change our designs.

Our business could be subject to environmental liabilities.

As is the case with manufacturers of similar products, we use certain hazardous substances in our operations. Currently, our business is subject to the Environmental Protection Law of the PRC as well as national and local laws regarding pollutant discharge, air, water and noise pollution. Although we believe we are in compliance in all material respects with the environmental laws and regulations of the municipal and provincial authorities of Liaoning Province and China, if it is determined that we are in violation of these regulations, we could be subject to financial penalties as well as the loss of our business license. Furthermore, if the national or local government adopts more stringent environmental regulations, we may incur significant costs in complying with such regulations. If we fail to comply with present or future environmental regulations, we may be required to pay substantial fines, suspend production or cease operations and may be subject to adverse publicity. We currently do not incur any material costs in connection with our compliance with environmental laws as our manufacturing processes generate minimal discharge. However, the risk of environmental liability and charges associated with maintaining compliance with PRC environmental laws is inherent in the nature of our business, and there is no assurance that material environmental liabilities and compliance charges will not arise in the future.

We incur significant costs as a result of our operating as a public company and our management is required to devote substantial time to new compliance initiatives.

While we are a public company, our compliance costs prior to the acquisition of Creative Bellows were not substantial in light of our limited operations. Creative Bellows never operated as a public company prior to our acquisition of it. As a public company with substantial operations, we incur increased legal, accounting and other expenses. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited financial statements to shareholders is time-consuming and costly.

It will also be time-consuming, difficult and costly for us to implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. Certain members of our management have limited or no experience operating a company whose securities are publicly traded or with the rules and reporting practices required by the federal securities laws and applicable to a publicly traded company. We will need to recruit, hire, train and retain additional financial reporting, internal control and other personnel in order to implement appropriate internal controls and reporting procedures.
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If we fail to maintain an effective system of internal controls, we may not be able to report our financial results accurately. Any inability to report and file our financial results accurately and timely could harm our business and adversely affect the trading price of our common stock.

We are required to establish and maintain internal control over financial reporting and disclosure controls and procedures and to comply with other requirements of the Sarbanes-Oxley Act and the rules promulgated by the SEC. At present, we have instituted internal controls, but it may take time to implement them fully as a newly public company. Our management, including our Chief Executive Officer and Chief Financial Officer, cannot guarantee that our internal controls and disclosure controls and procedures will prevent all possible errors. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the possibility that judgments in decision-making can be faulty and subject to simple error or mistake. Furthermore, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Our inability or failure to report and file our financial results accurately and timely could harm our business and the trading price of our common stock.

Our accounting personnel who are primarily responsible for the preparation and supervision of the preparation of our financial statements under generally accepted accounting principles in the U.S., or U.S. GAAP, have limited relevant education and training in U.S. GAAP and SEC rules and regulations pertaining to financial reporting, which could impact our ability to prepare our financial statements and convert our books and records to U.S. GAAP.

Our manufacturing operations are in China and we have historically maintained our books and records in accordance with generally accepted accounting principles in the PRC, or PRC GAAP. Our accounting personnel in the PRC who have the primary responsibilities of preparing and supervising the preparation of financial statements under U.S. GAAP have limited relevant education and training in U.S. GAAP and related SEC rules and regulations. As such, they may be unable to identify potential accounting and disclosure issues that may arise upon the conversion of our books and records from PRC GAAP to U.S. GAAP, which could affect our ability to prepare our financial statements in accordance with U.S. GAAP. We have taken steps to ensure that our financial statements are in accordance with U.S. GAAP, including our hiring of a U.S. accounting firm to work with our PRC accounting personnel and management to convert our books and records to U.S. GAAP and prepare our financial statements. In addition, our annual financial statements are prepared by a consultant who is a U.S. Certified Public Accountant for compliance with U.S. GAAP and to ensure that all necessary and appropriate adjustments from PRC GAAP to U.S. GAAP have been made. However, the measures we have taken may not be sufficient to mitigate the foregoing risks associated with the limited education and training of our accounting personnel in U.S. GAAP and related SEC rules and regulations.

We are a holding company that depends on cash flow from our wholly owned subsidiaries to meet our obligations.

After our acquisition of Creative Bellows, we became a holding company with no material assets other than the ownership interests of our two wholly owned subsidiaries in China, Creative Bellows and Creative Wind Power, itself a wholly owned subsidiary of Creative Bellows. Accordingly, Creative Bellows and Creative Wind Power conduct all of our operations. We rely on dividends paid by our subsidiaries 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. China has currency and capital transfer regulations that require us to comply with complex regulations for the movement of capital. 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 also are required to set aside at least 10% of our net income after taxes based on China’s accounting standards each year to statutory surplus reserves until the cumulative amount of such reserves reaches 50% of registered capital. These reserves are not distributable as cash dividends. Our subsidiaries also may allocate a portion of their after-tax profits to their staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. In addition, if our subsidiaries incur debt, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. Accordingly, if our subsidiaries are unable to pay us dividends and make other payments to us when needed because of regulatory restrictions or otherwise, we may be materially and adversely limited in our ability to make investments or acquisitions that could be beneficial to our business, pay dividends or otherwise fund and conduct our business.
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All of Creative Bellows’ liabilities survived its acquisition by us, and there may be undisclosed liabilities that could have a negative impact on our financial condition.

Before our acquisition of Creative Bellows, certain due diligence activities on our company and Creative Bellows were performed by us, our auditors and our attorneys. The due diligence process may not have revealed all liabilities (actual or contingent) of our company and Creative Bellows that existed or which may arise in the future relating to activities before the consummation of our acquisition of Creative Bellows. Notwithstanding that all of our pre-closing liabilities were transferred to the seller pursuant to the terms of the Share Exchange Agreement, it is possible that claims for such liabilities may still be made against us, which we will be required to defend or otherwise resolve. The transfer of pre-closing liabilities pursuant to the Share Exchange Agreement may not be sufficient to protect us from claims and liabilities, and any breaches of related representations and warranties. Any liabilities remaining from pre-closing activities could harm our financial condition and results of operations.

We pledged one of our manufacturing plants as collateral for its construction cost, and if we do not make payments under its construction agreement, we can be removed from the plant, causing significant disruption to our business.

One of our manufacturing plants in Tieling, Liaoning Province, China was built pursuant to a construction agreement entered into with the local government authority, the Administration Committee for Liaoning Special Vehicle Production Base on September 21, 2009. Under the terms of the construction agreement, LSVPB was responsible for the construction of the plant and we pledged the plant as collateral for our payment to LSVPB of $1,944,151 (RMB 12,249,900) in plant construction costs over five equal annual installment payments. We started using the completed plant in August 2010. LSVPB has the right to foreclose on the plant in the event that our payments are in arrears for more than two years. In the fourth quarter of 2011, the Company received a subsidy from LSVPB of $1.11 million (RMB 7,000,000) against the outstanding payment. In the first quarter of 2012, the Company repaid $382,886 (RMB 2,410,000). In the event that we fail to make the annual installment payments in a timely manner and LSVPB forecloses on the plant, and we are unable to relocate immediately to comparable facilities, our manufacturing process will be significantly disrupted, and our business, financial condition and results of operations will be adversely affected.

Risks Related to Business in China

Inflation in China could negatively affect our profitability and growth.

The rapid growth of China’s economy has been uneven among economic sectors and geographic regions of the country and has been fueled over the last three years by a large amount of debt issuances. China’s economy grew at an annual rate of 7.7% in 2013, as measured by the year-over-year change in Gross Domestic Product, or GDP, according to the National Bureau of Statistics of China, or the NBS. Rapid economic growth and less restrictive monetary policies can lead to growth in the money supply and rising inflation. According to the NBS, the annual inflation rate in China, as measured by the year-over-year change in consumer price index, was 2.6% in 2013, according to the NBS. If prices for our products fail to rise at a rate sufficient to compensate for the increased costs of supplies, such as raw materials, due to inflation, it may have an adverse effect on our profitability.

In order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets, restrictions on state bank lending and raised reserve requirements for banks. In addition, the People’s Bank of China, or the PBOC, which is the central bank of the PRC, has effected several increases in interest rates in response to inflationary concerns in China’s economy. The implementation of such policies may further impede future economic growth. If the PBOC continues to raise interest rates, economic activity in China could further slow and, in turn, materially increase our costs and reduce demand for our products and services.

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China’s economic policies could affect our business.

All of our assets are located in China and all of our revenue is derived from our operations in China. Accordingly, our results of operations and prospects are subject to the economic, political and legal developments in China. While China’s economy has experienced significant growth in the past 20 years, such growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may have a negative effect on us. For example, operating results and financial condition may be adversely affected by the government control over capital investments or changes in tax regulations. In recent years, the PRC government has implemented measures emphasizing the utilization of market forces for economic reform and the reduction of state ownership of productive assets, and the establishment of corporate governance in business enterprises; however, a substantial portion of productive assets in China are still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over China’s economic growth through the allocation of resources, the control of payment of foreign currency-denominated obligations, the setting of monetary policy and the provision of preferential treatment to particular industries or companies. 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 clean energy investments and expenditures in China, which in turn could lead to reduced demand for our products and consequently have a material adverse effect on our business.
We may have difficulty establishing adequate management, legal and financial controls in China.

Historically, China has not adopted an international style of management or financial reporting concepts and practices, nor modern banking, computer and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in China. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet international standards.

If relations between the United States and China worsen, investors may be unwilling to hold or buy our stock and our stock price may decrease.

At various times during recent years, the United States and China have had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our common stock.

China could change its policies toward private enterprises or nationalize or expropriate private enterprises.

Our business is subject to significant political and economic uncertainties and may be affected by political, economic and social developments in China. Over the past several years, the PRC government has pursued economic reform policies including the encouragement of private economic activity and greater economic decentralization. The PRC government may not continue to pursue these policies or may significantly alter them to our detriment from time to time with little, if any, prior notice.

Changes in policies, laws and regulations or in their interpretation or the imposition of confiscatory taxation, restrictions on currency conversion, restrictions or prohibitions on dividend payments to shareholders, or devaluations of currency could cause a decline in the price of our common stock, should a market for our common stock ever develop. Nationalization or expropriation could result in the total loss of your investment.
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The nature and application of many laws of China create an uncertain environment for business operations and they could have a negative effect on us.

The legal system in China is a civil law system. Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, China began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in China and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes to existing laws and the abrogation of local regulations by national laws could cause a decline in the price of our common stock. In addition, as these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty.

Furthermore, the political, governmental and judicial systems in China are sometimes impacted by corruption. There is no assurance we will be able to obtain recourse in any legal disputes with suppliers, customers or other parties with whom we conduct business, if desired, through China’s developing and sometimes corrupt judicial systems.

It will be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets based in China.

As our executive officers and several of our directors, including the Chairman of our Board of Directors, are citizens of the PRC, it may be difficult, if not impossible, to acquire jurisdiction over these persons in the event a lawsuit is initiated against us or our executive officers and directors by a shareholder or group of shareholders in the U.S. Also, because our operating subsidiaries and assets are located in China, it may be extremely difficult or impossible for individuals to access those assets to enforce judgments rendered against us or our directors or executive officers by U.S. courts. In addition, the courts in China may not permit the enforcement of judgments arising out of U.S. federal and state corporate, securities or similar laws. Accordingly, U.S. investors may not be able to enforce judgments against us for violation of U.S. securities laws.
Fluctuation of the Renminbi may affect our financial condition and the value of our securities.

Although we use the U.S. dollar, or USD, for financial reporting purposes, most of the transactions effected by our operating subsidiaries are denominated in Chinese yuan renminbi, or RMB, the national currency of the PRC. The value of the RMB fluctuates and is subject to changes in China’s political and economic conditions. Since June 2008, the RMB has been pegged to the USD. Because the PBOC regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the USD in the medium to long term. Moreover, it is possible that in the future the PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market. In June 2010, the PBOC announced that it will manage the RMB exchange rate more flexibly, following nearly two years in which the RMB has been pegged to the USD.

Future movements in the exchange rate of the RMB could adversely affect our financial condition as we may suffer financial losses when transferring money raised outside of China into the country or paying vendors for services performed outside of China. Moreover, fluctuations in the exchange rate between the USD and RMB will affect our financial results reported in USD terms without giving effect to any underlying change in our business, financial condition or results of operations. The value of our common stock likewise will be affected by the foreign exchange rate between the USD and RMB, and between those currencies and other currencies in which our sales may be denominated. Fluctuations in the exchange rate will also affect the relative value of any dividend we may issue in the future that will be exchanged into USD and earnings from, and the value of, any USD-denominated investments we make in the future. For example, if we need to convert USD into RMB for our operational needs and the RMB appreciates against the USD at that time, our financial position, our business and the price of our common stock may be harmed. Conversely, if we decide to convert our RMB into USD for the purpose of declaring dividends on our common stock or for other business purposes and the USD appreciates against the RMB, the USD equivalent of our earnings from our subsidiaries in China would be reduced.
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PRC regulations relating to mergers, off-shore companies and PRC resident shareholders, if applied to us, may limit our ability to operate our business.

PRC regulations govern the process by which we may participate in an acquisition of assets or equity interests. Depending on the structure of the transaction, these regulations require involved parties to make a series of applications and supplemental applications to various government agencies. In some instances, the application process may require the presentation of economic data concerning a transaction, including appraisals of the target business and evaluations of the acquirer, which are designed to allow the government to assess the transaction. Government approvals will have expiration dates by which a transaction must be completed and reported to the government agencies. Compliance with the new regulations is likely to be more time consuming and expensive than in the past and the government can now exert more control over the combination of two businesses. Accordingly, due to PRC regulations, our ability to engage in business combination transactions in China through our subsidiaries in China has become significantly more complicated, time consuming and expensive, and we may not be able to negotiate transactions acceptable to us or sufficiently protective of our interests.

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

The RMB is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans. Currently, our subsidiaries in China may purchase foreign currencies for settlement of current account transactions, including payments of dividends to us, without the approval of the State Administration of Foreign Exchange, or SAFE. However, the relevant PRC government authorities may limit or eliminate their ability to purchase foreign currencies in the future. Since a significant amount of our revenues are denominated in RMB, any existing and future restrictions on currency exchange may limit our ability to utilize revenues generated in RMB to fund our business activities outside China that are denominated in foreign currencies.

On August 29, 2008, the SAFE promulgated the Notice on Perfecting Practices Concerning Foreign Exchange Settlement Regarding the Capital Contribution by Foreign-invested Enterprises, or Circular 142, to regulate the conversion by foreign-invested enterprises of foreign currency into RMB by restricting how the converted RMB may be used. Circular 142 requires that RMB converted from the foreign currency-dominated capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC unless specifically provided for otherwise. In addition, the SAFE strengthened its oversight over the flow and use of RMB funds converted from the foreign currency-dominated capital of a foreign-invested enterprise. The use of such RMB may not be changed without approval from the SAFE, and may not be used to repay RMB loans if the proceeds of such loans have not yet been used. If we finance our subsidiaries by means of additional capital contributions, these capital contributions must be approved by certain government authorities, including the NDRC, the Ministry of Commerce, or MOFCOM, or their respective local counterparts. These limitations could affect the ability of our subsidiaries in China to obtain foreign exchange through debt or equity financing.
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PRC regulations relating to the registration requirements for PRC resident shareholders owning shares in off-shore companies as well as registration requirements of employee stock ownership plans or share option plans may subject our PRC resident shareholders to personal liability and limit our ability to acquire companies in China or to inject capital into our operating subsidiaries in China, limit our subsidiaries’ ability to distribute profits to us or otherwise materially and adversely affect our business.

SAFE issued a public notice in October 2005, which we refer to as Circular 75, requiring PRC residents, including both legal persons and natural persons, to register with the competent local SAFE branch before establishing or controlling any company outside of China, referred to as an “off-shore special purpose company,” for the purpose of acquiring any assets of or equity interest in PRC companies and raising funds from overseas. In addition, any PRC resident who is the shareholder of an off-shore special purpose company is required to amend his or her SAFE registration with the local SAFE branch, with respect to that off-shore special purpose company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. If any PRC resident who is the shareholder of an off-shore special purpose company fails to comply with the SAFE registration requirements, the PRC subsidiaries of the off-shore special purpose company may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to their off-shore parent company and the off-shore parent company may be restricted in its ability to contribute additional capital into its PRC subsidiaries. Moreover, failure to comply with the SAFE registration requirements could result in liabilities under PRC laws for evasion of foreign exchange restrictions. We cannot predict fully how Circular 75 will affect our business operations or future strategies because of ongoing uncertainty over how Circular 75 is interpreted and implemented, and how or whether SAFE will apply it to us.

We have requested our PRC resident beneficial owners, including our Chairman and Chief Executive Officer, to make the necessary applications, filings and amendments as required under SAFE regulations in connection with their equity interests in us. We attempt to ensure that our subsidiaries in China comply, and that our PRC resident beneficial owners subject to these rules comply, with the relevant SAFE regulations. We cannot provide any assurance that all of our present or prospective direct or indirect PRC resident beneficial owners have complied or will comply fully with all applicable registrations or required approvals. The failure or inability of our PRC resident beneficial owners to comply with the applicable SAFE registration requirements may subject these beneficial owners or us to fines, legal sanctions and restrictions described above.

On March 28, 2007, SAFE released detailed registration procedures for employee stock ownership plans or share option plans to be established by overseas listed companies and for individual plan participants. Any failure to comply with the relevant registration procedures may affect the effectiveness of employee stock ownership plans or share option plans and subject the plan participants, the companies offering the plans or the relevant intermediaries, as the case may be, to penalties under the PRC foreign exchange regime. To date, all of our grants of options have been solely to U.S. citizens. We currently have no employee stock ownership plan or share option plan in effect. If we establish an employee stock ownership plan or share option plan and fail to comply with the relevant registration procedures, we may be subject to fines and legal sanctions or be prevented from making distributions or paying dividends, as a result of which our results of operations and ability to distribute profits could be materially and adversely affected.

The waiver and release agreements between us and certain shareholders may be challenged by PRC tax authorities and be subject to transfer pricing adjustments.

On October 27, 2010, certain shareholders waived any right to receive further payment for their ownership interests in us resulting from the Share Exchange Agreement in exchange for a mutual release of claims pursuant to waiver and release agreements, or the Waiver and Release Agreements. Under applicable PRC tax rules, any transaction between related parties must be priced on an arm’s length basis. The PRC tax authority has the right to investigate any related party transaction and to make adjustment if it finds that the price does not reflect an arm’s length transaction. The PRC tax authority would make adjustments by applying a deemed arm’s length price to the transaction. Given that the parties to the respective Waiver and Release agreements were related parties, there is a possibility that these transfers may be challenged and investigated by the PRC tax authority and deemed to have been made without consideration. If the deemed appropriate arm’s length price determined by the PRC tax authority during such investigation is higher than that already paid to those shareholders, such excess amount could be subject to a 20% PRC income tax. Although we believe that the respective individual shareholders would be responsible for any possible PRC income tax, we understand that it is common practice for PRC tax authorities to enforce the tax collection against the entity at issue, which in this case would be us. If the PRC tax authorities do hold us responsible for these taxes, we may be required to pay the possible PRC tax on behalf of certain shareholders for these transactions.
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If we fail to satisfy our required additional contribution of registered capital to Creative Bellows, CleanTech may be required to pay a penalty and it may not be able to distribute dividends to us, which could adversely affect our business.
We were required to contribute $8.45 million as additional capital to Creative Bellows by July 2012 which was not made at that time. We may be subject to a penalty related to the unsatisfied portion of registered capital. We can pay the penalty and request that our registered capital be reduced to the amount already paid or to another amount that can be satisfied within a specific period of time. We may also apply for a grace period to receive up to an additional nine months to make the payment, or we may apply to reduce its registered capital prior to the payment becoming due.  We plan to apply for, and expect to be approved for, permission to decrease capital contribution to our current contribution of RMB 122.6 million (US$19.35 million) in 2013. In May 2013, the Company was approved to reduce its capital contribution to RMB 122.6 million (US$19.35 million).  Under PRC laws, shareholders of a foreign-invested enterprise are required to contribute capital to satisfy the registered capital requirement of the foreign-invested enterprise within a period of not more than two years from the date when the foreign-invested enterprise’s license to conduct business is initially granted. The relevant PRC government agencies may extend the contribution period for an additional six months without penalty, and, upon application by the foreign-invested enterprise, grant a further three-month grace period without penalty. If the capital contribution remains incomplete after the grace periods have been exhausted or denied, the foreign invested enterprise may be required to pay a negotiated penalty related to the unsatisfied contribution of registered capital remaining outstanding. If the shareholders remain unable to complete the registered capital contribution within a six-month period following payment of the penalty, the foreign-invested enterprise may reduce its increased registered capital to the amount contributed with the amount remaining outstanding waived by the relevant PRC government agencies. Until such contribution of capital is satisfied or the registered capital requirement is reduced to the amount already contributed, however, the foreign-invested enterprise is not allowed to repatriate profits to its shareholders, unless otherwise approved by SAFE. If we fail to satisfy our additional capital contribution to Creative Bellows, Creative Bellows may be required to pay a penalty and it may not be able to repatriate profits or dividends to us, which could adversely affect our business and the value of our common stock.
PRC labor laws may adversely affect our results of operations.

On June 29, 2007, the PRC government promulgated a new labor law, namely, the Labor Contract Law of the PRC, or the Labor Contract Law, which became effective on January 1, 2008. The Labor Contract Law imposes greater liabilities on employers and significantly affects the cost of an employer’s decision to reduce its workforce. Further, it requires that certain terminations be based upon seniority and not merit. In the event we decide to significantly change or decrease our workforce in China, the Labor Contract Law could adversely affect our ability to effect such changes in a manner that is most advantageous to our business or in a timely and cost-effective manner, thus materially and adversely affecting our financial condition and results of operations.

We operate in the PRC through our wholly owned operating entities, and the local office of the MOFCOM has initially approved Creative Bellows’ WFOE status. However, we cannot assure you that such approval procedures have been completely satisfied.

On August 8, 2006, six PRC regulatory agencies, including MOFCOM and the China Securities Regulatory Commission, or the CSRC, promulgated the Rules on Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Regulations, which govern the acquisition of PRC domestic enterprises by foreign investors as well as the listing of certain non-PRC entities on exchanges outside of China. The M&A Regulations took effect on September 8, 2006. Under the M&A Regulations, the approval of MOFCOM’s central office is required for any acquisition of a PRC domestic enterprise by a foreign investor established or controlled by a PRC person associated with the PRC domestic enterprise. The M&A Regulations further prohibit the use of equity of a foreign investor whose shares are traded on an over-the-counter market as consideration in the acquisition of a PRC domestic enterprise.

We believe that our issuance of equity to the shareholders of Creative Bellows and their designees, which was at the time of such issuance a PRC domestic enterprise, did not require the approval of MOFCOM because it was not in consideration for the acquisition of a PRC domestic enterprise. We further believe that our acquisition of approximately 87% of Creative Bellows in August 2010, by which time Creative Bellows had been transformed into a Sino-foreign joint venture company, and our acquisition of the remaining minority interest in Creative Bellows in October 2010, was not governed by the M&A Regulations but rather by the 1997 Provisions on Changes in Equity Interest of Foreign Investment Enterprises, which do not require the approval of MOFCOM’s central office in connection with the acquisition of interests in a foreign-invested entity by a foreign investor owned in part by shareholders of the foreign-invested entity.

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Furthermore, in October 2010, we received approval to acquire the remaining minority interest in Creative Bellows from its shareholders for cash consideration. On October 27, 2010, pursuant to the Waiver and Release Agreements, the shareholders of Creative Bellows waived any right to receive any part of this cash consideration for their ownership interests in Creative Bellows in exchange for a mutual release of claims. Because the PRC regulatory approval of our acquisition of the remaining minority interest in Creative Bellows was based on the payment of cash as consideration for those ownership interests, it is unclear whether we must submit Creative Bellows’ WFOE application for reapproval by MOFCOM and SAFE, or at least notify MOFCOM of the change in consideration used.
The meaning of many of the provisions of the M&A Regulations is still unclear, and regulators have wide latitude in the enforcement of these and other relevant regulations. If MOFCOM subsequently determines that we should have obtained the approval of MOFCOM’s central office for any or all of the transactions described above, we may be subject to fines and penalties on our operations in China, have our operating privileges limited, have the payment or remittance of dividends paid by Creative Bellows delayed or restricted, or be subject to other regulatory or administrative actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our shares.

The approval of the CSRC may be required under the M&A Regulations in connection with our acquisition of Creative Bellows and, if required, we cannot predict whether we will be able to obtain such approval.

The M&A Regulations require that if an overseas company established or controlled by PRC domestic companies or citizens intends to acquire equity interests or assets of any other PRC domestic company affiliated with the PRC domestic companies or citizens, such acquisition must be submitted to MOFCOM for approval. In addition, this regulation requires that an overseas company controlled directly or indirectly by PRC companies or citizens and holding equity interests of PRC domestic companies needs to obtain the approval of the CSRC prior to listing its securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying the documents and materials required to be submitted by overseas special purpose companies seeking the CSRC’s approval of their overseas listings.

The application of the M&A Regulations remains unclear. We believe that we are not required to obtain the approval of the CSRC for the listing of our common stock in the U.S. equity markets because we are not an off-shore special purpose company, as defined in the M&A Regulations. If the CSRC or another PRC regulatory agency subsequently determines that approvals from MOFCOM or the CSRC were required for our acquisition of Creative Bellows, we may need to apply for a remedial approval from the CSRC and may be subject to certain administrative punishments or other sanctions from PRC regulatory agencies. The PRC regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of our foreign currency in our offshore bank accounts into the PRC, or take other actions that could materially and adversely affect our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common stock.

If MOFCOM or the CSRC later requires that we obtain its approval, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding these approval requirements could materially and adversely affect the trading price of our common stock.

Failure to register with the PRC foreign exchange authorities the cash payment for some of the equity of Creative Bellows that we acquired could have an adverse impact on our ability to transfer funds in or out of China.

PRC law requires the registration with SAFE of any payments made by a foreign investor in exchange for the equity of a PRC domestic enterprise or foreign-invested enterprise. Because Bei Lv, Dianfu Lv, Wenge Chen and Wonderful Limited waived their right to receive any cash payments in connection with the transfer to us of their equity in Creative Bellows, no registration of a cash payment was possible or was made. We cannot assure you that SAFE will not view this as a failure to comply with PRC laws relating to foreign exchange and take actions that could delay or restrict our ability to transfer funds in or out of China in the future, or subject us to fines or penalties.
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Tax laws and regulations in China are subject to substantial revision, some of which may adversely affect our profitability.

The PRC corporate tax regime continues to undergo substantial revision. Tax benefits that we presently enjoy may not be available to us in the wake of these changes, and we could incur tax obligations to the PRC government that are significantly higher than currently anticipated. These increased tax obligations could negatively affect our financial condition and our revenues, gross margins, profitability and results of operations may be adversely affected as a result.

Certain tax treatment for which we are eligible in China is scheduled to expire over the next several years.

As of October 2010, Creative Bellows has been classified as a “high technology enterprise” eligible for certain tax benefits, including a preferential 15% enterprise income tax rate instead of the standard 25% enterprise income tax rate. These tax benefits are retroactive for 2010 and any income tax we paid in 2010 under the higher standard rate either will be refunded to us or offset in future periods and recorded as income tax benefit. Our eligibility for the tax benefits lasts until December 31, 2012. When the tax benefits expire, and if our favorable tax treatment is not continued, our income tax expenses will increase, which will reduce our net income.
Under the Enterprise Income Tax Law, we are likely to be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us.

China passed a new Enterprise Income Tax Law, or the EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it must be treated as a PRC domestic enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.

On April 22, 2009, the State Administration of Taxation, or the SAT, issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Off-shore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the EIT Law and its implementation regarding non-PRC enterprise or group controlled off-shore entities. Pursuant to the Notice, an enterprise incorporated in an off-shore jurisdiction and controlled by a PRC enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if: (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management often reside in China. A “resident enterprise” would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC shareholders. However, detailed measures on imposition of tax from non-domestically incorporated resident enterprises are not yet available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

We may be deemed to be a “resident enterprise” by PRC tax authorities. If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on financing proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as “resident enterprises” for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares. If we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be creditable against our U.S. tax.
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Dividends distributed by us to our non-PRC resident shareholders may be subject to PRC withholding taxes.

Before the EIT came into effect on January 1, 2008, dividends paid to foreign investors by foreign-invested enterprises, such as dividends paid to us by our subsidiaries in China, were exempt from PRC withholding tax. We are a Nevada holding company and substantially all of our income is derived from dividends we receive from our subsidiaries in China. Pursuant to the EIT, dividends generated after January 1, 2008, and distributed to us by our subsidiaries are subject to withholding tax at a rate of 5%, provided that we are determined by the relevant PRC tax authorities to be a “non-resident enterprise” under the EIT and hold at least 25% of the equity interest of our subsidiaries. If we are determined to be a “resident enterprise,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as “resident enterprises” for PRC enterprise income tax purposes. In addition, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares.
On October 27, 2009, the SAT promulgated “Notice on How to Understand and Determine the Beneficial Owners in Tax Agreement,” or SAT Circular 601, which provides guidance for determining whether a resident of a contracting state is the “beneficial owner” of an item of income under China’s tax treaties and tax arrangements. According to SAT Circular 601, a beneficial owner generally must be engaged in substantive business activities. An agent or conduit company will not be regarded as a beneficial owner and, therefore, will not qualify for treaty benefits. The agent or conduit company normally refers to a company that is registered in a jurisdiction other than China and merely meets the minimum legal requirements on organizational form and is not engaged in substantive operational activities for manufacturing, distribution or management. It is still unclear how SAT Circular 601 is implemented by SAT or its local counterparts in practice and whether we could be recognized as a “beneficial owner.” If we are deemed a non-resident enterprise but not qualified as a beneficial owner, we will not be entitled to a reduced 5% withholding tax and the 10% withholding tax would be imposed on our dividend income received from our subsidiaries. As a result, our net income would be reduced and our operating results would be adversely affected.

Our compliance with the U.S. Foreign Corrupt Practices Act, or the FCPA, may put us at a competitive disadvantage, while our failure to comply with the FCPA may result in substantial penalties.

We are required to comply with the FCPA, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties. Non-U.S. companies, including some of our competitors, are not subject to the provisions of the FCPA. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time to time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage.

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Risks Related to Our Securities

The market price for our common stock may be volatile.

The trading price of our common stock may fluctuate widely in response to various factors, some of which are beyond our control. These factors include, but not limited to, our quarterly operating results or the operating results of other companies in our industry, announcements by us or our competitors of acquisitions, new products, product improvements, commercial relationships, intellectual property, legal, regulatory or other business developments and changes in financial estimates or recommendations by stock market analysts regarding us or our competitors. In addition, the stock market in general, and the market for companies based in China in particular, has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated or disproportionate to their operating performance. These broad market fluctuations may materially affect our stock price, regardless of our operating results. Furthermore, the market for our common stock historically has been limited and we cannot assure you that a larger market will ever be developed or maintained. The price at which investors purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, these factors may make it more difficult or impossible for you to sell our common stock for a positive return on your investment.

Shares of our common stock lack a significant trading market.

Shares of our common stock are not eligible for trading on any national securities exchange. Our common stock is qualified for quotation on the OTCQB and trades in the over-the-counter markets, or in what are commonly referred to as “pink sheets.” However, there is no active market for our common stock at this time. These over-the-counter markets are highly illiquid. There is no assurance that an active trading market in our common stock will develop, or if such a market develops, that it will be sustained. In addition, there is a greater chance for market volatility for securities quoted on the OTCQB or pink sheets as opposed to securities traded on a national securities exchange. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the absence of consistent administrative supervision of “bid” and “ask” quotations and generally lower trading volume. As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock, or to obtain coverage for significant news events concerning us, and the common stock could become substantially less attractive for margin loans, for investment by financial institutions, as consideration in future capital raising transactions or for other purposes.
Future sales of shares of our common stock by our shareholders could cause our stock price to decline.

Future sales of shares of our common stock could adversely affect the prevailing market price of our stock. If our significant shareholders sell a large number of shares, or if we issue a large number of shares, the market price of our stock could decline. Moreover, the perception in the public market that shareholders might sell shares of our stock could depress the market for our shares. Our directors and executive officers and certain of our other shareholders who received shares of our common stock issued pursuant to the Share Exchange Agreement are subject to lockup agreements that prohibit their sale of all shares of our common stock held currently or acquired by them in the future to the general public until December 15, 2013, except in the event of a change of control or sale of our company. Upon the termination of these lockup agreements, if such shareholders sell substantial amounts of our common stock in the public market, such sales could create a circumstance commonly referred to as an “overhang,” in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price we deem reasonable or appropriate.

37

We may issue additional shares of our capital stock to raise capital or complete acquisitions, which would reduce the equity interest of our shareholders.

Our Articles of Incorporation authorize the issuance of 100,000,000 shares of common stock and 100,000,000 shares of preferred stock. As of April 4, 2014, there were 72,215,868 authorized and unissued shares of our common stock available for future issuance, based on 24,982,822 shares of our common stock outstanding and our reservation of 1,987,500 shares of our common stock issuable upon exercise of outstanding warrants, and 100,000,000 authorized and unissued shares of our preferred stock available for future issuance. Although we have no commitments as of the date of this report to issue our securities, we may issue a substantial number of additional shares of our common stock to complete a business combination or to raise capital. The issuance of additional shares of our common stock may significantly reduce the equity interest of our existing shareholders and adversely affect prevailing market prices for our common stock.

The application of the “penny stock” rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

Our common stock may be subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of 1934, or the Exchange Act. The penny stock rules apply to issuers whose common stock does not trade on a national securities exchange and trades at less than $5.00 per share, or that have a tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC that contains the following information:
·a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

·a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities laws;

·a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the “bid” and “ask” prices;

·a toll free telephone number for inquiries on disciplinary actions;

·definitions of any significant terms in the disclosure document or in the conduct of trading in penny stocks; and

·such other information and is in such form (including language, type, size and format), as the SEC shall require by rule or regulation.

Prior to effecting any transaction in a penny stock, the broker-dealer also must provide the customer with the following information:
·bid and offer quotations for the penny stock;

·compensation of the broker-dealer and our salesperson in the transaction;

·number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and

·monthly account statements showing the market value of each penny stock held in the customer’s account.
The penny stock rules further require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks and a signed and dated copy of a written suitability statement.
38

Due to the requirements of the penny stock rules, many broker-dealers have decided not to trade penny stocks. As a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. Moreover, if our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.

We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the Board of Directors may consider relevant. Furthermore, China has currency and capital transfer regulations that require us to comply with complex regulations for the movement of capital and restrict the amount of capital available for distribution as dividends. See “Risks Related to Our Business – We are a holding company that depends on cash flow from our wholly owned subsidiaries to meet our obligations.” Although our management believes that we are in compliance with these regulations, should these regulations or their interpretation by PRC courts or regulatory agencies change, we may not be able to pay dividends to our shareholders outside of China. Our management intends to follow a policy of retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business. If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.
Our principal shareholder has the ability to exert significant control in matters requiring a shareholder vote and could delay, deter or prevent a change of control in our company.

As of December 31, 2013, Bei Lv, our Chairman and Chief Executive Officer, and our largest shareholder, owned approximately 37.53% of our outstanding common stock. Ms. Lv exerts significant influence over us, giving her the ability, among other things, to exercise significant control over the election of all or a majority of the Board of Directors and to approve significant corporate transactions. Such stock ownership and control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company. Without the consent of Ms. Lv, we could be prevented from entering into potentially beneficial transactions if they conflict with our principal shareholder’s interests. The interests of Ms. Lv may differ from the interests of our other shareholders.

Provisions in our Articles of Incorporation and Amended and Restated Bylaws could make it very difficult for you to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.

Pursuant to our Articles of Incorporation, members of our Board of Directors and our officers will have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited circumstances. Accordingly, you may be unable to prevail in a legal action against our directors or officers even if they have breached their fiduciary duty of care. In addition, our Articles of Incorporation and Amended and Restated Bylaws allow us to indemnify our directors and officers from and against any and all costs, charges and expenses resulting from their acting in such capacities with us. This means if you were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit and any judgment or settlement they otherwise would be required to pay.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Our principal executive offices and our designing and manufacturing facilities are located in the Tieling Economic Development Zone, Tieling, Liaoning Province, China. We own eight buildings, which together include our office headquarters and manufacturing facilities. Creative Bellows has been granted land use rights in Tieling to 94,473 square meters through 2058. Our current facilities have a total production space of 17,246 square meters. We believe that our existing facilities are adequate for current operations and presently foreseeable operations.
39F-3

 
Item6D 3. Legal ProceedingsGLOBAL TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS
As of March 31, 2012, Creative Bellows had a case pending in arbitration for the recovery of approximately one million RMB. Creative Bellows filed the arbitration proceeding for a breach of contract by Dongbei Jincheng Construction Co., Ltd., a plant construction contractor. On March 14, 2013, Dongbei JinCheng filed a complaint in the Tieling Intermediate People’s Court against the Company, alleging that the Company owes it construction costs in the amount of RMB 2,400,099.82 plus RMB 700,000 interest and RMB 28,176 arbitration expenses. On March 19, 2013, the company filed a counterclaim against Dongbei JinCheng, alleging that Dongbei JinCheng breached the contract by failing to complete the construction work according to quality specifications. The Company sought in RMB 2,197,131.53 monetary damages. On October 9, 2013, Dongbei JinCheng was ordered by the court to pay RMB 27,000 examination fee, RMB 77,413.89 repair costs and RMB 13,000 design and appraisal costs
  
December 31,
2014
  
December 31,
2013
 
Assets      
 Current Assets      
 Cash
 $4,888,797  $5,611 
 Accounts receivable
  1,316,448   1,117,624 
 Unbilled revenues
  62,049   131,844 
 Deferred tax assets
  161,255   - 
 Prepaid expenses and other current assets
  165,907   47,457 
   Total Current Assets
  6,594,456   1,302,536 
         
 Property and Equipment, net
  154,917   183,841 
         
 Other Assets
        
 Restricted cash
  110,699   110,499 
 Security deposits
  24,075   48,707 
 Due from related party
  -   410,130 
 Total Other Assets
  134,774   569,336 
         
 Total Assets
 $6,884,147  $2,055,713 
         
Liabilities and Stockholders' Equity  (Deficit)
        
         
 Current Liabilities
        
 Accounts payable and accrued liabilities
 $1,039,301  $818,316 
 Due to factor
  833,938   870,295 
 Current maturities of capital lease liability
  53,610   52,892 
 Deferred revenue
  68,420   - 
 Current maturities of notes payable
  6,600   586,600 
   Total Current Liabilities
  2,001,869   2,328,103 
         
 Long-Term Liabilities
        
 Capital lease liability, net of current maturities
  111,130   131,348 
 Notes payable, net of current maturities
  53,420   60,020 
 Security deposit payable
  30,000   - 
 Deferred rent
  55,429   73,192 
   Total Long-Term Liabilities
  249,979   264,560 
         
 Total Liabilities
 $2,251,848  $2,592,663 
         
 Commitment and Contingencies
        
         
 Stockholders' Equity (Deficit)
        
 Preferred stock, par value $0.00001; 10,000,000 shares authorized; 0 shares issued and outstanding
  -   - 
 Common stock, par value $0.00001; 150,000,000 shares authorized as of December 31, 2014; 77,575,617 and 38,215,054 shares issued and outstanding as of December 31, 2014 and December 31, 2013, respectively
  776   382 
 Additional paid-in capital
  5,203,279   2,618 
 Accumulated deficit
  (571,756)  (539,950)
         
  Total Stockholders' Equity (Deficit)
  4,632,299   (536,950)
         
 Total Liabilities and Stockholders’ Equity (Deficit)
 $6,884,147  $2,055,713 
See accompanying notes to the Company. On October 10, 2013, the Company filed an appeal against Dongbei JinCheng to Liaoning High People’s Court in order to obtain higher damages. As of April 4, 2014, this case is under review by Liaoning High People’s Court.
On January 5, 2012, the Company filed an amended complaint in the United States District Court for the Southern District of New York against the NASDAQ Stock Market, LLC and NASDAQ OMX Group, referred to collectively as NASDAQ. The Company alleged that NASDAQ’s actions resulted in a violation of the Company’s equal protection rights under the United States Constitution, amounted to selective prosecution and intentionally breached the Company’s attorney-client privilege.  The Company sought a permanent injunction enjoining NASDAQ from using its discriminatory policies against the Company and also sought at least $300 million in monetary damages.  On January 31, 2012, the amended complaint was dismissed on the basis of a lack of subject matter jurisdiction. The Company decided not to file an appeal to the Second Circuit Court of Appeals so it could focus on its appeal to the SEC of NASDAQ Listing Qualifications determination to delist the Company’s common stock.

The Company applied to the SEC for a review of the final delisting decision made by NASDAQ Listing Qualifications. On July 11, 2013, the Securities Exchange Commission (“SEC”) reversed the 2011 delisting of the Company’s stock on the NASDAQ Stock Market, LLC.   

On March 21, 2012, Fensterstock & Partners LLP, filed a complaint in the Supreme Court of the State of New York against the Company, and others, seeking $400,808 in unpaid legal fees in connection with Fensterstock’s representation of the Company in its suit against the NASDAQ Stock Market, LLC and NASDAQ OMX Group. The Company has filed an answer to the complaint, denying the material allegations of the complaint. Fensterstock filed a motion for partial summary judgment on its claim for “account stated" and the Company then filed papers in opposition to Fensterstock’s motion for partial summary judgment. The Company intends to continue to defend itself against the claims asserted.  On October 9, 2012, the court awarded a judgment in favor of Fensterstock & Partners LLP in the amount of 423,333.26 (original due of $400,808 plus accrued interest from March 1, 2012 through August 24, 2012) plus interest at 9% until paid in full.

We may occasionally become involved in various lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters that may arise from time to time could have an adverse effect on our business,consolidated financial condition or operating results. We are currently not aware of any s uch legal proceedings, aside from those listed above, or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Item 4. Mine Safety Disclosures

Not applicable.statements.
 
 
40F-4

 
PART II6D GLOBAL TECHNOLOGIES, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock trades on the OTCQB under the symbol “CTEK.” From December 15, 2010, to March 2, 2011, our common stock traded on the NASDAQ Capital Market under the symbol “CTEK.” Prior to December 15, 2010, our common stock was quoted on the OTC Bulletin Board under the symbol “EVCP” since October 23, 2008. No trades of our common stock occurred through the facilities of the OTC Bulletin Board until July 2, 2010. The following table sets forth the range of the high and low closing prices per share of our common stock for each quarter (or portion thereof) as reported on the NASDAQ Capital Market beginning January 1, 2012, through to March 2, 2011, and as reported on the OTCQB thereafter. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
  
For the Years Ended
 
  
December 31,
2014
  
December 31,
2013
 
       
 Revenues
 
$
11,797,813
  
$
9,640,286
 
         
 Cost of revenues
  
7,425,857
   
6,514,040
 
         
 Gross margin
  
4,371,956
   
3,126,246
 
         
Operating Expenses
        
Selling general and administrative
  
3,878,075
   
3,789,228
 
 Operating expenses
  
3,878,075
   
3,789,228 
 
         
 Income (loss) from operations
  
493,881
   
(662,982
)
         
 Other income (expense)
        
 Interest expense, net
  
(147,069
)
  
(154,420
)
 Loss on debt extinguishment
  
(57,502
)
  
-
 
 Realized gain on sale of marketable securities
  -
 
  
4,817
 
 Other Income
  
20,000
   
22
 
     Other expense, net
  
(184,571
)
  
(149,581
)
         
 Income (loss) before income taxes benefit
  
309,310
   
(812,563
)
         
 Income tax benefit
  
(161,255
)
  
-
 
         
 Net income (loss)
 
$
470,565
  
$
(812,563
)
         
 Net income (loss) per common share - basic
 
$
0.01
  
$
(0.02
)
         
 Weighted average common shares - basic
  
48,500,156
   
38,215,054
 
         
 Net income (loss) per common share - diluted
 
$
0.01
  
$
(0.02
)
         
 Weighted average common shares - diluted
  
48,668,720
   
38,215,054
 
 
  2013  2012 
  High  Low  High  Low 
First Quarter (through March 31) $0.59  $0.15  $0.71  $0.37 
Second Quarter (through June 30)  0.95   0.14   0.94   0.28 
Third Quarter (through September 30)  0.97   0.15   0.30   0.22 
Fourth Quarter (through December 31)  0.77   0.54   0.34   0.22 

Holders of Record

As of April 4, 2014, there were 126 shareholders of record. Many shares of our common stock are held in street or nominee name by brokers and other institutions on behalf of shareholders and we are unable to estimate the total number of shareholders represented by these record holders.

Dividend Policy

We have not paid any cash dividends on our common stock and do not anticipate or contemplate paying dividends on our common stock in the foreseeable future. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors. We currently intend to utilize all available funds to develop our business.

Our ability to pay dividends may be affected by the complex currency and capital transfer regulations in China that restrict the payment of dividends to us by our subsidiaries in China. PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. We also are required to set aside at least 10% of our net income after taxes based on China’s accounting standards each year to statutory surplus reserves until the cumulative amount of such reserves reaches 50% of registered capital. These reserves are not distributable as cash dividends. Our subsidiaries also may be required to allocate a portion of their after-tax profits to their staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. If our subsidiaries incur debt, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

In addition, Circular 75 requires PRC residents, including both legal persons and natural persons, to register with the competent local SAFE branch before establishing or controlling any company outside of China. If the PRC subsidiaries of an off-shore parent company do not report the need for their PRC investors to registerSee accompanying notes to the local SAFE authorities, they may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to their off-shore parent company. Although we believe that our subsidiaries are in compliance with these regulations, should these regulations or the interpretation of them by PRC courts or regulatory agencies change, we may not be able to pay dividends outside of China.consolidated financial statements.
 
 
41F-5

 
Securities Authorized for Issuance under Equity Compensation Plans6D GLOBAL TECHNOLOGIES, INC.
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
  For the Years Ended 
  
December 31,
2014
  
December 31,
2013
 
       
 Net income (loss)
 
$
470,565
  
$
(812,563
)
 Other comprehensive income (loss):
        
 Net unrealized gain on marketable securities
  
-
   
3,100
 
 Reclassification to realized gain on sale of marketable securities
  
-
   
(4,817
)
       Other comprehensive loss
  
-
   
(1,717
)
 Comprehensive income (loss)
 
$
470,565
  
$
(814,280
)

During the year ended December 31, 2013, we did not have a formal equity compensation plan in effect. The following table sets forth information regarding all equity compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance as of December 31, 2013.

Equity Compensation Plan Information
Plan category
Number of securities
to be issued upon exercise
of outstanding
options, warrants and rights
Weighted-average exercise
price of outstanding
options, warrants and rights
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities reflected in
column (a))
Equity compensation plans approved by security holders-$--
Equity compensation plans not approved by security holders-$--
Total$0

We did not issue any equity compensation during the fiscal year ended December 31, 2013.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not repurchase any shares of our common stock during the fourth quarter of 2012.

Item 6. Selected Financial Data

Not required.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Overview

We are a manufacturer of structural towers for megawatt-class wind turbines and other highly engineered metal components used in the energy and other industries in the People’s Republic of China, which we refer to as China or the PRC. We currently design, manufacture, test and sell structural towers for 1, 1.5 and 3 megawatt, or MW, on-land wind turbines, and believe we have the expertise and manufacturing capacity to provide towers for higher-powered on-land and off-shore turbines. We are currently the only wind tower manufacturer in Tieling, Liaoning Province, which we believe provides us a competitive advantage in supplying towersSee accompanying notes to the wind-energy-rich northern provinces of China. We also manufacture specialty metal products that require advanced manufacturing and engineering capabilities, including bellows expansion joints and connecting bend pipes used for waste heat recycling in steel production, in ultra-high-voltage electricity transmission grids and industrial pressure vessels. Our products provide solutions for China’s increasing demand for clean energy. consolidated financial statements.
 
We sell our products exclusively in the PRC domestic market. We produce wind towers, a component of wind turbine installations, but do not compete with wind turbine manufacturers. Our specialty metal products are used by large-scale industrial companies involved mainly in the steel and coke, petrochemical, high-voltage electricity transmission and thermoelectric industries.

 
We operate through two wholly owned subsidiaries organized under6D GLOBAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
  Preferred stock  Common stock             
  Shares  Amount  Shares  Amount  Additional paid in capital  Retained earnings (Accumulated deficit)  Accumulated Other Comprehensive Income (Loss)  Total 
Balance at
January 1, 2013
  -  $-   38,215,054  $382  $2,618  $322,585  $1,717  $327,302 
Distribution to stockholders  -   -   -   -   -   (49,972)  -   (49,972)
Net loss  -   -   -   -   -   (812,563)  -   (812,563)
Change in net unrealized gain on marketable securities  -   -   -   -   -   -   (1,717)  (1,717)
Balance at
December 31, 2013
  -   -   38,215,054   382   2,618   (539,950)  -   (536,950)
Promissory note conversion
  -   -   300,001   3   402,499   -   -   402,502 
Private placements, net of issuance costs
          2,859,300   29   4,798,524   -   -   4,798,553 
Reverse recapitalization
  -   -   36,201,262   362   (362)  -   -   - 
Distribution to stockholders
  -   -   -   -   -   (502,371)  -   (502,371)
Net income
  -   -   -   -   -   470,565   -   470,565 
Balance at
December 31, 2014
  -  $-   77,575,617  $776  $5,203,279  $(571,756) $-  $4,632,299 
See accompanying notes to the lawsconsolidated financial statements.
6D GLOBAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Years Ended 
  
December 31,
2014
  
December 31,
2013
 
Cash Flows From Operating Activities:      
Net income (loss)
 
$
470,565
  
$
(812,563
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
        
Depreciation and amortization
  
82,342
   
39,170
 
Amortization of debt issuance costs
  
-
   
1,753
 
Realized gain on sale of marketable securities
  
-
   
(4,817
)
Loss on debt extinguishment
  
57,502
   
-
 
Deferred Tax Benefit
  
(161,255
)
  
-
 
Changes in operating assets and liabilities:
        
Deferred Revenue
  
68,420
   
-
 
Deferred Rent
  
(17,763
)
  
73,192
 
Restricted Cash
  
(200
)
  
(110,499
)
Accounts receivable
  
(198,824
)
  
(208,944
)
Unbilled revenues
  
69,795
   
(123,894
)
Prepaid expenses and other current assets
  
(118,450
)
  
20,255
 
Security deposits
  
24,632
   
(22,808
)
Security deposit payable
  
30,000
   
-
 
Accounts payable and accrued liabilities
  
220,985
   
435,872
 
Net Cash Provided by (Used in) Operating Activities
  
527,749
   
(713,283
)
         
Cash Flows From Investing Activities:
        
Purchase of property & equipment
  
(15,137
)
  
-
 
Proceeds from sale of marketable securities
  
-
   
27,748
 
Loans to related parties
  
(46,433
)
  
(27,935
)
Net Cash Used in Investing Activities
  
(61,570
)
  
(187
)
         
Cash Flows From Financing Activities:
   
 
    
Gross proceeds from line of credit
  
-
   
6,883,286
 
Repayments of line of credit
  
-
 
  
(6,629,950
)
Gross proceeds from factor borrowing
  
11,283,679
 
  
3,526,410
 
Repayments of factor borrowing
  
(11,320,036
)
  
(3,420,290
)
Distribution to stockholders
  
(45,808
)
  
(49,972
)
Repayment of capital lease obligations
  
(57,781
)
  
(36,983
)
Proceeds from issuance of notes payable
  
20,000
   
375,000
 
Repayment of notes payable
  
(261,600
)
  
(6,600
)
Proceeds from private placements, net of issuance costs
  
4,798,553
   
-
 
Net Cash Provided by Financing Activities
  
4,417,007
   
640,901
 
         
Net change in cash
  
4,883,186
   
(72,569
)
         
Cash, beginning of period
  
5,611
   
78,180
 
         
Cash, end of period
 
$
4,888,797
  
$
5,611
 
         
Supplemental disclosures of cash flow information:
        
Cash paid for taxes
 
$
4,495
  
$
-
 
Cash paid for interest
 
$
151,041
  
$
154,549
 
         
Supplemental disclosure of non-cash investing and financing activities:
     
Capital lease of computer equipment
 
$
38,281
  
$
182,303
 
Conversion of notes payable into common stock issuable
 
$
345,000
  
$
-
 
Distribution to stockholders
 
$
456,563
  
$
-
 
Line of credit paid via factor
 
$
-
  
$
764,175
 
Net unrealized gain on marketable securities
 
$
-
  
$
1,717
 
Warrant issuance in connection with private placements
 
$
1,751,962
  
$
-
 
See accompanying notes to the consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization and Operations

6D Global Technologies, Inc. (the “Company or “6D Global”) is a digital business solutions company serving the digital marketing and technology needs of enterprise-class organizations worldwide.  6D Global offers a full suite of services and solutions to help large organizations optimize digital business channels and create better experiences for their customers.  Services include web content management, web analytics, marketing automation, mobile applications, business intelligence, marketing cloud, and IT infrastructure staffing solutions.  In addition, the Company provides digital marketing and digital technology consulting services to leading enterprises during periods of critical change and growth.
As more fully described below, in September 29, 2014, CleanTech Innovations Inc. (“CleanTech”) consummated an Agreement and Plan of Share Exchange (the “Exchange Agreement” or the “Exchange”) with Six Dimensions, Inc., a Nevada corporation formerly known as Initial Koncepts, Inc. (“Six Dimensions”), whereby CleanTech acquired all of the PRC: Liaoning Creative Bellows Co.issued and outstanding capital stock of Six Dimensions, 29,643,068 shares, in exchange for 38,664,871 shares of Common Stock (an exchange ratio of approximately 1.3 shares of CleanTech common stock for each share of Six Dimensions stock), Ltd. and, Liaoning Creative Wind Power Equipment Co.simultaneously therewith, CleanTech completed a private placement equity offering to accredited investors.  Pursuant to this private placement, CleanTech received $4,556,100 in gross proceeds and issued 2,201,031 shares of Common Stock to the purchasers thereunder.  Pursuant to the Exchange Agreement, in September 2014, CleanTech converted into a Delaware corporation whereby it changed its name to 6D Global Technologies, Inc. (stock symbol: “SIXD”, Ltd.website: www.6DGlobal.com), increased the number of its authorized shares of capital stock from 28,985,507 to 160,000,000 shares, of which we refer to as Creative Bellows150,000,000 shares were designated common stock, par value $0.00001 per share (the “Common Stock”) and Creative Wind Power, respectively. Creative Bellows was incorporated on September 17, 2007, and is our wholly foreign-owned enterprise, or WFOE; Creative Bellows owns 100% of Creative Wind Power, which was incorporated on May 26, 2009. Creative Bellows provides the production expertise, employees and facilities to manufacture our wind towers, bellows expansion joints, pressure vessels and other fabricated metal specialty products. Creative Wind Power markets and sells the wind towers designed and manufactured by Creative Bellows.10,000,000 shares were designated preferred stock, par value $0.00001 per share (the “Preferred Stock”).

Reverse Recapitalization
   
Our organizational structureSix Dimensions was originally incorporated as Initial Koncepts, Inc. in the State of California on February 9, 2004.  On June 25, 2014, Initial Koncepts, Inc. converted from an S-Corporation into a California LLC and changed its name to Six Dimensions, LLC.  On June 27, 2014, Six Dimensions, LLC converted into a Nevada C-Corporation and changed its name to Six Dimensions, Inc.

On September 29, 2014, the Company undertook the following events:

·  Converted into a Delaware corporation.
·  Changed its name to 6D Global Technologies, Inc.
·  Increased the number of its authorized shares of capital stock from 28,985,507 to 160,000,000 of which 150,000,000 shares were designated Common Stock, par value $0.00001 per share and 10,000,000 shares were designated Preferred Stock, par value $0.00001 per share.

On the same date and concurrently to the transactions described above, the Company also undertook the following transactions;

·  Share exchange - CleanTech consummated the Exchange Agreement with Six Dimensions, Inc., whereby the Company acquired all of the issued and outstanding capital stock of Six Dimensions in exchange for 38,664,871 shares of Common Stock.
·  Private placement ­- CleanTech completed a private placement equity offering to accredited investors.  The Company received $4,556,100 in gross proceeds and issued 2,201,031 shares of Common Stock.
·  Debt conversion - CleanTech converted approximately $16,000,000 of debt owed to NYGG (Asia) LTD. in exchange for 35,149,883 shares of Common Stock.
·  Stock split – CleanTech shares of Common Stock were increased by 1,051,379 after a 2 for 3 reverse stock split.

The Exchange is being treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since substantially all of CleanTech's operations were disposed of prior to the consummation of the transaction.  Six Dimensions is treated as the accounting acquirer as its stockholders control the Company after the Exchange Agreement, even though CleanTech was the legal acquirer.  As a result, the assets and liabilities and the historical operations that are reflected in these financial statements are those of Six Dimensions as if Six Dimensions had always been the reporting company and, on the date of this report is set forth in the following diagram:Exchange Agreement, changed its name and reorganized its capital stock.  Since CleanTech had no operations upon the Exchange Agreement taking place, the transaction was treated as a reverse recapitalization for accounting purposes and no goodwill or other intangible assets were recorded by the Company as a result of the Exchange Agreement.  Historical common stock amounts and additional paid-in capital have been retroactively adjusted using the exchange ratio of approximately 1.3 shares of CleanTech Common Stock for each one common share of Six Dimensions.

 
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Note 2 – Significant and Critical Accounting Policies and Practices

While our significantThe management of the Company is responsible for the selection and use of appropriate accounting policies are more fully described in Note 2 to our consolidated financial statements, we believeand the followingappropriateness of accounting policies and their application.  Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.  The Company’s significant and critical to aid youaccounting policies and practices are disclosed below as required by accounting principles generally accepted in understanding and evaluating this management discussion and analysis.the United States of America (“U.S. GAAP”).

Basis of Presentation

OurThe accompanying consolidated financial statements arehave been prepared in accordance with generally accepted accounting principles inU.S. GAAP for year-end financial information and the United States, orrules and regulations of the Securities and Exchange Commission (the “SEC”).  Accordingly, since they are year-end statements, the accompanying consolidated financial statements include all of the information and notes required by U.S. GAAP.

Going Concern

We incurredGAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a net lossfair presentation of $16.43 millionthe financial position for the year ended December 31, 2013. In addition, we had loans as2014 and results of operations and cash flows for the annual periods presented.  The consolidated financial statements for the year ended December 31, 2013 for $2.26 million and promissory notes of $10 million and $50,000 that are past due. Through a new Line of Credit Agreement entered with the same lender on August 17, 2013, the default promissory note of $10 million became payable upon Note-holder’s request. As of December 31, 2013, the Company had an outstanding balance of $645,348 including accrued interest under this credit line and short term payable of $442,827 currently in default. We have been unable to raise fundswere derived from the U.S. markets to pay off these obligations. These conditions raise a substantial doubtaudited financial statements as to whether we may continue as a going concern. We are seeking to obtain additional financing from local banks in the PRC.  We will also seek to improve our cash flows from operations by implementing cost control measures and reducing our inventory purchases.of that date.

Principles of Consolidation

The Company’s consolidated financial statements include theall of its accounts of CleanTech, Creative Bellows and Creative Wind Power. Allany intercompany transactions and account balances arehave been eliminated in consolidation.
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accordance with U.S. GAAP.  The Company has one subsidiary, Six Dimensions, Inc. organized as two operating segments that are combined into one reporting segment.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

In preparing
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management makesto make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuresdisclosure of contingent assets and liabilities at the datesdate(s) of the financial statements as well asand the reported amounts of revenues and expenses during the reporting period. Significantperiod(s). Management bases its estimates required by management, includeon historical experience and on various other assumptions it believes to be reasonable under the recoverabilitycircumstances, the results of long-livedwhich form the basis for making judgments about the carrying values of assets and the valuation of inventories.liabilities.  Actual results couldmay differ from those estimates.these estimates and such differences may be material.
 
Accounts and Retentions Receivable

We maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Past due receivables are determined based on payment terms specified in the contract. We do not anticipate any significant credit risk because the majority of our customers are large, well-capitalized state-owned and publicly traded utility and industrial companies with stable operations. The retention is 10% of the sales price with a term of one year, but no later than the termination of the warranty period.

Revenue Recognition

Our revenue recognition policies are in compliance with Securities Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) 104 (codified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605). Sales revenue, including the final 10% of the purchase price, is recognized after delivery is complete, customer acceptance of the product occurs and collectability is reasonably assured. Customer acceptance occurs after the customer puts the product through a quality inspection, which normally is completed within one to two weeks from customer receipt of the product. In case of sales contracts with FOB shipping terms, the customer is responsible for the cost of freight, and insurance and revenue is recognized when products are delivered to the carrier. In case of sales contracts with FOB destination terms, the Company is responsible for the cost of freight, and insurance and revenue is recognized when customer acceptance is received. The customer is responsible for installation and integration of our products into its end products. Payments received before satisfaction of all relevant criteria for revenue recognition are recorded as unearned revenue. Unearned revenue consists of payments received from customers prior to customer acceptance of our products.

Sales revenue represents the invoiced value of goods, net of value-added tax, or VAT. Our products sold and services provided in China are subject to VAT of 17% of gross sales price. This VAT may be offset by VAT paid by us on raw materials and other materials included in the cost of producing the finished product. We recorded VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.

Segment Reporting

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (codified in FASB ASC Topic 280), requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within a company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure or any other manner in which management disaggregates a company.

Management determined our product lines – wind towers, bellows expansion joints and pressure vessels – constitute a single reportable segment under ASC 280. We operate in one business: the design and manufacture of highly engineered metal components for heavy industry. The manufacturing processes for our products, principally rolling and welding of raw steel materials, use the same production workers and engineering talent for design, fabrication, assembly and testing. Our products are characterized and marketed by their ability to withstand temperature, pressure, structural load and other environmental factors. Our products are used by major electrical utilities and large-scale industrial companies in China specializing in heavy industry, and our sales force sells our products directly to these companies, which utilize our components in their finished products. All of our long-lived assets for production are located in our facilities in Tieling, Liaoning Province, China, and operate within the same environmental, safety and quality regulations governing industrial component manufacturing companies. We established our subsidiary, Creative Wind Power, to market and sell our wind towers, which constitute the structural support cylinder for industrial wind turbines. Management believes the economic characteristicsCompany’s critical accounting policies and estimates are those related to revenue recognition, allowances, leases and income taxes.

Fair Value of our product lines, specifically costsFinancial Instruments

The Company has categorized its financial assets and gross margin, willliabilities measured at fair value into a three level hierarchy in accordance with U.S. GAAP.  Fair value is defined as an exit price, the amount that would be similar as production increasesreceived upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date.  The degree of judgment utilized in measuring the fair value of assets and labor continuesliabilities generally correlates to the level of pricing observability.  Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be shared across products.measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value.  Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment.  These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability.

The three (3) levels of fair value hierarchy are described below:
Level 1Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3Pricing inputs that are generally observable inputs and not corroborated by market data.

 
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We initiated salesThe carrying amounts of our wind towers in 2010, which have a comparatively lower margin then our bellows expansion jointsthe Company’s financial assets and pressure vesselsliabilities, such as cash, accounts receivable, unbilled revenues, prepaid expense and other current assets, accounts payable, and due to factor, approximate their fair values because of higher raw material costs. Gross margins for our bellows expansion joints and pressure vessels decreased since 2010 as we have broadenedthe short maturity of these product lines to include more components with lower margins. Higher raw material costs in 2012 and 2013 decreased our gross margins on all products, but as our overall mix of products and product gross margins continue to broaden, we expect the gross margins of our product lines to converge and stabilize in the long run. As a result, management views our business and operations for all product lines as a blended gross margin when determining future growth, return on investment and cash flows. Accordingly, management has concluded that we have one reportable segment under ASC 280 because: (i) all of our products are created with similar production processes, in the same facilities, under the same regulatory environment and sold to similar customers using similar distribution systems; and (ii) gross margins of all product lines have been converging and should continue to converge.
RESULTS OF OPERATIONSinstruments.

The year ended December 31, 2013, comparedCompany’s capital lease liability and notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the year ended December 31, 2012

The following table presents the consolidated results of operationsCompany for similar financial arrangements for the years ended December 31, 20132014 and 2012. 
  2013  2012 
  $  % of Sales  $  % of Sales 
Net sales  5,894,264   100 %  4,821,340   100 %
Cost of goods sold  8,062,625   137 %  3,972,934   82 %
Gross profit (loss)  (2,168,361  (37) %  848,406   18 %
Operating expenses  10,770,941   183 %  7,035,355   146 %
Loss from operations  (12,939,302  (220)%  (6,186,949)  (128)%
Total non-operating expense  (3,492,018  (59)%  (1,113,862)  (23)%
Loss before income tax  (16,431,320  (279)%  (7,300,811)  (151)%
Income tax expense  -     - %   -   -%
Net loss  (16,431,320  (279)%  (7,300,811)  (151)%

NET SALES

Net sales for the year ended December 31, 2013 increased to $5.89 million from $4.82 million for the comparable period of 2012, an increase of $1.07 million or 22%. Net sales for the year ended December 31, 2013, consisted of $0.85 million in sales of bellows expansion joints, $3.32 million in sales of pressure vessels, $1.06 million in sales of wind towers, and $0.67 million in other sales. Net sales for the comparable period of 2012 consisted of $0.82 million in sales of bellows expansion joints, $3.58 million in sales of pressure vessels and $0.42 million in other sales. The increase was due to the sale of wind tower projects for $1.06 million in the year ended December 31, 2013 while we only had $165 sales in wind tower accessories in the comparable period of 2012.  Our ability to raise capital to finance our already signed wind tower contracts has proven impossible in 2012 since a decision by the NASDAQ Listing Qualifications Department in January 2011 to delist our common stock. However, on July 11, 2013, the SEC reversed the 2011 delisting of the Company’s stock on the NASDAQ Stock Market, LLC, and ordered the Company’s stock listed on the NASDAQ Stock Market. We hope we can reconnect to the capital market and raise capital to support our winder tower operations as a result of SEC decision of ordering our stock listed on the NASDAQ Stock Market. We re-launch the sales of wind tower projects in 2013 was a positive reaction from our customers as a result of SEC decision of ordering our stock listed on the NASDAQ Stock Market.

COST OF GOODS SOLD

Cost of goods sold (“COGS”) for the year ended December 31, 2013 increased to $8.06 million from $3.97 million for the comparable period of 2012. COGS include material costs, primarily steel, labor and related overhead costs. The increased COGS was due primarily to increased provision for inventory impairment and increased production. We also faced increased raw material costs with respect to the production of all of our products due to overall inflation being experienced in China. COGS as a percentage of net sales was 137% in the year ended December 31, 2013 compared to 82% for the 2012 period, the increase in COGS to total sales was mainly due to increased provision for inventory impairment of $3.34 million in 2013 comparing with $0.21 million in 2012, and increased production of wind tower products which usually have higher production cost including increased fixed costs such as depreciation and salary expense.

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GROSS PROFIT (LOSS)

Gross profit (loss) for the year ended December 31, 2013 decreased to $(2.17) million loss from $0.85 million profit for the 2012 period. Profit margin decreased to (37)% for the year ended December 31, 2013 from 18% for the 2012 period, as a result of inventory impairment provision of $3.34 million in 2013, and increased production of wind tower products including increased fixed cost.
OPERATING EXPENSES

Operating expenses for the year ended December 31, 2013 increased to $10.77 million from $7.04 million for the 2012 period. The increase of operating expense is mainly due to increased bad debt expense of $7.91 million for other receivables and advance to suppliers for the year ended December 31, 2013, while we had $4.20 million bad debt expensefor the year ended December 31, 2012. Operating expenses as a percentage of net sales for the year ended December 31, 2013 was 183% compared to 146% for the 2012 period.  Our selling expense increased by $0.53 million in 2013 was a result of increased sales, while our G&A expenses decreased by $0.48 million in 2013 was mainly due to our effort on budget and expense control.

TOTAL NON-OPERATING INCOME (EXPENSE)

Total non-operating expense for the year ended December 31, 2013 was $3,492,018 and consisted mainly of $3,635,046 in interest expense, but offset with net other income of $143,028, compared to $1,113,862 for the year ended December 31, 2012, which consisted mainly of $1,322,278 in interest expense,but offset with $171,090 government subsidy income.For the year ended December 31, 2012, the subsidy income included $161,584 government support for developing the advance technology for pressure vessels and $9,505 as Development Zone Reward.

NET INCOME (LOSS)

Net loss for the year ended December 31, 2013 was $16.43 million compared to net loss of $7.30 million for the 2012 period. Net loss as a percentage of net sales for the year ended December 31, 2013 was 279% compared to 151% for the 2012 period. The increase in net loss was attributable to increased bad debt provision and inventory impairment provision.

LIQUIDITY AND CAPITAL RESOURCES

The year ended December 31, 2013, compared to the year ended December 31, 2012

Our operational and liquidity needs are funded primarily through cash flows from operations, short-term borrowings, shareholder contributions and financing through capital markets. The cash was used primarily in operations and plant construction.

As of December 31, 2013, we had cash and equivalents of $8,178, other current assets of $13,321,754 and current liabilities of $20,781,027. Working capital deficit was $7,451,095 at December 31, 2013. The ratio of current assets to current liabilities was 0.64-to-1 as of December 31, 2013.

Cash

Cash consists of checking accounts, marketable securities and money market accounts.  The followingCompany considers all highly-liquid investments purchased with an original maturity of three months or less to be cash.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts.  The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

Management charges balances off against the allowance after all means of collection have been exhausted and the potential for recovery is a summary of cash provided byconsidered remote.  The Company determines when receivables are past due or used in eachdelinquent based on how recently payments have been received.

Outstanding account balances are reviewed individually for collectability.  The allowance for doubtful accounts is the Company’s best estimate of the indicated typesamount of activities duringprobable credit losses in the Company’s existing accounts receivable.  For the years ended December 31, 2014 and 2013, and 2012:
  2013  2012 
Cash provided by (used in):      
Operating activities $159,641  $265,709 
Investing activities  (4,922  (607,587)
Financing activities  (332,822  (686,860

Net cash provided by operating activitiesthe allowance for doubtful accounts was $159,641not material.  Additionally there were no write-offs of the Company accounts receivables for the yearyears ended December 31, 2013, compared to $265,709 for the 2012 period. The decrease in net cash provided in operating activities during the year ended December 31, 2013 was due mainly to increased net loss of $16.43 million, although the net loss was offset by noncash expense of bad debt allowance of $7.91 million, and provision for inventory impairment of $3.34 million, and increased accrued expenses, but we had increased cash outflow resulting from less payments received from advance from customer of $1.16 million, while we had cash inflow of $1.19 million from advance from customer in 2012.2014 or 2013.

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The Company does not have any off-balance-sheet credit exposure to its customers.
 
Net cash used in investing activities was $4,922 during the year ended December 31, 2013 comparedProperty and Equipment

Property and equipment is recorded at cost.  Expenditures for major additions and betterments are capitalized.  Maintenance and repairs are charged to net cash used in investing activities of $607,587 for the 2012 period. The cash used in investing activities in the year ended December 31, 2013 was for the payment for purchasingoperations as incurred.  Depreciation of property and equipment for $51,329 and acquisitionis computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of intangiblethe respective assets of $50,146, but offset with receiving of payment of $96,553 from cancellation of long-term investment.  In the year ended December 31, 2012, the cash used in investing activities was for the purchase of property and equipment for $3,151, construction in progress for $25,030, and prepayment for construction for $579,406.as follows:

Net cash used
Estimated Useful Life (Years)
Machinery and Equipment1 – 3
Furniture4 – 4.5
Software
3

Leases

Lease agreements are evaluated to determine if they are capital leases meeting any of the following criteria at inception: (a) Transfer of ownership; (b) Bargain purchase option; (c) The lease term is equal to 75 percent or more of the estimated economic life of the leased property; (d) The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.

If at its inception a lease meets any of the four lease criteria above, the lease is classified by the lessee as a capital lease; and if none of the four criteria are met, the lease is classified by the lessee as an operating lease.

Contingencies

Occasionally, the Company may be involved in financing activities was $332,822 forclaims and legal proceedings arising from the year ended December 31, 2013 compared to net cash used in financing activitiesordinary course of $686,860 million for the 2012 period.its business.  The cash outflow in the year ended December 31, 2013 was for repayment of $1.06 million for the short-term loan, offset withCompany records a payment from shareholder of $90,311 and proceeds from credit line of $638,951. In the year ended December 31, 2012, we repaid $95,050provision for a short-term loan, $210,028 net payment toliability when it believes that is both probable that a liability has been incurred, and the shareholder, and repayment of long-term payable of $0.38 million.
Our standard payment terms with our wind tower customers generally provide that 10% of the purchase price is due upon our deposit of restricted cash into a bank account as a contract guarantee, 20% upon our purchase of raw material for the order, 10% upon delivery of the base ring component of the wind towers, 30% upon delivery of the wind tower tube sections and 20% upon customer inspection and acceptance of the product, which customers normally complete within 1-2 weeks after delivery. As a common practice in the manufacturing business in China, payment of the final 10% of the purchase price is due no later than the termination date of the product warranty period, whichamount can be upreasonably estimated.  If these estimates and assumptions change or prove to 12 months from the customer acceptance date. For our bellows expansion joints and pressure vessels, payment terms are negotiated on a case-by-case basis and these payment percentages and terms may differ for each customer. We may experience payment delays from time to time of up to six months from the due date, but we expect to receive all payments despite any customer delays in payment. We do not anticipate any significant credit risk because the majority of our customers are large, well-capitalized state-owned and publicly traded utility and industrial companies with stable operations. Furthermore, we do not believe the delays have a significant negative impact on our liquidity as payment delays are very common in the manufacturing industry in China.

As of December 31, 2013, we had accounts receivable of $6,523,998 (before bad debt allowance of $4,523,084), of which $835,765 was current, $528,518 had aging over 30 days, $454,930 had aging over 90 days, $991,034 had aging over 180 days and $3,713,751 had aging over 360 days.

Recent Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-2, Comprehensive Income (ASC Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, the new ASU requires entities to disclose in a single location (either on the face of the financial statement that reports net income or in the notes) the effects of reclassifications out of accumulated other comprehensive income (AOCI). For items reclassified out of AOCI and into net income in their entirety, entities must disclose the effect of the reclassification on each affected net income item. For AOCI reclassification items that are not reclassified in their entirety into net income, entities must provide a cross-reference to other required U.S. GAAP disclosures. There is no change in the requirement to present the components of net income and other comprehensive income in either a single continuous statement or two separate consecutive statements.  The ASU does not change the items currently reported in other comprehensive income.
For public entities, the new disclosure requirements are effective for annual reporting periods beginning after December 15, 2012, and interim periods within those years. The ASU applies prospectively, and early adoption is permitted. The adoption of this ASU did notbe incorrect, it could have a material impact on the Company’s consolidated financial statements.
Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee  Contingencies are inherently unpredictable and the payment obligations of any third parties. We have not entered into any derivative contracts indexed to our shares and classified as stockholders’ equity or 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. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

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Contractual Obligations

On September 21, 2009, we entered into a construction contract with a local authority, the Administration Committee for Liaoning Special Vehicle Production Base, or LSVPB, to build a plant for us. Under the termsassessments of the construction agreement, LSVPB was responsible for the constructionvalue can involve a series of the plantcomplex judgments about future events and we pledged the plant as collateral for our payment to LSVPB of $1,944,151 (RMB 12,249,900) in plant construction costs in five equal annual installment payments starting in October 2010 with $388,830 (RMB 2,449,980) as the first installment amount. In the fourth quarter of 2011, the Company received a subsidy from LSVPB of $1.11 million (RMB 7,000,000) against the outstanding payment. In the first quarter of 2012, the Company repaid $382,886 (RMB 2,410,000). During 2013, the Company did not make any paymentscan rely heavily on estimates and was in default  as of December 31, 2013. The Company expects to pay the  outstanding amount of $442,827 in full by October 2014.

On September 13, 2010, we borrowed $1,827,050, $953,243 and $556,059 from three different credit unions. Each loan bore interest of 7.2% and was to mature on September 12, 2011. As of December 31, 2013, we repaid one of the three loans and the othertwo loans (which were paid in full in the first quarter 2014) were in default and an additional 3.6% interest on the remaining principal amount of the loans was charged for the overdue period. These loans were collateralized by one of the Company’s buildings and its land use right.  During the year ended December 31, 2013, we repaid $1.08 million.

On December 13, 2010, we entered into a loan with a lender for $10 million. At the Lender’s option, the principal amount of the note and all interest thereon shall be paid in either USD or RMB at an exchange rate of RMB 6.90 to USD 1.00 if paid on or before March 1, 2012, and thereafter at an exchange rate of RMB 6.30 to USD 1.00 to the Lender or any designee of Lender as provided to us in writing by Lender. The loan bore interest of 10% payable in advance at the beginning of each quarter with a maturity of March 1, 2012. The loan was amended to mature on March 1, 2013, and to decrease the interest rate to 8.5%, effective March 1, 2012, which interest shall be payable quarterly in advance. From March 1, 2012 through August 13, 2013, we were in default on interest payment that was required to pay in advance; we were also in default in payment of $10 million loan due on March 1, 2013. The interest, from the date of the Default, was at the lesser of 24% or the maximum applicable legal rate.  Accordingly, we used 24% as default interest rate from March 1, 2012 through August 13, 2013.  After August 13, 2013, the interest rate on the $10 million loan was 8.5% according to the Line of Credit Agreement descried below.Wehad interest payable of $3.63 million on this loan as of December 31, 2013.

Through a new Line of Credit Agreement entered with the same lender on August 17, 2013, this default loan became payable upon Note-holder’s request and the interest rate at 8.5% after August 13, 2013.  The Promissory Note entered on August 17, 2013 along with an Escrow Agreement was for a Line of Credit available to us of up to $10 million. The lender deposited the loan amount into an escrow account, and the escrow agent shall disburse some or all of the deposit from time to time as directed in writing by the lender for advancing us to pay expenses that are approved by the lender. The applicable interest rate for this line of credit is 3% during the first six months following each advance, and 0% thereafter, to be paid on the first day of each month, with maturity upon Note-holder’s request.  The promissory note has a default rate of 24%.  As of December 31, 2013, we borrowed $0.64 million from the credit line and accrued interest of $6,367.

On December 14, 2011, we entered into a 3% promissory note for $50,000 for paying legal expenses, maturing on February 1, 2012. As of the date of this report, the Note is past due and default interest at 6% is accruing.

At December 31, 2013, we had short-term loans outstanding of $12,952,396, and total accrued interest of $3.67 million.

Pending Litigation
As of March 31, 2012, Creative Bellows had a case pending in arbitration for the recovery of approximately one million RMB. Creative Bellows filed the arbitration proceeding for a breach of contract by Dongbei Jincheng Construction Co., Ltd., a plant construction contractor. On March 14, 2013, Dongbei JinCheng filed a complaint in the Tieling Intermediate People’s Court against the Company, alleging that the Company owes it construction costs in the amount of RMB 2,400,099.82 plus RMB 700,000 interest and RMB 28,176 arbitration expenses. On March 19, 2013, the company filed a counterclaim against Dongbei JinCheng, alleging that Dongbei JinCheng breached the contract by failing to complete the construction work according to quality specifications. The Company sought in RMB 2,197,131.53 monetary damages. On October 9, 2013, Dongbei JinCheng was ordered by the court to pay RMB 27,000 examination fee, RMB 77,413.89 repair costs and RMB 13,000 design and appraisal costs to the Company. On October 10, 2013, the Company filed an appeal against Dongbei JinCheng to Liaoning High People’s Court in order to obtain higher damages. As of April 4, 2014, this case is under review by Liaoning High People’s Court.
48

On January 5, 2012, the Company filed an amended complaint in the United States District Court for the Southern District of New York against the NASDAQ Stock Market, LLC and NASDAQ OMX Group, referred to collectively as NASDAQ. The Company alleged that NASDAQ’s actions resulted in a violation of the Company’s equal protection rights under the United States Constitution, amounted to selective prosecution and intentionally breached the Company’s attorney-client privilege.  The Company sought a permanent injunction enjoining NASDAQ from using its discriminatory policies against the Company and also sought at least $300 million in monetary damages.  On January 31, 2012, the amended complaint was dismissed on the basis of a lack of subject matter jurisdiction. The Company did not appeal to the Second Circuit Court of Appeals so it could focus on its appeal to the SEC of NASDAQ Listing Qualifications determination to delist the Company’s common stock.

The Company applied to the SEC for a review of the final delisting decision made by NASDAQ Listing Qualifications. Among other reasons for review, the Company claimed inherent procedural unfairness attendant to the decision to overturn a remand to NASDAQ’s Hearings Panel for further fact finding on the matter based on alleged “ex-parte communication.”  The Company sought to have the delisting decision to be overturned. On July 11, 2013, the SEC reversed the 2011 delisting of the Company’s stock on the NASDAQ Stock Market, LLC, and ordered that the Company’s stock be listed on the NASDAQ Stock Market.

On March 21, 2012, Fensterstock & Partners LLP, filed a complaint in the Supreme Court of the State of New York against the Company, and others, seeking $400,808 in unpaid legal fees in connection with Fensterstock’s representation of the Company in its suit against the NASDAQ Stock Market, LLC and NASDAQ OMX Group. The Company filed an answer to the complaint, denying the material allegations of the complaint. Fensterstock filed a motion for partial summary judgment on its claim for “account stated" and the Company then filed papers in opposition to Fensterstock’s motion for partial summary judgment. On October 9, 2012, the court awarded a judgment in favor of Fensterstock & Partners LLP of 423,333.26 (original due of $400,808 plus accrued interest from March 1, 2012 through August 24, 2012) plus interest at 9% until paid in full.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not required.

Item 8. Financial Statements and Supplementary Data

Our financial statements, together with the report thereon, appear in a separate section of this Annual Report beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and under the supervision of our principal executive officer, the Chief Executive Officer, or CEO, and principal financial officer, the Chief Financial Officer, or CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of December 31, 2013. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were not effective as of such date because of a material weakness identified in our internal control over financial reporting related to our internal level of U.S. GAAP expertise such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.assumptions.
 
 
49

Report of Management on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

§pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

§provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorizations of our management and directors;

§provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, internal control over financial reporting determined to be effective provides only reasonable assurance regarding the reliability of financial reporting and the preparations of financial statements for external purposes in accordance with generally accepted accounting principles.

We carried out an evaluation of the effectiveness, as of December 31, 2013, of the design and operation of our internal control over financial reporting pursuant to Rule 13a-15 of the Exchange Act, which was conducted under the supervision and with the participation of our CEO and CFO. This evaluation was based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in the report entitled “Internal Control – Integrated Framework.” Based on this evaluation, our  Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2013, our disclosure controls and procedures were not effective as of such date because of a material weakness identified in our internal control over financial reporting related to our internal level of U.S. GAAP expertise. We lack sufficient personnel with the appropriate level of knowledge, experience and training in U.S. GAAP for the preparation of financial statements in accordance with U.S. GAAP. None of our internal accounting staff, including our Chief Financial Officer, that are primarily responsible for the preparation of our books and records and financial statements in compliance with U.S. GAAP holds a license such as Certified Public Accountant in the U.S., nor have any attended U.S. institutions or extended educational programs that would provide enough of the relevant education relating to U.S. GAAP.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting pursuant to the exemption for smaller reporting companies under Item 308 of Regulation S-K.

Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended December 31, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Item 9B. Other Information

None.
50

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following table sets forth the names of our current directors, executive officers and certain significant employees and their ages, positions and biographical information. Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. Each executive officer is a full time employee. Our directors hold office for one-year terms or until their successors have been elected and qualified. Bei Lv, our Chairman and Chief Executive Officer, is the daughter of Dianfu Lv, one of our directors. There are no other family relationships between any of our directors, executive officers or other key personnel and any other of our directors, executive officers or key personnel. There are no arrangements or understandings between any of our directors or executive officers and any other persons pursuant to which such director or executive officer was selected in that capacity.

NamePositionAge
Bei LvChairman and Chief Executive Officer43
Fengjun SunChief Financial Officer42
Limin HanChief Operating Officer53
Dianfu LvDirector73
Shuyuan LiuDirector63
Zili ZhaoDirector64
Terry K. McEwenDirector55

Biographies

Ms. Bei Lv, Chairman and Chief Executive Officer

Ms. Lv was appointed our Chairman and Chief Executive Officer on July 2, 2010. Ms. Lv was one of the founders of Liaoning Creative Bellows Co., Ltd., or Creative Bellows, in September 2007, which is now our wholly owned subsidiary, and was appointed its Chairman of the Board and Chief Executive Officer in September 2007. From September 1993 to July 2007, Ms. Lv served as General Manager of Shenyang Xinxingjia Bellows Manufacture Co., Ltd. Since 2006, Ms. Lv has served as the Vice Chairman of the Professional Manager Association of Liaoning Province. In 2005, the China Professional Manager Research Center of State-owned Assets Supervision and Administration Commission (SASAC) and China National Center for Human Resources Ministry of Personnel selected Ms. Lv as a National Excellent Professional Manager. Ms. Lv has designed two patented bellows expansion joint products. Ms. Lv received her bachelor’s degree from Shenyang University of Technology in 1992. Ms. Lv is the daughter of Dianfu Lv, one of our directors. As one of our founders, Ms. Lv brings to the Board of Directors her extensive knowledge of our operations and long-term strategy. The Board of Directors believes Ms. Lv’s vision, leadership and extensive knowledge of us is essential to our future growth. Her skills include operations, marketing, business strategy and product development.

Fengjun Sun, Chief Financial Officer

Ms.Sun was appointed our Chief Financial Officer in October of 2010. From April 2007 – April 2019, Ms. Sun worked as a project manager at Jinkai Group,  and from May 2009 – August 2012 as a project manager at China Audit International, CPA Ltd.  Ms. Sun is a Certified Public Accountant, Certified Tax Agent and a Certified Public Appraiser in China. In her prior positions as project manager, Ms. Sun was responsible for auditing public companies in China and assets appraisal. Ms. Sun has extensive experience in professional financial management and internal controls.

51F-11


Limin Han, Chief Operating OfficerRevenue Recognition

Mr. Han was appointed our Chief Operating OfficerThe Company provides its services primarily under time-and-materials contracts.  Revenues earned under time-and-material arrangements are recognized as services are provided.  The Company recognizes revenue from the provision of professional services when it is realized or realizable and General Manager in Octoberearned.  The Company considers revenue realized or realizable and earned when all of 2010. From January 2009 – September 2010, Mr Han worked at the Shenyang LZ Manufacturing Co., LTDfollowing criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered to the customer, (iii) the sales price is fixed or determinable and (iv) collectability is reasonably assured.  Appropriate allowances for discounts are recorded concurrent with revenue recognition.

In accordance with ASC 605, Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses, the Company classifies reimbursed expenses as a General Manager for manufacturing. In his prior position, Mr. Han was responsible for supervising manufacturing operations in China based manufacturing company before being assigned as a general manager. In that position, Mr. Han was responsible for manufacturing, quality controlrevenue and coordinating operationsthe related expense within cost of all departmentsrevenue in the company. Mr. Sunaccompanying consolidated statements of operations.  For the years ended December 31, 2014 and 2013, the reimbursed expenses of $732,107 and $439,973 respectively, were included in revenue.

For fixed price service arrangements the Company applies the proportional performance model to recognize revenue.  When customer acceptance provisions exist, the Company is generally able to reliably demonstrate that the service meets, or will meet upon completion, the customer acceptance criteria.  If circumstances exist which prevent the Company from verifying compliance with the acceptance provisions until the service has over 20-yearbeen completed, revenue is not recognized until compliance can be verified.

Revenues recognized in excess of front-line experiencethe amounts invoiced to clients are classified as unbilled revenues in management from production designthe Company’s consolidated balance sheets.  For the years ended December 31, 2014 and 2013 the balance of unbilled revenue was $62,049 and $131,844, respectively.

The Company may record deferred revenue in circumstances where the customer’s contract calls for pre-billing of services. Amounts in deferred revenue are realized when the services are provided and the criteria noted above are met.  For the years ended December 31, 2014 and 2013, the balance of deferred revenues was $68,420 and $0, respectively.

Advertising Costs

Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to manufacturing.  His manufacturing experience is with products similar$75,707 and $31,967 for the years ended December 31, 2014 and 2013, respectively.

Research and Development

Because the industries in which we compete are characterized by rapid technological advances, our ability to bellowscompete successfully depends heavily upon our ability to ensure a continual and pressure vessels.timely flow of competitive services to the marketplace.  Total research and development expense was $0 for the years ended December 31, 2014 and 2013.
 
Dianfu Lv, DirectorOperating Expenses

Mr. Lv was appointedOur operating expenses encompass selling, general and administrative expenses consisting primarily of compensation and related costs for personnel and costs related to our Boardfacilities, finance, human resources, information technology and fees for professional services.  Professional services are principally comprised of Directors on July 2, 2010,outside legal, audit, information technology consulting, marketing and also serves as our Vice President of Operations. Mr. Lv was one of the founders of Creative Bellows in 2007, which is now our wholly owned subsidiary, and was appointed its Director in September 2007. From 1991 to 2007, Mr. Lv served as the Director of Shenyang Xinxingjia Bellows Manufacture Co., Ltd. From 1989 to 1990, Mr. Lv served as the General Engineer of Shenyang Bellows Group. From 1985 to 1989, Mr. Lv served as the Research Director of Shenyang Machinery Design & Research Institute. From 1963 to 1985, Mr. Lv served as a Senior Engineer of the Shenyang Second Tractor Plant. Mr. Lv received his bachelor’s degree in Machinery Manufacture and Design from the Shenyang University of Technology in 1963. Mr. Lv is the father of Bei Lv, our Chairman and Chief Executive Officer. Mr. Lv brings to the Board of Directors extensive knowledge of industrial product development through his nearly 40 years of design and manufacturing experience in China. The Board of Directors believes Mr. Lv’s knowledge of us and our operations, long-term strategy and industry as one of our founders is essential to our future growth. His skills include operations, business and product development, industry analysis and risk assessment.

Terry K. McEwen, Director

On September 30, 2013, the Board of Directors of CleanTech Innovations, Inc. voted to appoint Terry K. McEwen as a member of the Board of Directors, Chairman of the Audit Committee, and member of the Compensation Committee and Nominating and Corporate Governance Committee effectively immediately.  The Board of Directors has determined that Mr. McEwen is an independent director pursuant to the NASDAQ Stock Market listed company standards and the independence standards set forth in our corporate governance guidelines.  Mr. McEwen will receive compensation of $50,000 per annum.
Mr. McEwen has over thirty years’ experience in finance with a particular focus on banking.  Most noteworthy, from May 2006 to May 2010, Mr. McEwen served as the Director of Banking for the State of New Jersey Department of Banking and Insurance, a Governor appointed position that required confirmation by the State of New Jersey Senate.  In his position as Director of Banking, Mr. McEwen was responsible for the regulation, oversight, soundness and integrity of the $170 billion finance industry in New Jersey, which includes banks, credit unions, mortgage bankers & brokers, check cashers, industrial loan companies, realtors, pawn brokers, and a variety of other financial related entities.   In this position, he also served on a variety of national committees involving State banking regulatory authorities, including representing State regulatory authorities in Washington, D.C. in connection with the sub-prime crisis,outsourcing services as well as testifying before the New Jersey State Senate on bankingcosts related matters.to being a publically traded company.

Presently, Mr. McEwen is Managing Partner of Preservation Capital Services, LLC, a financial advisory firm that provides strategic financial advice to organizations interested in asset growth and/or the acquisition of tactical assets.Earnings (Loss) Per Share

Mr. McEwen is a 1980 graduateThe Company follows ASC 260, “Earnings Per Share” (“EPS”), which requires presentation of basic and diluted EPS on the face of the University of Pittsburgh, Pittsburgh, PA, where he was awardedincome statements for all entities with complex capital structures, and requires a B.S. in Business Administration, with a minor in economics and psychology, and was a memberreconciliation of the University’s 1976 National Championship football team.  Additionally,numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.  In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during his business career, Mr. McEwen attended Rider University, Lawrenceville, NJ, where he earned a Master of Business Administration (MBA) in 1998.the period.  Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
 
 
52F-12


Shuyuan Liu, Director

Mr. Liu was appointed to our Board of Directors on July 13, 2010, and serves currently as the Chairman of our Nominating and Corporate Governance Committee and member of our Audit Committee and Compensation Committee. Mr. Liu brings to the Board of Directors extensive business and financial experience in the energy and steel industries in China. Mr. Liu is a former director at China Huaneng Power International, Inc., one of the five largest power producers in China engaging in the development, construction and operation of large power plants. Since 2000, Mr. Liu has served as the Chairman of Liaoning Energy Investment (Group) Co., Ltd., a large government-authorized investment company in China specializing in investments in the energy sector. From 2004 to 2008, Mr. Liu served as the Chairman of Liaoning Guoneng Group (Holding) Co., Ltd., a large government-authorized steel product logistics company. Mr. Liu was named Outstanding Entrepreneur by the Central Government of China in 2006 and was also awarded the Medal of Prominent Entrepreneur. Mr. Liu is an accomplished economist and he is currently the President of the Liaoning Entrepreneurs Association. His skills include logistics, industry analysis and financial analysis.
Zili Zhao, Director

Mr. Zhao was appointed to our Board of Directors on July 13, 2010, and serves currently as the Chairman of our Compensation Committee and member of our Audit Committee and Nominating and Corporate Governance Committee. Mr. Zhao brings to the Board of Directors his over 25 years of extensive experience in the energy industry in China. Mr. Zhao currently serves as the Deputy General Manager and Deputy Secretary of Liaoning Electric Power Company Ltd., a subsidiary of China State Grid, the largest electric power transmission and distribution company in China. From 1995 to 2000, Mr. Zhao served as the Director of Dalian Electric Power Bureau. Prior to 1995, Mr. Zhao devoted 20 years to academia. From 1991 to 1995, Mr. Zhao served as the Headmaster of Dalian Electric Power Economic Management University. From 1985 to 1991, he served as the Headmaster of Dalian Electric Power University. Prior to 1991, he held multiple positions within the Dalian Electric Power University, including Deputy Party Secretary, Director of Committee Organization, and Professor of Power Generation. Mr. Zhao received a bachelor’s degree in Education Principles from HuaZhong Normal University and a master’s degree in Electric Power Generation from Dongbei Electric Power University.

Involvement in certain legal proceedings

During the past ten years, none of our directors or executive officers has been:

·the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
·convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

·subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities;
·found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, that has not been reversed, suspended, or vacated;

·subject of, or a party to, any order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of a federal or state securities or commodities law or regulation, law or regulation respecting financial institutions or insurance companies, law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
·subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

None of our directors, officers or affiliates, or any beneficial owner of 5% or more of our common stock, or any associate of such persons, is an adverse party in any material proceeding to, or has a material interest adverse to, us or any of our subsidiaries.

53

Audit Committee and Audit Committee Financial Expert

We established our Audit Committee in July 2010. The Audit Committee consists of Messrs. McEwen, Liu and Zhao, each of whom is an independent director. Mr. McEwen, Chairman of the Audit Committee, is an “audit committee financial expert” as defined under Item 407(d) of Regulation S-K. The purpose of the Audit Committee is to represent and assist our Board of Directors in its general oversight of our accounting and financial reporting processes, audits of the financial statements and internal control and audit functions. As more fully described in its charter, a copy of which is included as an exhibit to this Annual Report, the functions of the Audit Committee include the following:

§appointment of independent auditors, determination of their compensation and oversight of their work;
§review the arrangements for and scope of the audit by independent auditors;
§review the independence of the independent auditors;
§consider the adequacy and effectiveness of the internal controls over financial reporting;
§pre-approve audit and non-audit services;
§establish procedures regarding complaints relating to accounting, internal accounting controls, or auditing matters;
§review and approve any related party transactions;
§discuss with management our major financial risk exposures and our risk assessment and risk management policies; and
§discuss with management and the independent auditors our draft quarterly interim and annual financial statements and key accounting and reporting matters.
Procedures for Shareholder Recommendation of Nominees to the Boards of Directors

During the year ended December 31, 2013, there were no material changes to the procedures by which shareholders may recommend nominees to the Board of Directors from those described in the charter of our Nominating and Corporate Governance Committee as adopted by the Board of Directors on July 8, 2010, a copy of which is included as an exhibit to this Annual Report.

Code of Ethics

On July 8, 2010, the Board of Directors adopted a revised and amended Code of Conduct superseding and replacing our prior Code of Ethics adopted in 2008. The Code of Conduct applies to all directors, officers and employees, including our principal executive officer, our principal financial and accounting officer and all members of our finance department performing similar functions. A copy of the Code of Conduct is included as an exhibit to this Annual Report. The Code of Conduct is also available in print, without charge, upon written request to CleanTech Innovations, Inc., C District, Maoshan Industry Park, Tieling Economic Development Zone, Tieling, Liaoning Province, China 112616, Attn: Corporate Secretary.

54

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of our common stock to file reports regarding ownership of, and transactions in, our securities with the SEC and to provide us with copies of those filings. Based solely on our review of such filings (and any amendments thereof) received by us and on the written representations of certain reporting persons, we believe that during our fiscal year ended December 31, 2013, no reporting person failed to file such reports on a timely basis.

Item 11. Executive Compensation

As a “smaller reporting company,” we have elected to follow the scaled disclosure requirements for smaller reporting companies with respect to the disclosures required by Item 402 of Regulation S-K. Under such scaled disclosure, we are not required to provide a Compensation Discussion and Analysis, Compensation Committee Report and certain other tabular and narrative disclosures relating to executive compensation.

Executive Compensation

The following table sets forth information concerning the compensation for the fiscal years ended December 31, 2012 and 2013, of our Chairman and Chief Executive Officer.

Summary Compensation Table 
Name and Principal Position Year Salary  Bonus  Stock Awards  Option Awards  Nonequity Incentive Plan Compensation  Nonqualified Deferred Compensation Earnings  All Other Compensation Total 
    ($)  ($)  ($)  ($)  ($)  ($)  ($) ($) 
Bei Lv 2012  19,044   0   0   0   0   0   0 19,044 
Chairman and Chief Executive Officer 2013  19,044   0   0   0   0   0   0 19,044 
                               38,088 

Narrative Disclosure to Summary Compensation Table

Employment Agreements

We have entered into labor contracts that are standard for PRC domestic companies with Bei Lv, Ms. Sun and Mr. Han which does not contain provisions prohibiting competition by Ms. Lv. Ms. Lv’s labor contract expired July 1, 2013 and was renewed for another three-year term since then. Ms. Sun’s expires in September of 2015 and Mr. Han’s expires in September of 2015. These labor contracts set forth the general terms and conditions of their employment, require us to establish a safe work environment and provide for social insurance as required by state and provincial regulations, including pension, unemployment, basic medical and workplace injury insurance.
Change-In-Control and Separation Agreements

The standard labor contracts we entered into with Ms. Lv specify the conditions under which the contracts may be terminated and set forth minimum severance payments, which generally equal one month’s salary for each year of employment in cases where termination is initiated other than for “cause.”

We do not have any other existing arrangements providing for payments or benefits in connection with the resignation, severance, retirement or other termination of any of our named executive officers, or a change in control of our company or a change in the named executive officer’s responsibilities following a change in control.

55

Equity Incentive Plans

We currently have no equity incentive plan. We intend to adopt an equity incentive plan in order to further our growth by enabling our officers, employees, contractors and service providers to acquire our common stock, increasing their personal involvement with us and thereby enabling us to attract and retain our officers, employees, contractors and service providers.

Outstanding Equity Awards at Fiscal Year-End

As of December 31, 2013, there were no outstanding equity awards held by our executive officers.

Compensation of Directors

The following table sets forth information concerning the compensation of our directors for the year ended December 31, 2013.

Director Compensation Table – 2013
Name
Fees Earned or
Paid in Cash
Stock
Awards
Option
Awards
Total
($)($)($)($)
Dianfu Lv----
Shuyuan Liu----
Zili Zhao----
Terry K. McEwen----

We did not compensate any of our directors during the fiscal year ended 2013.
Narrative Disclosure to Director Compensation Table

We do not compensate our non-independent directors, such as Ms. Lv and Mr. Lv, for serving as our directors, although they are entitled to reimbursement for reasonable expenses incurred in connection with attending our board meetings.

We do not maintain medical, dental or retirement benefits plans for our directors.

Impact of Accounting and Tax Treatment of Compensation

Section 162(m) of the U.S. Internal Revenue Code disallows a tax deduction to publicly held companies for compensation paid to the principal executive officer and to each of the four other most highly compensated officers (other than the principal financial officer) to the extent that such compensation exceeds $1.0 million per covered officer in any fiscal year. The limitation applies only to compensation that is not considered to be performance-based. Non-performance-based compensation paid to our executive officers during fiscal year 2011 did not exceed the $1.0 million limit per officer, and we do not expect the non-performance-based compensation to be paid to our executive officers during fiscal year 2011 to exceed that limit. Because it is unlikely that the cash compensation payable to any of our executive officers in the foreseeable future will approach the $1.0 million limit, we do not expect to take any action to limit or restructure the elements of cash compensation payable to our executive officers so as to qualify that compensation as performance-based compensation under Section 162(m). We will reconsider this decision should the individual cash compensation of any executive officer ever approach the $1.0 million level.
56

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of April 4, 2014, regarding the number of shares of our common stock beneficially owned by (i) each person that we know beneficially owns more than 5% of our outstanding common stock, (ii) each of our named executive officers, (iii) each of our directors and (iv) all of our named executive officers and directors as a group. The amounts and percentages of our common stock beneficially owned are reported on the basis of SEC rules governing the determination of beneficial ownership of securities. Under the SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days through the exercise of any stock option, warrant or other right. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Unless otherwise indicated, each of the shareholders named in the table below, or his or her family members, has sole voting and investment power with respect to such shares of our common stock. As of April 4, 2014, there were 24,982,822 shares of our common stock issued and outstanding.

Except as otherwise indicated, the address of each of the shareholders listed below is: c/o CleanTech Innovations, Inc., C District, Maoshan Industry Park, Tieling Economic Development Zone, Tieling, Liaoning Province, China 112616.

Name of beneficial owner Number of shares  Percent of class 
5% Shareholders      
Wenge Chen(1)
  2,117,691   8.48%
         
Directors and Named Executive Officers        
Bei Lv, Chairman and Chief Executive Officer  9,375,348   37.53%
Dianfu Lv, Director  2,117,691   8.48%
All Directors and Named Executive Officers as a Group (7 Persons)  11,493,039   46%

(1) Wenge Chen is our Vice President of Marketing.

We are not aware of any arrangements that could result in a change in control of our company.

The disclosure of securities authorized for issuance under equity compensation plans required by Item 201(d) of Regulation S-K is set forth in Item 5 herein.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

Bei Lv, our Chairman and Chief Executive Officer, is the daughtercomputation of Dianfu Lv, one of our directors. There are no other family relationships (as that term is defined in Item 401 in Regulation S-K) between any of our directors, executive officers or other key personnel and any other of our directors, executive officers or other key personnel.

On September 8, 2010, we entered into an Intellectual Property Rights Transfer Agreement with Bei Lv, our Chairman and Chief Executive Officer, to clarify the terms of the perpetual, exclusive, worldwide and royalty-free intellectual property usage rights she granted to us, effective as of September 17, 2007, in connection with the transfer to us of her ownership of a design patent issued in China and used by us in our Connecting Bend Pipe product. The State Intellectual Property Office of the PRC approved the ownership transfer effective as of July 23, 2010.

57

On October 27, 2010, we entered into the Waiver and Release Agreements pursuant to which the minority shareholders of Creative Bellows waived any right to receive any part of the approximately $6 million in PRC government-approved cash consideration for their ownership interests in Creative Bellows resulting from the Share Exchange Agreement in exchange for a mutual release of claims. The minority shareholders of Creative Bellows party to the Waiver and Release Agreements included Bei Lv, our Chairman and Chief Executive Officer, Dianfu Lv, one of our directors, and Wenge Chen, a shareholder of more than 5% of our common stock and the wife of Dianfu Lv and mother of Bei Lv, who waived the right to receive from us approximately $3.78 million, $1.18 million and $864,508, respectively.
On December 3, 2010, Bei Lv, our Chairman and Chief Executive Officer, borrowed $558,101, of which $517,916 is principal and $40,185 interest, from a bank for the purchase of equipment on our behalf and with our guarantee, which she in turn loaned back to us on the same terms. The loans bear interest of 7.28% with a maturity date of December 3, 2012.  The loan has been paid in full.

In 2011, the Company advanced $161,882 to Bei Lv, our Chairman and Chief Executive Officer, in order for Bei Lvr to negotiate and purchase certain raw materials on the Company’s behalf.  However, the purchase was never completed as the cost of the raw materials was considered too high and she returned the full amount of the advance to the Company in the first quarter 2012.

There were no other transactions with any related persons (as that term is defined in Item 404 of Regulation S-K) during our last two fiscal years or any currently proposed transaction in which we were or are to be a participant and the amount involved was in excess of $120,000 and in which any related person had a direct or indirect material interest.

We have adopted a written policy in connection with related party transactions involving us. The policy requires the approval by our Audit Committee for any transaction, arrangement or relationship in which (i) the aggregate amount involved will or may be expected to reach $50,000 in any calendar year, (ii) we are a participant and (iii) any related person has or will have an interest. For the purposes of this report, “related persons” include our executive officers, directors, greater than 5% shareholders or immediate family members of any of the foregoing. Pursuant to this policy, the Audit Committee, among other factors, is required to take into account whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances. In addition, the Chairman of the Audit Committee has the authority to approve or ratify any interested transaction with a related person in which the aggregate amount involved is expected to be less than $25,000.

Director Independence

Our Board of Directors has determined that each of Messrs. McEwen, Liu and Zhao are independent directors for the purposes of the NASDAQ listed company standards currently in effect and all applicable rules and regulations of the SEC. We have established the following standing committees of the Board of Directors: Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. All members of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, on each of which Messrs. McEwen, Liu and Zhao serve, satisfy the “independence” standards applicable to members of each such committee. The Board of Directors made this affirmative determination regarding these directors’ independence based on discussions with the directors and on its review of the directors’ responses to a standard questionnaire regarding employment and compensation history; affiliations, family and other relationships; and transactions between us and the directors, if any. The Board of Directors considered relationships and transactions between each director, or any member of his or her immediate family, and our company, our subsidiaries and our affiliates. The purpose of the Board of Directors’ review with respect to each director was to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent under the NASDAQ rules.

58

Item 14. Principal Accounting Fees and Services

Our Audit Committee selected Goldman Kurland and Mohidin, LLP, or GKM, as the independent registered public accounting firm to audit our books and accounts for the fiscal year ending December 31, 2013. GKM has served as our independent accountant since April 23, 2009. The following table presents the aggregate fees billed for professional services rendered by GKMdiluted EPS for the years ended December 31, 20122014 and 2013.

  2012  2013 
Audit fees $123,000  $123,000 
Audit-related fees  0   0 
Tax fees        
All other fees        

In the above table, “audit fees” are fees billed for services provided related to the audit of our annual financial statements, quarterly reviews of our interim financial statements and services normally provided by the independent accountant in connection with statutory and regulatory filings or engagements for those fiscal periods. “Audit-related fees” are fees not included in audit fees that are billed by the independent accountant for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. “Tax fees” are fees billed by the independent accountant for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the independent accountant for products and services not included in the foregoing categories.2013:
 

Audit Committee’s Pre-Approval Policy

The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent accountants. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a written policy for the pre-approval of services provided by the independent accountants, under which policy the Audit Committee generally pre-approves services for up to one year and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. In addition, the Audit Committee may also pre-approve particular services on a case-by-case basis. For each proposed service, the independent accountant is required to provide detailed back-up documentation at the time of approval. The Audit Committee may delegate pre-approval authority to one or more of its members. Such a member must report any decisions to the Audit Committee at the next scheduled meeting.
  Year ended December 31, 2014 
  Net income (Numerator)  Shares (Denominator)  Per Share Amount 
Basic EPS
 
$
470,565
   
48,500,156
  
$
          0.01
 
Dilutive shares related to warrants
  
-
   
168,564
     
Dilutive EPS
 
$
470,565
   
48,668,720
  
$
          0.01
 
 
59

  Year ended December 31, 2013 
  Net loss (Numerator)  Shares (Denominator)  Per Share Amount 
Basic and Diluted EPS
 
$
(812,563
)  
38,215,054
  
$
(0.02
)
 
PART IV

Item 15. Exhibits, Financial Statement Schedules

The following documents are filed as part of or are included in this Annual Report:
1.  Financial statements listed in the Index to Financial Statements, filed as part of this Annual Report beginning on page F-1; and

2.  Exhibits listed in the Exhibit Index filed as part of this Annual Report.

60

CleanTech Innovations, Inc and Subsidiaries
Consolidated Financial Statements
Years Ended December 31, 2013 and 2012

Index to Financial Statements

Page
Report of Independent Registered Public Accounting FirmF-2
Financial Statements
F-3
F-4
F-5
F-6
F-7
F-1


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
CleanTech Innovations, Inc.

We have audited the accompanying consolidated balance sheets of CleanTech Innovations, Inc., and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of CleanTech Innovations, Inc., and subsidiaries as of December 31, 2013 and 2012, and the consolidated results of their operations and their consolidated cash flows for the years ended December 31, 2013 and 2012, in conformity with generally accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of 16.43 million in 2013. In addition, the Company had accumulated deficit of $16.64 million and short-term loans and payable of $ 13.4 million as of December 31, 2013.  These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans are also discussed in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 /s/ Goldman Kurland and Mohidin, LLP
Goldman Kurland and Mohidin, LLP
Encino, California
April 14, 2014

F-2

CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2013 AND DECEMBER 31, 2012
  2013  2012 
ASSETS      
       
CURRENT ASSETS:      
Cash and equivalents $8,178  $42,996 
Restricted cash  244,427   267,689 
Accounts receivable, net  2,000,914   2,548,834 
Other receivables and deposits, net  2,758,253   233,570 
Retentions receivable, net  1,051,227   3,297,533 
Advances to suppliers, net  466,878   10,727,685 
Taxes receivable  -   1,790 
Inventories, net  6,061,974   8,117,227 
Due from shareholder  -   89,336 
Notes receivable  738,080   850,529 
         
Total current assets  13,329,931   26,177,189 
         
NONCURRENT ASSETS:        
Long term investment  -   95,458 
Advance for equipment purchase  336,822   - 
Prepayments  321,248   318,609 
Construction in progress  -   1,894,400 
Property and equipment, net  11,853,575   10,626,245 
Land use right and patents, net  4,162,058   4,078,260 
         
Total non current assets  16,673,703   17,012,972 
         
TOTAL ASSETS $30,003,634  $43,190,161 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
CURRENT LIABILITIES:        
Accounts payable $2,720,996  $2,376,229 
Accrued expenses and other payables  4,353,402   1,109,748 
Advance from customers  243,171   1,385,976 
Tax payable  68,234   - 
Short term loans  12,952,396   13,295,565 
Short term payable, net of unamortized interest  442,827   87,172 
         
Total current liabilities  20,781,026   18,254,690 
         
Long term payables, net of unamortized interest  -   283,099 
         
Total Liabilities  20,781,026   18,537,789 
         
CONTINGENCIES AND COMMITMENTS        
         
STOCKHOLDERS' EQUITY:        
Preferred stock, $0.00001 par value, 100,000,000 shares
authorized, no shares issued and outstanding
  -   - 
Common stock, $0.00001 par value, 100,000,000 shares
authorized, 24,982,822 shares issued and outstanding
  250   250 
Additional paid in capital  20,649,092   20,649,092 
Statutory reserve fund  1,104,138   1,104,138 
Accumulated other comprehensive income  4,105,963   3,104,407 
Accumulated deficit  (16,636,835)  (205,515)
         
Total stockholders' equity  9,222,608   24,652,372 
   ��     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,003,634  $43,190,161 
The accompanying notes are an integral part of these financial statements.

F-3

CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 31, 2013 AND 2012
  Years ended December 31, 
  2013  2012 
       
Net sales $5,894,264  $4,821,340 
Cost of goods sold  8,062,625   3,972,934 
         
Gross profit (loss)  (2,168,361)  848,406 
         
Operating expenses        
Selling  840,239   336,712 
General and administrative  2,018,818   2,495,498 
Bad debt  7,911,884   4,203,145 
         
Total operating expenses  10,770,941   7,035,355 
         
Loss from operations  (12,939,302)  (6,186,949)
         
Non-operating income (expenses)        
Interest income  730   6,073 
Interest expense  (3,635,046)  (1,322,278)
Subsidy income  -   171,089 
Other income  610,759   290,830 
Other expenses  (468,461)  (259,576)
         
Total non-operating expenses, net  (3,492,018)  (1,113,862)
         
Loss before income tax  (16,431,320)  (7,300,811)
Income tax expense  -   - 
         
Net loss  (16,431,320)  (7,300,811)
Foreign currency translation gain  1,001,556   76,076 
         
Comprehensive loss $(15,429,764) $(7,224,735)
         
Basic and diluted weighted average shares outstanding  24,982,822   24,982,822 
         
Basic and diluted loss per share $(0.66) $(0.29)
The accompanying notes are an integral part of these financial statements.
F-4

CLEANTECH INNOVATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2013 AND 2012
           Accumulated  Retained    
           other  earnings    
  Common stock        comprehensive  (accumulated    
  Shares  Amount  Paid in capital  Statutory reserves  income  deficit)  Total 
                      
Balance at January 1, 2012  24,982,822  $250  $20,649,092  $1,104,138  $3,028,331  $7,095,296  $31,877,107 
                             
Net loss  -   -   -   -   -   (7,300,811)  (7,300,811)
                             
Foreign currency translation gain  -   -   -   -   76,076   -   76,076 
                             
Balance at December 31, 2012  24,982,822   250   20,649,092   1,104,138   3,104,407   (205,515)  24,652,372 
                             
Net loss  -   -   -   -   -   (16,431,320)  (16,431,320)
                             
Foreign currency translation gain  -   -   -   -   1,001,556   -   1,001,556 
                             
Balance at December 31, 2013  24,982,822  $250  $20,649,092  $1,104,138  $4,105,963  $(16,636,835) $9,222,608 
The accompanying notes are an integral part of these financial statements.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2013 AND 2012
  2013  2012 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(16,431,320) $(7,300,811)
Adjustments to reconcile net loss to net cash
provided by operating activities:
        
Depreciation and amortization  672,907   676,531 
Gain on disposal of fixed assets  (6,115)  - 
Amortization of interest  59,949   82,293 
Increase in bad debt allowance  7,911,884   4,203,145 
Provision for inventory impairment  3,343,809   208,457 
(Increase) decrease in assets:        
Restricted cash  30,945   1,027,806 
Accounts receivable  1,184,858   786,124 
Retentions receivable  641,121   (98,862)
Notes receivable  136,140   (285,782)
Other receivables, deposits and prepayments  265,710   375,355 
Advances to suppliers  1,105,264   1,001,669 
Inventories  (1,080,995)  (1,970,829)
Increase (decrease) in liabilities:        
Accounts payable  268,430   (517,492)
Accrued expenses  3,236,456   952,183 
Advance from customers  (1,163,297)  1,193,339 
Taxes payable  (16,105)  (67,417)
         
Net cash provided by operating activities  159,641   265,709 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Construction in process  -   (25,030)
Acquisition of property & equipment  (51,329)  (3,151)
Intangible assets  (50,146)  - 
Prepayment for construction  -   (579,406)
Long term investment receipt  96,553   - 
         
Net cash used in investing activities  (4,922)  (607,587)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from credit line  638,951   - 
Payments on long term payable  -   (381,782)
Due from shareholder  90,311   72,631 
Advance from shareholder  -   (282,659)
Repayment of short term loans  (1,062,084)  (95,050)
         
Net cash used in financing activities  (332,822)  (686,860)
         
EFFECT OF EXCHANGE RATE CHANGE ON CASH & EQUIVALENTS  143,285   (1,324)
         
NET DECREASE IN CASH & EQUIVALENTS  (34,818)  (1,030,062)
         
CASH & EQUIVALENTS, BEGINNING OF YEAR  42,996   1,073,058 
         
CASH & EQUIVALENTS, END OF YEAR $8,178  $42,996 
         
Supplemental Cash flow data:        
Income tax paid $-  $69,254 
Interest paid $287,434  $360,123 
The accompanying notes are an integral part of these financial statements.
F-6

CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

CleanTech Innovations, Inc., formerly known as Everton Capital Corporation (the “Company” or “CleanTech”), was incorporated on May 9, 2006, in the State of Nevada. Through its wholly owned operating subsidiaries in China, the Company designs, manufactures tests and sells structural towers for on-land and off-shore wind turbines. The Company also manufactures specialty metal products that require advanced manufacturing and engineering capabilities, including bellows expansion joints and connecting bend pipes used for waste heat recycling in steel production, in ultra-high-voltage electricity transmission grids and in industrial pressure vessels.

The Company acquired Liaoning Creative Bellows Co., Ltd. (“Creative Bellows”) pursuant to the terms of a Share Exchange Agreement and Plan of Reorganization, dated July 2, 2010, as amended. Under the terms of the Share Exchange Agreement, on July 2, 2010, the Company issued 15,122,000 shares of common stock to the three owners of Creative Bellows and two of their designees to enter into a series of transactions, described below, by which the Company acquired 100% of Creative Bellows. Concurrently with the Share Exchange Agreement and as a condition thereof, the Company entered into an agreement with Jonathan Woo, the Company’s former Chief Executive Officer and Director, pursuant to which he returned 40,000,000 shares of the Company’s common stock for cancellation. Mr. Woo received $40,000 from the Company for the cancellation of his shares of common stock, which was charged to additional paid-in capital. The $40,000 payment reflected the fair value “FV” of the shares in the Company, which was a non-operating public shell with no trading market for its common stock prior to the Share Exchange Agreement. The cancelled shares were retired and, for accounting purposes, it were treated as not having been outstanding for any period presented. Upon completion of the foregoing transactions, the Company had 19,130,000 shares of its common stock issued and outstanding.

On July 15, 2010, the State Administration of Industry and Commerce (“SAIC”) of the People’s Republic of China (“PRC”) issued a Sino-foreign joint venture business license to Creative Bellows, indicating a capital injection by Wonderful Limited, a British Virgin Islands company, was approved and registering its ownership of a 4.999% equity interest in Creative Bellows. On August 18, 2010, the SAIC issued an approval registration of the Company’s capital injection of $23.3 million in cash for 87% of Creative Bellows. Finally, on October 15, 2010, the Company obtained PRC government approval to acquire the remaining minority interest in Creative Bellows held by its original shareholders and Wonderful Limited for $6 million. On October 27, 2010, pursuant to waiver and release agreements, the selling minority shareholders of Creative Bellows waived their rights to receive cash for their equity interests for a mutual release of claims. As a result of these transactions, Creative Bellows became a 100% owned subsidiary of the Company effective October 15, 2010.

For accounting purposes, the Share Exchange Agreement and subsequent transactions described above were treated as a reverse acquisition and recapitalization of Creative Bellows because, prior to the transactions, the Company was a non-operating public shell and, subsequent to the transactions, the shareholders of Creative Bellows owned a majority of the outstanding common stock of the Company and exercise significant influence over the operating and financial policies of the consolidated entity. Pursuant to Securities and Exchange Commission (“SEC”) rules, the merger or acquisition of a private operating company into a non-operating public shell with nominal net assets is considered a capital transaction.
Liaoning Creative Bellows Co., Ltd. (“Creative Bellows”) was incorporated in the PRC province of Liaoning on September 17, 2007. Creative Bellows designs and manufactures bellows expansion joints, pressure vessels, wind tower components for wind turbines and other fabricated metal specialty products. On May 26, 2009, the three individual shareholders of Creative Bellows established Liaoning Creative Wind Power Equipment Co., Ltd. (“Creative Wind Power”). During 2009, the three shareholders transferred their Creative Wind Power shares to Creative Bellows at cost; as a result of the transfer of ownership, Creative Bellows owned 100% of Creative Wind Power. Creative Wind Power markets and sells wind tower components designed and manufactured by Creative Bellows. 

F-7

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity with U.S. GAAP. The Company’s functional currency is the Chinese Yuan Renminbi (“RMB”); however, the accompanying consolidated financial statements were translated and presented in United States Dollars (“USD”). The accompanying consolidated financial statements present the historical financial condition, results of operations and cash flows of the operating companies. 
Going Concern

The Company incurred a net loss of $16.43 million for the year ended December 31, 2013. In addition, the Company had loans of $2.26 million and promissory notes of $10 million and $50,000 that are past due. Through a new Line of Credit Agreement entered with the same lender on August 17, 2013, the default promissory note of $10 million became payable upon Note-holder’s request (See Note 14).  As of December 31, 2013, the Company had an outstanding balance of $645,348 including accrued interest under this credit line and $442,827 under short term payable currently in default. The Company has been unable to raise funds from the U.S. markets to pay off these obligations. These conditions raise a substantial doubt as to whether the Company may continue as a going concern. The Company is seeking to obtain additional financing from local banks in the PRC.  The Company will also seek to improve its cash flows from operations by implementing cost control measures and reducing inventory purchases.

Principles of Consolidation

The consolidated financial statements include the accounts of CleanTech and its wholly owned subsidiaries, Creative Bellows and Creative Wind Power. All intercompany transactions and account balances were eliminated in consolidation.

Use of Estimates

In preparing financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability of long-lived assets and the valuation of inventories. Actual results could differ from those estimates.

Cash and Equivalents

Cash and equivalents include cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of this purchase date

Restricted Cash

Restricted cash consists of a percentage of sales deposited by the Company into its bank accounts according to contract terms, which serves as a contract execution and product delivery guarantee. The restriction is released upon customer acceptance of the product.

Accounts and Retentions Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Past due receivables are determined based on contractual payment terms specified in the contract. Based on its historical collection activity, the Company had allowances for bad debts of $4,523,084 and $4,350,671 at December 31, 2013 and 2012, respectively.
At December 31, 2013 and 2012, the Company had gross retentions receivable for product quality assurance of $2,746,082 and $3,297,533, respectively. The retention generally is 10% of the sales price with a one-year term, but no later than the termination of the warranty period. The Company had allowances for retentions receivable of $1,694,855 and $0 at December 31, 2013 and 2012, respectively.
F-8


Inventories

The Company’s inventories are valued at the lower of cost or market, with cost determined on a weighted average basis. The Company compares the cost of inventories with market value and an allowance is made to write down the inventories to their market value, if lower.
Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with 5% salvage value and estimated lives as follows:
Buildings40  Years
Machinery5-15 Years
Vehicles5  Years
Office equipment5  Years
Testing equipment10  Years

Land Use Rights

Right to use land is stated at cost less accumulated amortization. Amortization is provided using the straight-line method over 50 years.

Impairment of Long-Lived Assets

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, but at least annually.

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by it. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the FV of the assets. FV is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that as of December 31, 2013 and 2012, there were no significant impairments of its long-lived assets.

Income Taxes

The Company utilizes Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accountingaccounts for Income Taxes,” codified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, whichincome taxes under the asset and liability method.  This approach requires the recognition of deferred tax assets and liabilities forof the expected future tax consequences of events that were included intemporary differences between the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences betweencarrying amounts and the tax bases of assets and liabilitiesliabilities.  The U.S. GAAP guidance for income taxes prescribes a two-step approach for the financial statement recognition and their financial reporting amounts at each period end based on enactedmeasurement of income tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amountpositions taken or expected to be realized.
F-9

taken in an income tax return.  The Company follows FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), codified in FASB ASC Topic 740. When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of afirst step evaluates an income tax position is recognized in the financial statements in the period during which, based on all available evidence, management believesorder to determine whether it is more likely than not that the position will be sustained upon examination, includingbased on the resolutiontechnical merits of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Taxthe position.  The second step measure the benefit to be recognized in the financial statements for those income tax positions that meet the more-likely-than-notmore likely than not recognition threshold are measured asthreshold. U.S. GAAP also provides guidance on derecognition, classification, recognition and classification of interest and penalties, accounting in interim periods, disclosers and transition.  Under U.S. GAAP, the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected asCompany may recognize a liability forpreviously unrecognized tax benefits alongif the tax position is effectively (rather than “ultimately”) settled through examination, negotiation or litigation.  The Company reevaluates these uncertain tax positions on a quarterly basis.  This evaluations based on factor including, but not limited to, changes in facts and circumstances, changes in tax law, effectively settled issues, and new audit activity.  Any changes in these factors could result in changes to a tax benefit or tax provision.

Receivables under Factoring Agreement

The Company factors its receivables with any associated interestrecourse and, penalties that would be payableas a result, accounts for the factoring akin to a secured borrowing.  The Company does maintain the gross receivable asset and due to factor liability on its books and records.  The financial institution makes available 90% of the face value of the eligible receivables to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classifiedCompany and retains the remaining 10% as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income. At December 31, 2013 and 2012, the Company did not take any uncertain positions that would necessitate recording a tax-related liability.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 605). Sales revenue, including the final 10% of the purchase price, is recognized after delivery is complete, customer acceptance of the product occurs and collectability is reasonably assured. Customer acceptance occurs after the customer puts the product through a quality inspection, which normally is completed within one to two weeks from customerguaranteed until receipt of the product. In case of sales contractsproceeds associated with FOB shipping terms, the customer is responsible for cost of freight and insurance and revenue is recognized when products are delivered to the carrier. In case of sales contracts with FOB destination terms, the Company is responsible for the cost of freight and insurance and revenue is recognized when customer acceptance is received. The customer is responsible for installation and integration of our component products into its end products. Payments received before satisfaction of all relevant criteria for revenue recognition are recorded as unearned revenue or advances from customers. Unearned revenue or advances from customers consists of payments received from customers prior to customer acceptance of the product.

The Company’s standard payment terms with its wind tower customers generally provide that 10% of the purchase price is due upon the Company’s deposit of restricted cash into a bank account as a contract guarantee, 20% upon the Company’s purchase of raw material for the order, 10% upon delivery of the base ring component of the wind towers, 30% upon delivery of the wind tower tube sections and 20% upon customer inspection and acceptance of the product, which customers normally complete within 1-2 weeks after delivery. As a common practice in the manufacturing business in PRC, payment of the final 10% of the purchase price is due no later than the termination date of the product warranty, which can be up to 12 months from the customer acceptance date. The final 10% of the purchase price (retentions receivable) is recognized as revenue upon customer acceptance of the product. For the Company’s bellows expansion joints and pressure vessels, payment terms are negotiated on a case-by-case basis and these payment percentages and terms may differ for each customer.

Sales revenue is the invoiced value of goods, net of value-added tax (“VAT”). The Company’s products sold and services provided in China are subject to VAT of 17% of the sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing the finished product. The Company recorded VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.

Warranties

The Company offers a product warranty to its customers of up to 12 months depending on the terms negotiated with each customer. During the warranty period, the Company will repair or replace defective products free of charge. The Company commenced production in 2009 and as of December 31, 2013, the Company accrued $8,188 in warranty expense. The Company implemented internal manufacturing protocols designed to ensure product quality beginning from the receipt of raw materials to the final inspection at the time products are shipped. The Company monitors warranty claims and accrues for warranty expense accordingly, using ASC Topic 450 to account for its standard warranty.

The Company provides its warranty to all customers and does not consider it an additional service; rather, the warranty is considered an integral part of the product’s sale. There is no general right of return indicated in the contracts or purchase orders. If a product under warranty is defective or malfunctions, the Company is responsible for fixing it or replacing it with a new product. The Company’s products are its only deliverables.
The Company’s warranty reserve activity for the years ended December 31, 2013 and 2012 is as follows:
  2013  2012 
Balance at beginning of period $9,790  $11,094 
Foreign currency translation loss  (1,602  (1,304
Actual costs incurred      - 
Ending balance (accrued expense) $8,188  $9,790 
After the warranty period, the Company charges for after-sales services on its products. Such revenue is recognized when the service is provided. For the years ended December 31, 2013 and 2012, the Company had no after-sales services income.  The warranty reserve is included in accrued expense (Note 13).
Cost of Goods Sold

Cost of goods sold (“COGS”) consists primarily of material, labor and related overhead, which are attributable to the products, and other indirect costs that benefit all products. Write-down of inventory to lower of cost or market is also recorded in COGS.
Research and Development

Research and development (“R&D”) costs are related primarily to the Company’s development and testing of its new technologies used to manufacture its bellows-related products. R&D costs are expensed as incurred. For the years ended December 31, 2013 and 2012, R&D was $179,745 and $387,486, respectively, and was included in general and administrative expenses.

Subsidy Income

For the years ended December 31, 2013 and 2012, subsidy income was $0 and $171,089, respectively. For the year ended December 31, 2012, the subsidy income included $161,584 government support for developing the advance technology for pressure vessels and $9,505 as Development Zone Reward.  The Company was not under any obligation and there were no conditions attached to the subsidy income.

Shipping and Handling Costs

Shipping and handling costs for delivery of finished goods are included in selling expenses.factored invoices.  During the years ended December 31, 20132014 and 2012, shipping and handling costs were $515,185 and $163,109, respectively.
Basic and Diluted Earnings per Share (“EPS”)

Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS are based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and warrants, and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

  2013  2012 
Net loss $(16,431,320 $(7,300,811
         
Weighted average shares outstanding – basic  24,982,822   24,982,822 
Effect of dilutive securities:        
Unexercised warrants and options  -   - 
Weighted average shares outstanding – diluted  24,982,822   24,982,822 
         
Loss per share – basic $(0.66)  $(0.29
Loss per share – diluted $(0.66)  $(0.29

The warrants and options to purchase up to 1,987,500 and 2,821,310 shares of common stock were anti-dilutive during the years ended December 31, 2013, and 2012, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist primarilyrecorded factor fees of accountsapproximately $97,218 and other receivables and advances to suppliers. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of its clients’ financial condition and customer payment practices to minimize collection risk on accounts receivable. 

Cash includes cash on hand and demand deposits in bank accounts maintained within China.  Cash balances at financial institutions within China are not covered by insurance. The Company has not experienced any losses in such accounts.

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, as well as by the general state of the PRC economy.

Statement of Cash Flows

In accordance with SFAS No. 95, “Statement of Cash Flows,” codified in FASB ASC Topic 230, cash flows from the Company’s operations are calculated based upon local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

Fair Value of Financial Instruments

Certain of the Company’s financial instruments, including cash and equivalents, accounts receivable, other receivables, accounts payable, accrued liabilities and short-term debt, have carrying amounts that approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the “FV” of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines FV and establishes a three-level valuation hierarchy for disclosures of FV measurement that enhances disclosure requirements for FV measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
·Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

·Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

·Level 3 inputs to the valuation methodology are unobservable and significant to the FV measurement.

As of December 31, 2013 and 2012, the Company did not identify any assets and liabilities required to be presented on the balance sheet at FV.

Stock-Based Compensation

The Company accounts for its stock-based compensation in accordance with SFAS No. 123R, “Share-Based Payment, an Amendment of FASB Statement No. 123” (codified in FASB ASC Topics 718 and 505). The Company recognizes in the income statement the grant-date fair value (“FV”) of stock options and other equity-based compensation issued to employees and non-employees.
Foreign Currency Translation and Transactions

The accompanying consolidated financial statements are presented in USD. The Company’s functional currency is RMB,$97,716, respectively, which is translated into USD for balance sheet accounts using the current exchange rates in effect as of the balance sheet date and for revenue and expense accounts using the average exchange rate during the period. The translation adjustments are recorded as a separate component of stockholders’ equity, captioned accumulated other comprehensive income (loss). Gains and losses resulting from transactions denominated in foreign currencies are included in other income (expense)within interest expense in the consolidated statements of operations.

The RMB to USD exchange rates in effect as of December 31, 2013 and 2012, were $1 = RMB 6.0969 and $1 = RMB 6.2855, respectively. The average RMB to USD exchange rates in effect for the years ended December 31, 2013 and 2012, were $1 = RMB 6.2142 and $1 = RMB 6.3125, respectively. The exchange rates used in translation from RMB to USD were published by the People’s Bank of China.Recently Issued Accounting Pronouncements

Comprehensive Income (Loss)

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Amendments in this ASU create Topic 606, Revenue from Contracts with Customers, and supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification.  In addition, the amendments supersede the cost guidance in Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts, and create new Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers.  In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is the final version of Proposed ASU 2011-230 – Revenue Recognition (Topic 605) and Proposed ASU 2011–250 – Revenue Recognition (Topic 605): Codification Amendments, both of which have been deleted.  The amendments in this ASU are effective for the Company for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  The Company uses SFAS No. 130 “Reporting Comprehensive Income” (codified in FASB ASC Topic 220). Comprehensive income is comprisedcurrently evaluating the effects of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive loss for the years ended December 31, 2013 and 2012, included net loss and foreign currency translation adjustments.

Segment Reporting

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (codified in FASB ASC Topic 280), requires use of the “management approach” model for segment reporting. The management approach model is basedASU 2014-09 on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure or any other manner in which management disaggregates a company.financial statements.
 

Management determinedIn November 2014, the Company’s product lines – wind towers, bellows expansion joints and pressure vessels – constituteFinancial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-17, “Business Combinations (Topic 805) Pushdown Accounting a single reportable segment under ASC 280.consensus of the FASM Emerging Issues Task Force.”  The Company operates exclusivelyamendments in one business:this Update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the design and manufacture of highly engineered metal components for heavy industry. The manufacturing processesacquired entity.  An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs.  An acquired entity should determine whether to elect to apply pushdown accounting for each individual change-in-control event in which an acquirer obtains control of the Company’s products, principallyacquired entity.  If pushdown accounting is not applied in the rollingreporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent change-in-control event.  An election to apply pushdown accounting in a reporting period after the reporting period in which the change-in-control event occurred should be considered a change in accounting principle in accordance with Topic 250, Accounting Changes and welding of raw steel materials, make uses ofError Corrections.  If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable.  The amendments in this ASU 2014-17 became effective on November 18, 2014 and are not expected to have a material impact on the same pool of production workers and engineering talent for design, fabrication, assembly and testing. The Company’s products are characterized and marketed by their ability to withstand temperature, pressure, structural load and other environmental factors. The Company’s products are used by major electrical utilities and large-scale industrial companies in China specializing in heavy industry, and the Company’s sales force sells its products directly to these companies, which utilize the Company’s components in their finished products. All of the Company’s long-lived assets for production are located in its facilities in Tieling, Liaoning Province, China, and operate within the same environmental, safety and quality regulations governing industrial component manufacturing companies. The Company established its subsidiary, Creative Wind Power, solely to market and sell the Company’s wind towers, which constitute the structural support cylinder for an industrial wind turbine installation. Management believes that the economic characteristics of the Company’s product lines, specifically costs and gross margin, will be similar as production increases and labor continues to be shared across products.financial statements.

AsIn January 2015, the FASB issued ASU 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20) Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.”  The amendments in this Update eliminate from U.S. GAAP the concept of extraordinary items.  The FASB concluded that the amendments in this Update will not result in a result, management viewsloss of information because although the Company’s businessamendments will eliminate the requirements in Subtopic 225-20 for reporting entities to consider whether an underlying event or transaction is extraordinary, the presentation and operationsdisclosure guidance for all product lines asitems that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring.  The amendments in this ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and is not expected to have a blended gross margin when determining future growth, returnmaterial impact on investment and cash flows. Accordingly, management concluded the Company had one reportable segment under ASC 280 because: (i) allfinancial statements.

Reclassification

Certain previously reported amounts have been reclassified to conform to the presentation used in December 31, 2014 consolidated financial statements.  The results of the Company’s products are created with similar production processes, in the same facilities, under the same regulatory environment and sold to similar customers using similar distribution systems; and (ii) gross marginsreclassification did not affect our consolidated Statement of all product lines have been converging and should continue to converge.Operations.

FollowingNote 3 – Property and Equipment, net

The following is a summary of sales by productsproperty and equipment, net:
  
December 31,
2014
  
December 31,
2013
 
       
Property and equipment $302,699  $249,281 
Less accumulated depreciation and amortization  (147,782  (65,440)
Property and equipment, net $154,917  $183,841 

Depreciation and amortization expense totaled $82,342 and $39,170 for the years ended December 31, 2014, and 2013, and 2012:
  2013  2012 
       
Bellows expansion joints and related $845,839  $824,328 
Pressure vessels  3,318,976   3,579,954 
Wind towers  1,060,983   165 
Other - resale of raw materials  668,466   416,893 
  $5,894,264  $4,821,340 
New Accounting Pronouncementsrespectively.

In FebruaryNote 4 – Related Party Transactions

Due from Related Party

The Company had a loan outstanding to its largest stockholder.  The balance for the year December 31, 2013 was $410,130.  The receivable bore interest at 2.64% with no definite repayment terms and during the FASB issued ASU 2013-2, Comprehensive Income (ASC Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, the new ASU requires entities to disclose in a single location (either on the face of the financial statement that reports net income oryear ended December 31, 2014 interest totaled $46,433 which was included in the notes) the effects of reclassifications out of accumulated other comprehensive income (AOCI). For items reclassified out of AOCI and into net income in their entirety, entities must disclose the effect of the reclassification on each affected net income item. For AOCI reclassification items that are not reclassified in their entirety into net income, entities must provide a cross-reference to other required U.S. GAAP disclosures. There is no change in the requirement to present the components of net income and other comprehensive income in either a single continuous statement or two separate consecutive statements.  The ASU does not change the items currently reported in other comprehensive income.
For public entities, the new disclosure requirements are effective for annual reporting periods beginning after December 15, 2012, and interim periods within those years. The ASU applies prospectively, and early adoption is permitted. The adoption of this ASU did not have a material impactDue from related party account on the Company’s consolidated financial statements.balance sheet.  During the year ended December 31, 2014, and prior to the Company becoming a C-Corporation, the loan balance of $456,563 was eliminated as the Company treated the loan balance as a stockholder distribution.  No amounts were due from the related party for the year ended December 31, 2014.
 
As ofStockholder distributions for the years ended December 31, 2014 and 2013 there is no recently issued accounting standards not yet adopted that would have a material effect on the Company’s consolidated financial statements.totaled $502,371 and $49,972 respectively.
 
 
3. OTHER RECEIVABLES (NET) AND DEPOSITSNote 5 – Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
  
December 31,
2014
  
December 31,
2013
 
       
Accrued trade payables
 
$
703,725
  
$
561,145
 
Accrued compensation
  
335,576
   
257,171
 
Total Accounts Payable and Accrued Liabilities
 
$
1,039,301
  
$
818,316
 
Note 6 – Letter of Credit and Restricted Cash
The Company has secured a standby letter of credit for the benefit of the landlord for the required security deposit on their office facility in New York.
The Bank letter of credit is in the amount of $110,422. The letter of credit expires in July 2015 and contains renewal periods of one year.
The letter of credit was collateralized by $110,699 and $110,499 of cash for the years December 31, 2014 and 2013, respectively, which was reported as restricted on the consolidated balance sheets.
Note 7 – Due to Factor

Other receivables and deposits consisted of the following at December 31,On August 6, 2013, and 2012:

  2013  2012 
Deposits for contract bids $97,603  $132,008 
Advance to employees  87,943   51,453 
Advance to unrelated party company  295,232   - 
Deposit for land use right bid  328,036   - 
Other  2,462,948   50,109 
Less: bad debt allowance  (513,509)  - 
Total $2,758,253  $233,570 

As of December 31, 2013, other of $2,462,948 mainly consisted of receivable of $607,040 from sales of equipment, retainers for legal expense of $270,000, and the receivables of $993,808 from suppliers, which the Company previously prepaidsigned a one year agreement with a financial services company for raw material purchases but the purchase orders were later cancelled byand sale of accounts receivables with a recourse basis.  The financial services company commenced funding during August 2013.  The financial services company advances up to 90% of qualified customer invoices, less applicable discount fees, and holds the remaining 10% as a reserve until the customer pays the financial services company.  The released reserves are returned to the Company.  The Company expected to collectwas charged 0.7% for the full payments in 2014.  Advance to unrelated party companyfirst thirty (30) days outstanding as well as each subsequent month plus prime plus 1.75% daily for funds outstanding over thirty (30) days.  On August 21, 2014, the Company renewed this agreement which included among other changes, an elimination of $295,232 wasthe interest rate and the adoption of a short-term loan, bore no interest, and payable upon demand.  DepositService Fee of $328,036 was an initial deposit1.15% per month for company to bid for a land use right; however, this deposit will be refundedall periods covered under the renewed agreement.  Since inception, uncollectable customer invoices are charged back to the Company ifafter ninety (90) days.  For the Company failed the bidding for the purchase.  The Company made the deposit for land use right bid in July 2013, and is currently waiting for the bidding result.

4. ADVANCES TO SUPPLIERS

Advances to suppliers mainly consisted of prepayments to suppliers for raw materials which were mainly comprised of steel.

5. INVENTORIES

Inventories consisted of the following atyears ended December 31, 20132014 and 2012:

  2013  2012 
Raw materials $2,988,859  $1,472,427 
Finished goods  1,649,209   3,709,225 
Work in process  5,047,877   3,144,928 
Less: allowance for inventory impairment  (3,623,971)  (209,353)
Total $6,061,974  $8,117,227 

6. DUE FROM SHAREHOLDER

As of December 31, 2013 and 2012, the Company advanced $0 and $89,336, respectively, to the Company’s CEO, who is also a shareholder of the Company, for her to negotiate and purchase certain raw materials, pay the expenses of biding the contracts on Company’s behalf, as well as the advance for the CEO’s business trip.
7. NOTES RECEIVABLE – BANK ACCEPTANCES

The Company sold goods to its customers and received commercial notes (bank acceptances) from them in lieu of payment for accounts receivable. The Company discounted these notes with a bank or endorsed notes to vendors for payment of its obligations or to get cash from third parties. Most of the commercial notes have a maturity of less than six months. These notes receivable are with recourse and the Company is contingently liable to make the payment to the endorsee in case of a default. As of December 31, 2013, the Company had notes receivableadvances from the factor, inclusive of $590,000 thatfees, amounted to $970,541 and $997,160, respectively, which were endorsed to vendors as payments foroffset against due from factor of $136,603 and $106,865, respectively.  Advances from the Company’s obligation (contingent liability).

8. LONG-TERM INVESTMENTfactor are collateralized by substantially all assets of the Company.

On June 10, 2009, Creative Bellows madeAugust 21, 2014, the Company renewed its agreement with the same financial services company to continue the same purchasing and sales of its accounts receivable on a recourse basis.  The renewed agreement will expire in August 2015.
Note 8 – Notes Payable

In February 2012, the Company established a revolving Working Capital Line of Credit (“Credit Line”).  The Credit Line is limited to total borrowings of $750,000. The initial contract term will be for one year, and is renewable on an investmentannual basis thereafter.  Interest is computed using the rate of 2.50% per annum in excess of the prime floating rate with a credit union and purchased 600,000 credit union shares for $95,000 (RMB 600,000). Asfloor of 5.75% per annum.  The Credit Line is secured by all Company assets with a resultperfected first security interest in accounts receivable.  Advances under the Credit Line will be up to 85% against a pool of this investment, Creative Bellows became a 0.57% shareholder in the credit union. The Company accounted for this investment using the cost method. During the quarter ended June 30,eligible receivables.  In August 2013, the Company cancelledentered into a factoring agreement and the investment,facility was paid off and receivedclosed.  The total outstanding principal amount for the full refundyears ended December 31, 2014 and 2013 was $0.

In 2013 and prior, the Company issued $580,000 of $95,000 (RMB 600,000).notes payable to various individuals for business operations and growth opportunities.

Prior to 2013, the Company executed a note for $94,060.  The note matures in January 2021 and bears no interest.  The monthly fixed principal payment is $550. The note is secured by all assets of the Company. The total outstanding balance as of December 2014 and 2013 is $60,020 and $66,620, respectively.
9. PREPAYMENTS

Long-termprepayments mainly was a prepaid land occupancy fee paid to the inhabitants of the land on which the Company plans to construct a manufacturing plant. Currently, the Company amortizes prepaid rental over 50 years according to the terms of the lease agreement.

10. CONSTRUCTION IN PROGRESS

At December 31, 2013 and 2012, the Company had construction in progress of $0 and $1,894,400, respectively, forrebuilding and improvingits workshop ground and road and to build wind test towers. Total construction cost of the workshop and road project was approximately $1.94 million. As of December 31, 2013, the Company completed the construction and transferred into fixed assets.

11. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the followingFuture minimum debt repayments at December 31, 2013 and 2012:
  2013  2012 
Buildings $10,657,514  $8,443,329 
Equipment and machinery  2,770,675   3,335,885 
Vehicle  37,232   52,025 
Office equipment  109,933   103,706 
Total  13,575,354   11,934,945 
Accumulated depreciation  (1,721,779  (1,308,700
Net value $11,853,575  $10,626,245 

Depreciation for the years ended December 31, 2013 and 2012 was $581,203 and $569,828, respectively.2014 are as follows:

12. INTANGIBLE ASSETS
2015
 
$
6,600
 
2016
  
6,600
 
2017
  
6,600
 
2018
  
6,600
 
2019
  
6,600
 
Thereafter
  
27,020
 
Total
 
$
60,020
 

Intangible assets consistedOn May 27, 2014, the Company sold a $20,000 promissory note maturing in August 2014.  The note bore interest at 1% per month with interest payable monthly.  The promissory note was subsequently converted into equity.

During May and June of land use right and patents. All land2014, certain note holders converted their promissory notes into common shares.  In total, $345,000 of promissory notes was converted into 300,001 shares of common stock.  In connection with the note conversions, the Company recorded a loss on debt extinguishment of $57,502 in the PRC is government-ownedaccompanying consolidated statements of operations.
In June 2014, the Company repaid the remaining $255,000 of outstanding notes payable issued in 2013 and cannot be sold to any individual or company. However, the government grants the user a “land use right” to use the land. The Company has the right to use the land for 50 years and amortizes the right on a straight-line basis over 50 years.prior that had not converted into equity.

Note 9 – Stockholders’ Equity (Deficit)

The Company was granted an exclusive license to use a production method patent until December 31, 2016, for lead-free soft solder with mischmetal fromtable below shows the Shenyang Industry University. The Company paid a one-time useCompany’s par value, authorized shares, issued shares and outstanding shares of technology fee of RMB 100,000 ($15,887).
Intangible assetsits common and preferred stock as of December 31, 20132014 and 2012 were as follows:2013:

  December 31, 
  2014  2013 
Common Stock      
Authorized; par value $0.00001  150,000,000   150,000,000 
Issued  77,575,617   38,215,054 
Outstanding  77,575,617   38,215,054 
         
Preferred Stock        
Authorized; par value $0.00001  10,000,000   - 
Issued  -   - 
Outstanding  -   - 

Issuance of Common Stock

During June 2014, the Company issued 142,362 shares of common stock to investors in private placements at $1.75 per share for total proceeds of $191,000.
 
During July 2014, the Company issued 7,454 shares of common stock to an investor in a private placement at $1.75 per share for total proceeds of $10,000.
  2013  2012 
Land use right $4,634,762  $4,446,116 
Patents  16,401   15,910 
Total  4,651,163   4,462,026 
Accumulated amortization  (489,105)  (383,766)
Net $4,162,058  $4,078,260 
 
AmortizationDuring May and June of intangible assets for2014, certain note holders converted their promissory notes into common shares.  In total, $345,000 of promissory notes was converted into 300,001 shares of common stock.  In connection with the yearsnote conversions, the Company recorded a loss on debt extinguishment of $57,502 in the accompanying consolidated statements of operations.
In September 2014, the Company completed a private placement equity offering to accredited investors.  The Company received $4,556,100 in gross proceeds and issued 2,201,031 shares of Common Stock.  The issuance costs associated with the private placement were $774,213.  These costs have been recorded as a reduction to additional paid-in capital as of the year ended December 31, 2013 and 2012 was $91,704 and $106,703, respectively. At December 31, 2013, annual amortization for the next five years was expected to be as follows:2014.

Year Amount 
2014 $94,644 
2015  94,644 
2016  94,644 
2017  94,644 
2018    94,644 
Thereafter  3,688,838 
Total $4,162,058 
 
 
As of December 31, 2013,The Exchange Agreement completed in September 2014 had the following impact on stockholders’ equity:
·  In January 2014, the beginning balance of common shares, common stock and additional paid in capital were changed to reflect the exchange of 1.3 CleanTech shares for each share of Six Dimensions.

·  The stockholders’ equity balances of CleanTech as of September 2014 were added to total stockholders’ equity to reflect the reverse recapitalization transaction.
On November 21, 2014, the Company iscompleted a private placement equity offering to accredited investors.  The Company received $1,052,498 in the processgross proceeds, and issued 508,453 shares of acquiring a land use right in the Liaoning Province Tieling Economic and Technological Development Zone for which a land use right deposit of $0.4 million was made to Tieling Yinzhou Industrial Park Management Committee and Teiling Economic Development Zone Non-Tax Revenue Bureau.Common Stock.  The deposit of the land use right was transferred into intangible assets during the first quarter of 2012; however, the Company has not obtained the land use right as of this report date.

13. ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables at December 31, 2013 and 2012 were as follows:
  2013  2012 
Payroll-related $111,800  $34,634 
Warranty (note 2)  8,188   9,790 
Other  95,210   110,928 
Accrued interest  3,737,396   499,495 
Accrued outsourcing labor cost  -   54,093 
Accrued legal expense  400,808   400,808 
Total $4,353,402  $1,109,748 
As of December 31, 2013, the Company had $400,808 accrued legal expense and $66,315 accrued interest for unpaid legal fees to a law firm in connectionissuance costs associated with the representation of the Company in its lawsuit against the NASDAQ Stock Market, LLC and NASDAQ OMX Group (See Note 24).

Accrued interest included interest on promissory notes, line of credit and credit union loans and interest on amount owedprivate placement were $236,832.  These costs have been recorded as a reduction to legal expenses (See Note 14 & 24).
14. SHORT-TERM LOANS

On September 13, 2010, the Company borrowed $1,827,050, $953,243 and $556,059 from three different credit unions. Each loan bore interest of 7.2% and was to mature on September 12, 2011. The Company extended the maturity date of the loans through an agreement with one of the credit unions. Pursuant to this agreement, the Company was required to pay $317,415 (RMB 2,000,000) by October 2011, with the remaining balance to be paid by June 2012. However, the Company did not make the payment of $317,415 (RMB 2,000,000), as per the agreement and, as such, the extension of maturity date was not granted.  As of December 31, 2013, the Company repaidone of the three loans and the othertwo loans (which were paid in full in the first quarter 2014) were in default and an additional 3.6% interest on the remaining principal amount of the loans was chargedAdditional paid-in-capital for the overdue period. These loans were collateralized by one of the Company’s buildings and its land use right.  During the year ended December 31, 2013, the Company repaid $1.08 million.2014.

On December 13, 2010, the Company entered into a loan with a lender for $10 million. At the Lender’s option, the principal amount of the note and all interest thereon shall be paid in either USD or RMB at an exchange rate of RMB 6.90 to USD 1.00 if paid on or before March 1, 2012, and thereafter at an exchange rate of RMB 6.30 to USD 1.00 to the Lender or any designee of Lender as provided to the Company in writing by Lender. The loan bore interest of 10% payable in advance at the beginning of each quarter with a maturity of March 1, 2012. The loan was amended to mature on March 1, 2013, and to decrease the interest rate to 8.5%, effective March 1, 2012, which interest shall be payable quarterly in advance. From March 1, 2012 through August 13, 2013, the Company was in default on interest payment that was required to pay in advance; the Company was also in default in payment of $10 million loan due on March 1, 2013. The interest, from the date of the Default, was at the lesser of 24% or the maximum applicable legal rate. The Company used 24% as default interest rate from March 1, 2012 through August 13, 2013.  After August 13, 2013, the interest rate on the $10 million loan was 8.5% according to the Line of Credit Agreement descried below.  The Company had interest payable of $3.63 million as of December 31, 2013.
Through a new Line of Credit Agreement entered with the same lender on August 17, 2013, this default loan became payable upon Note-holder’s request and the interest rate at 8.5% after August 13, 2013.  The Promissory Note entered on August 17, 2013 along with an Escrow Agreement was for a Line of Credit available to the Company of up to $10 million. The lender deposited the loan amount into an escrow account, and the escrow agent shall disburse some or all of the deposit from time to time as directed in writing by the lender for advancing the Company to pay expenses that are approved by the lender. The applicable interest rate for the amount borrowed under this line of credit is 3% during the first six months following each advance, and 0% thereafter, to be paid on the first day of each month, with maturity upon Note-holder’s request.  The promissory note has a default rate of 24%.  As of December 31, 2013, the Company borrowed $0.64 million from the credit line and accrued interest of $6,367.
On December 14, 2011, the Company entered into a 3% promissory note with a lender for $50,000, maturing on February 1, 2012, for the payment of its legal expenses. As of December 31, 2013, the Company had accrued interest of $5,951 on this note. The note is past due with default interest at 6% to be accrued subsequent to February 1, 2012.

At December 31, 2013 and 2012, the short-term loans consisted of the following:
  2013  2012 
Credit Union 1, China subsidiary $1,426,955  $1,734,150 
Credit Union 2, China subsidiary  836,490   954,578 
Credit Union 3, China subsidiary  -   556,837 
Promissory Note of US parent  50,000   50,000 
Loan of U.S. Parent  10,000,000   10,000,000 
Credit line payable of U.S. Parent  638,951   - 
Total short term loan $12,952,396  $13,295,565 

15. TAXES PAYABLE (RECEIVABLE)

Taxes payable (receivable) consisted of the following at December 31, 2013 and 2012:

  2013  2012 
Value-added tax $23,543  $(54,727)
Income tax  (8,218)  (7,971)
Other  52,909   60,908 
Total $68,234  $(1,790)

16. SHORT-TERM PAYABLE

On September 21, 2009, the Company entered into a construction contract with a local authority, the Administration Committee for Liaoning Special Vehicle Production Base (“LSVPB”), to build a plant. LSVPB was responsible for the construction of the main body of the plant and the Company was responsible for the construction of certain infrastructure for the plant, including plumbing, heating and electrical systems. The plant is 9,074 square meters with construction costs of RMB 1,350 ($214) per square meter.

LSVPB was responsible for hiring a qualified construction team according to the Company’s approved design and the Company needed to approve any material changes to the design during construction. LSVPB was also responsible for site survey, quality supervision and completion of inspection, as well as the transfer of all construction completion records to the Company. Upon completion of the Company’s ownership registration, the Company was required to pledge the plant as collateral for payment by the Company to LSVPB of $1,944,151 (RMB 12,249,900). The pledge will terminate upon payment in full by the Company.
The Company is to pay LSVPB for the cost of the project in five equal annual installments in October of each year beginning in October 2010. The Company is not required to pay interest, and ownership of the plant will transfer to the Company upon payment in full. The default penalty is 0.5% of the amount outstanding, compounded daily, in the event of a default. LSVPB has the right to foreclose on the plant if payments are in arrears for more than two years, in which case all prior payments made by the Company will be treated as liquidated damages by LSVPB.
The Company recorded the cost of construction at the present value of the five annual payments by imputing interest of 9% from when the Company started using the plant. Depreciation of the construction cost and amortization of the unamortized interest commenced on the date of occupation and use. The Company started using the plant on August 30, 2010. The certificate of the property ownership was received in the third quarter of 2011.

In the fourth quarter of 2011, the Company received a subsidy from LSVPB of $1.11 million (RMB 7,000,000) against the outstanding payment. In the first quarter of 2012, the Company repaid $382,886 (RMB 2,410,000). During 2013, the Company did not make any payments and is currently in default as of December 31, 2013.The Company expects to pay the remaining amount by the due date of October 2014.
At December 31, 2013, the short-term payable consisted of the following:
Short-term payable $465,794 
Less: unamortized interest  (22,967)
Net  442,827 

As of December 31, 2013, future minimum payments for the next year until maturity are as follows:

Year   
2014 $442,827 

17. MAJOR CUSTOMERS AND VENDORS

Three customers accounted for 72% of sales forFor the year ended December 31, 2013, and each customer accounted for 36%, 18%, and 18% of total sales, respectively. At December 31, 2013, total receivables from these customers were $5,219,337 ($880,776, $819,363 and $3,519,198, respectively).

Three customers accounted for 89% of sales for the year ended December 31, 2012, and each customer accounted for 43%, 31% and 15% of total sales, respectively. At December 31, 2012, total receivables from these customers were $2,185,563 ($433,555, $1,679,061 and $72,947, respectively).

One vendor accounted for 10% of total purchases for the year ended December 31, 2013. At December 31, 2013, the total payable to these vendors was $0.

One vendor accounted for 27% of total purchases for the year ended December 31, 2012. At December 31, 2012, the total payable to the vendor was $1,098.


18. DEFERRED TAX ASSET (LIABILITY)

Deferred tax asset (liability) represented differences between the bad debt allowance and provision of inventory impairment booked bybefore becoming a C-Corporation, the Company which was not allowed per tax purpose,distributed $49,972 to certain stockholders and net operating loss for income tax purpose. Ashad a deficit in total stockholders’ equity of December 31, 2013 and 2012, deferred tax asset (liability) consisted of the following:$536,950.
  2013  2012 
Deferred tax asset - current (bad debt allowance)
 
$
6,217,939
  
$
4,350,671
 
Deferred tax asset - current (inventory allowance)
  
3,623,970
   
209,352
 
Deferred tax asset – current (allowance to other receivable)
  
513,509
   
-
 
Deferred tax asset – current (allowance for advance to supplier)
  
5,817,908
   
-
 
Deferred tax asset – noncurrent (NOL)
  
1,276,569
   
598,990
 
Less: valuation allowance
  
(17,449,895
)
  
(5,159,013
)
Net
 
$
-
  
$
-
 

19. INCOME TAX

The Company is subject to income taxes by entity on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

CleanTech, the U.S. parent company, was incorporated in the U.S. and has net operating losses (NOL) for income tax purposes. CleanTech has NOL of $7.78 million as of December 31, 2013, which may be available to reduce future years’ taxable income as NOL can be carried forward up to 20 years from the year the loss is incurred. Management believes the realization of benefits from these losses remains uncertain due to CleanTech’s, the U.S. parent company, has limited operating history and continuing losses. Accordingly, a 100% deferred tax asset valuation allowance was provided. 

Creative Bellows and Creative Wind Power generated substantially all of their net income from their PRC operations and are governed by the Income Tax Law of the PRC for privately-run enterprises. According to this law, privately-run enterprises are generally subject to a tax rate of 25% on income reported in the privately-run enterprises’ financial statements, after appropriate tax adjustments.
According to the new income tax law that became effective January 1, 2008, new high-tech enterprises given special support by the PRC government are subject to an income tax rate of 15%. Creative Bellows was recognized as a new high-tech enterprise and registered its status with the tax bureau, providing it with an income tax rate of 15% from 2010 through 2012, and 25% for 2013 and the years after.
The following table reconciles the U.S. statutory rates to the Company’s consolidated effective tax rate forFor the years ended December 31, 2014 and 2013 and 2012:

  2013  2012 
U.S. statutory rates (benefit)  (34.0)%  (34)%
Tax rate difference  6.8 %  7.2 %
Other  - %  - %
Effective tax holiday  - %  1.7 %
Valuation allowance  27.2 %  25.1 %
Effective income tax rate  - %  - %

There werethe Company had no material temporary differences that resulted in deferred taxes as of December 31, 2013 and 2012.issued or outstanding Preferred stock.

20. STOCKHOLDERS’ EQUITY

Common Stock withNote 10 – Warrants Issued for Cash

On July 12, 2010,September 29, 2014, in connection with the Exchange, the Company completed a private placement equity offering to accredited investors, raising $4,556,100 in which it sold 3,333,322 units, consisting of one share of its common stock and a warrant to purchase 15% of one share of its common stock, at $3.00 per unit for $10,000,000. The warrants are immediately exercisable, expired on the third anniversary of their issuance and entitle the holders to purchase up to 499,978 shares of the Company’s common stock at $3.00 per share. The Company may call the warrants at any time after (i) the registration statement registering the common stock underlying the warrants becomes effective, (ii) the common stock is listed on a national securities exchange and (iii) the trading price of the common stock exceeds $4.00. The Company also issued warrants, having the same terms and conditions as the warrants issued in the private placement, to purchase 333,332 shares of its common stock to the placement agents in the private placement. The warrants issued in this private placement are exercisable for a fixed number of shares, solely redeemable by the Company and not redeemable by the warrant holders. Accordingly, such warrants are classified as equity instruments. The Company accounted for the warrants issued to the investors and placement agents based on the FV method under ASC Topic 505. The FV of the warrants was calculated using the Black-Scholes model and the following assumptions: estimated life of 3 years, volatility of 147%, risk-free interest rate of 1.89% and dividend yield of 0%. No estimate of forfeitures was made as the Company has a short history of granting options and warrants. The FV of the warrants at grant date was $5,903,228. The Company received net proceeds of $8.4 million from this private placement. The commission and legal cost associated with this offering was $1.6 million. During the year ended December 31, 2013, there were no warrants exercised into common stock. The unexercised warrants expired on July 11, 2013.
On December 13, 2010, the Company completed a closing of $20,000,000 in a combination of debt and equity offerings through accredited institutional investors. In a private placement of equity, the Company sold 2,500,000 units, consisting of one share of its common stock and a warrant to purchase 67.5% of one share of its common stock, at $4.00 per unit for $10,000,000. The warrants are immediately exercisable, expire on the fifth anniversary of their issuance and entitle the holders to purchase up to 1,687,500 shares of the Company’s common stock at $4.00 per share.gross proceeds.  For its assistance in thethis private placement of equity, the Company paid a placement agent $1,000,000$356,250 and issued it warrants to purchase 300,000258,155 shares of the Company’s common stock under the same terms as the warrants issued in the private placement.stock.  The Company also paid the placement agent $100,000 for its assistance in arranging the loan. The FVfair value of the warrants was calculated using the Black-Scholes model and the following assumptions: estimated life of five years, volatility of 88%46.5%, risk-free interest rate of 1.89%1.77% and dividend yield of 0%.  No estimate of forfeitures was made as the Company has a short history of granting options and warrants. The FVfair value of the warrants at grant date was $10,282,442.

Concurrently with the closing of the private placement on December 13, 2010, the Company entered into a long-term loan agreement with a lender for $10 million. The loan bore interest of 10% payable in advance at the beginning of each quarter with a maturity of March 1, 2013 (See Note 14).   

Following is a summary of the warrant activity:
  
Number of
Shares
  
Weighted Average
Exercise
Price per Share
  
Weighted
Average
Remaining
Contractual
Term in Years
 
Outstanding at January 1, 2012  2,801,310  $3.71   3.25 
Exercisable at January 1, 2012  2,801,310  $3.71   3.25 
Granted  -   -   - 
Exercised  -   -   - 
Expired  -   -   - 
Outstanding at December31, 2012  2,801,310  $3.71   2.25 
Exercisable at December31, 2012  2,801,310  $3.71   2.25 
Granted  -   -   - 
Exercised  -   -   - 
Expired  813,810   3.00   - 
Outstanding at December 31, 2013  1,987,500  $4.00   1.95 
Exercisable at December 31, 2013  1,987,500  $4.00   1.95 

21. STOCK-BASED COMPENSATION PLAN$1,660,526.

On July 13, 2010,November 21, 2014, the Company granted non-statutory stock optionscompleted a private placement equity offering to accredited investors, raising $1,052,498 in gross proceeds.  For its one independent U.S. director. The termsassistance in this private placement of equity, the Company paid a placement commissions representing 10% of the options are: 30,000gross proceeds and issued it warrants to purchase 32,239 shares at an exercise price per share of $8.44, with athe Company’s common stock.  The fair value of the warrants was calculated using the Black-Scholes model and the following assumptions: estimated life of threefive years, and vesting over two years with 10,000 shares vested on the grant date and the remainder to vest in increments of 10,000 shares on each subsequent anniversary of the grant date, subject in each case to the director continuing to be associated with the Company as a director. The options were valued using a volatility of 147%46.5%, risk-free interest rate of 1.89%1.63% and dividend yield of 0%.  No estimateThe fair value of forfeituresthe warrants at grant date was made$91,436.
The Company uses the basis for the accounting of warrants issued in connection with the private placement to the placement agent in accordance with ASC 480 “Distinguishing Liabilities from Equity” and ASC 815 “Derivatives and Hedging.”  The warrants were considered an issuance cost for the private placement and therefore were deducted from the gross proceeds reducing equity.

Note 11 – Commitments and Contingencies

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business.  The Company records a provision for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably estimated.  If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements.  Contingencies are inherently unpredictable and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

Operating Leases

The Company is obligated under various operating lease agreements for office facilities in California, Florida, New York and Ohio.  In addition, the Company leases office facilities on a month-to-month basis in Minnesota and Colorado.

Rent expense under all office leases aggregated $342,170 and $261,642 for the years ended December 31, 2014 and 2013, respectively.  Rent expense was recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations.

The Company is also obligated under various operating lease agreements for equipment.  Rent expenses under all equipment leases aggregated $81,036 and $63,506 for the years ended December 31, 2014 and 2013, respectively.  Rent expenses under all equipment leases are recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Future minimum payments of the Company’s operating leases are as follows:
2015
 $295,336 
2016
  240,798 
2017
  260,633 
2018
  191,679 
2019
  - 
Thereafter
  - 
Total
 $988,446 

New York Office Sub-lease

On February 15, 2014, the Company signed a twenty-four (24) month agreement to sub-lease a portion of it office facilities in New York City expiring in February 29, 2016.  The lease requires base annual rental payments to the Company of $120,000 for the term of the lease.  Rental income will be recognized on a straight-line basis over the term of the lease.  As part of the lease agreement, the Company received a $30,000 security deposit, which is shown as a liability on the accompanying consolidated balance sheets.

California Leases

On April 29, 2014, the Company signed a lease amendment for its office facilities in San Ramon, California.  The amendment extends the lease past the May 31, 2014 expiration date on a month to month basis with monthly rental payments of $2,836.  On June 30, 2014, the Company cancelled the lease, and the lease expired on September 30, 2014.

On April 16, 2014, the Company signed a thirty-eight (38) month lease agreement for its office facilities in Pleasanton, California expiring on August 31, 2017.  The lease requires base annual rent of approximately $34,000 for the first year, with increases in increments of 3% each year thereafter.  The lease contains a two (2) month rent abatement period starting in July 2014.  Rent expense will be recognized on a straight line basis over the term of the lease.  The lease contains one option to renew for a term of thirty-six (36) months.

Deferred Rent

To induce the Company to enter into certain operating leases, landlords have granted free rent for various months over the term of occupancy.  Rent expenses recorded on the straight-line basis in excess of rents paid is recognized as deferred rent.  For the years ended December 31, 2014 and 2013, deferred rent was $55,429 and $73,192, respectively, which is shown as a liability in the consolidated balance sheets.

The Company’s capital lease obligations for computer software and hardware as of December 31 2014 are as follows:
2015
 $64,549 
2016
  54,617 
2017
  41,232 
2018
  27,186 
2019
  - 
Thereafter
  - 
Total
  187,584 
Amount representing interest
  22,844 
Present value of future minimum lease payments
  164,740 
Current portion of capital lease obligations
  53,610 
Capital lease obligations, net of current portion
 $111,130 

Future minimum payments of the Company’s capital leases are as follows:
2015
 $53,612 
2016
  47,404 
2017
  37,352 
2018
  26,372 
2019
  - 
Thereafter
  - 
Total
 $164,740 

Note 12 – Concentrations and Credit Risks

Revenues

For the years ended December 31, 2014 and 2013, the Company had two and one significant customer, respectively, that accounted for more than 10% of the Company’s total revenues.  The Company’s sales to its top five customers accounted for approximately 52% and 41% of revenues during the years ended December 31, 2014 and 2013, respectively.  During the year ended December 31, 2014, the Company had one foreign customer accounting for just under 9% of its revenues.  During the year ended December 31, 2013, the Company had no foreign customers.

Accounts Receivable

For the years ended December 31, 2014 and 2013, the Company had approximately 57% and 53% of its accounts receivable balance held by five customers, respectively.  During the years ended December 31, 2014 and 2013, the Company had three and two customers accounting for more than 10% each of its accounts receivables balances, respectively.

Accounts Payable

For the years ended December 31, 2014 and 2013, the Company had approximately 26% and 28% of its accounts payable balances held by its top five vendors, respectively.  During each of these same periods, the Company had none of its customers accounting for more than 10% each of the Company’s accounts payables balances, respectively.
Note 13 – Income Taxes

Effective June 2014, the Company converted into a C-Corporation. Going forward, the Company will be subject to federal and state income taxes and will have to recognize income tax expense and deferred taxes for financial statement purposes.  As a result, the Company recorded a deferred tax asset of $161,452 and a deferred tax liability of ($197) principally accounting for the difference in financial reporting and tax reporting as it relates to the deductibility of accruals, expenses and depreciation, respectively, as of December 31, 2014 in the accompanying consolidated balance sheet.

The provision for income taxes includes the following:
  Years Ended December 31, 
  2014  2013 
       
Current:      
Federal
 
$
-
  
$
-
 
State
  
-
   
-
 
         
Total Current Provision
  
-
   
-
 
         
Deferred:
        
Federal
 
$
136,111
  
$
-
 
State
  
25,144
   
-
 
         
Total deferred
  
161,255
   
-
 
         
Income tax benefit
 
$
(161,255
) 
$
-
 

The effects of temporary differences and tax loss carryforwards that give rise to significant portions of federal deferred tax assets and deferred tax liabilities at December 31, 2014 are presented below:

  December 31, 2014 
Deferred tax assets:   
    
Net operating loss carry-forwards $53,692 
     
Accrued compensated absences  60,164 
     
Deferred revenues  26,294 
     
Deferred rent  21,302 
     
Net deferred tax assets  161,452 
     
Deferred tax liabilities:    
     
Property and equipment  (197)
     
Total deferred tax liabilities  (197)
     
Net deferred tax assets $161,255 
On June 25, 2014, Initial Koncepts, Inc. converted from an S-Corporation into a California limited liability company (“LLC”) and changed its name to Six Dimensions, LLC.  From inception through June 26, 2014, the Company was taxed as an S-Corporation under the Internal Revenue Code of 1986, as amended and applicable state statutes.  Under an S-Corporation election, the income of the Company flows through to the stockholders to be taxed at the individual level rather than the corporate level.  Accordingly, the Company had no tax liability at the federal level (with limited exceptions) as long as the S-Corporation election was in effect.  On June 27, 2014, Six Dimensions, LLC converted into a Nevada C-Corporation and changed its name to Six Dimensions, Inc.

When the Company has a short historywas an S-Corporation, the income allocable to each shareholder is subject to examination by federal and state taxing authorities. In the event of granting options. The grant date FVan examination of the options was $203,235. On November 16, 2011,income tax returns, the director voluntary relinquished his rights to 10,000 non-vested stock options; accordingly, the unvested 10,000 shares were forfeited.

Based on the FV method under SFAS No. 123 (Revised) “Share Based Payment” (“SFAS 123(R)”) (codified in FASB ASC Financial Instruments, Topic 718), the FV of each stock option granted is estimated on the datetax liability of the grant usingstockholders could be changed if an adjustment in the Black-Scholes option pricing model. The Black-Scholes option pricing model has assumptions for risk-free interest rates, dividends, stock volatility and expected life of an option grant. The risk-free interest rateincome is based upon market yields for U.S. Treasury debt securities at a maturity nearultimately determined by the term remaining on the option. Dividend ratestaxing authorities.

Deferred taxes are computed based on the Company’s dividend history.tax liability or benefit in future years of the reversal of temporary differences in the recognition of income or deduction of expenses between financial and tax reporting purposes.  The stock volatility factornet difference, if any, between the provision for taxes and taxes currently payable is reflected in the balance sheet as deferred taxes.  Deferred tax assets and/or liabilities, if any, are classified as current and non-current based on the historical volatilityclassification of the related asset or liability for financial reporting purposes, or based on the expected reversal date for deferred taxes that are not related to an asset or liability.  Valuation allowances are recorded to reduce deferred tax assets to that amount which is more likely than not to be realized.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  The Company’s income tax returns are open to examination by federal, state and foreign tax authorities, generally for the years ended December 31, 2011 and later, with certain state jurisdictions open for audit for earlier years.  The Company has no amount recorded for any unrecognized tax benefits as of December 31, 2014 and 2013, nor did the Company record any amount for the implementation of ASC 740.  The Company’s policy is to record estimated interest and penalty related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision.  During the years ended 2014 and 2013, the Company did not recognize any interest or penalties in its consolidated statements of operations and there are no accruals for interest or penalties at December 31, 2014 or 2013.

The difference between the total income taxes computed at the federal statutory rate and the benefit rom income taxes consists of the following:

For the Year Ended December 31, 2014
Federal statutory rate34.00%
State taxes net of federal benefit7.69%
Changes in tax filing status39.14%
Non-deductible expenses(5.72)%
Other(0.38)%
Income tax benefit – Federal74.73%

As a result of the Company’s stock price.mid-year conversion to a C-Corporation for the year ended December 31, 2014, the Company had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $147,943 that may be offset against future taxable income through 2034.  The expected lifetax benefit of $40,948 has been recorded with respect to these net operating loss carry-forwards as the management of the Company believes that the realization of the Company’s net deferred tax assets of approximately $35,739 was considered more likely than not.

The Company is subject to U.S federal income taxes and income taxes in various states in the U.S. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.  Due to the Company’s NOL’s, all years remain open to examination by the major domestic taxing jurisdictions to which the Company is subject.  In addition, all the NOL’s and credit carryforwards that may be used in future years are still subject to adjustment.  The Company is not currently under examination by any tax jurisdiction.

Note 14 – Business and Geographic Segment Information

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments.  Operating segments are defined as components of an option grantenterprise about which separate financial information is based on management’s estimate. The FV of each option grant to independent directorsavailable that is calculatedevaluated regularly by the Black-Scholes methodchief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.  The Company’s chief operating decision maker is recognized as compensation expense over the vesting periodChief Executive Officer, who reviews the financial performance and the results of each stock option award.operations of the segments prepared in accordance with U.S. GAAP when making decisions about allocating resources and assessing performance of the Company.  The Company has determined that its two reportable segments are Content Management Systems (“CMS”) and Information Technology (“IT”) Staffing.  CMS offers web content management solutions, marketing cloud solutions, mobile applications, analytics, front-end user experience and design, and marketing automation.  The IT Staffing segment provides contract and contract-to-hire IT professional staffing services.

There are currently no intersegment revenues.  Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment.  The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial statements which are described in Note 2 – Significant and Critical Accounting Policies and Practices.
 

Following is a summarySegment information relating to the Company’s results of operations was as follows:
  Years Ended 
Revenues 
December 31,
2014
  
December 31,
2013
 
       
CMS
 
$
6,862,697
  
$
4,133,721
 
IT Staffing
  
4,935,116
   
5,506,565
 
Total
 
$
11,797,813
  
$
9,640,286
 
  Years Ended 
Gross Margin 
December 31,
2014
  
December 31,
2013
 
       
CMS
 
$
3,241,134
  
$
1,726,108
 
IT Staffing
  
1,130,822
   
1,400,138
 
TOTAL
 
$
4,371,956
  
$
3,126,246
 
  Years Ended 
Profit (Loss) 
December 31,
2014
  
December 31,
2013
 
CMS
 
$
2,130,064
  
$
730,296
 
IT Staffing
  
(1,659,499
)  
(1,542,859
)
Total
 
$
470,565
  
$
(812,563
)

Note 15 – Subsequent Events

Acquisitions

Storycode

On March 4, 2015 6D Global Technologies, Inc., acquired all of the option activity:
  
Number of
Shares
  
Weighted
Average
Exercise
Price per Share
  
Weighted
Average
Remaining
Contractual
Term in Years
 
Outstanding at January 1, 2012  20,000  8.44   1.53 
Exercisable at January 1, 2012  20,000  $8.44   1.53 
Granted  -   -   - 
Exercised  -   -   - 
Expired  -   -   - 
Outstanding at December31, 2012  20,000  8.44   0.53 
Exercisable at December 31, 2012  20,000  $8.44   0.53 
Granted  -   -   - 
Exercised  -   -   - 
Expired  20,000   8.44   - 
Outstanding at December 31, 2013  -  $-   - 
Exercisable at December 31, 2013  -  $-   - 
issued and outstanding membership interest of Topaz Interactive, LLC, an Oregon limited liability company doing business as “Storycode” pursuant to a Securities Purchase Agreement of that date.
 
There were no options exercised duringStorycode is headquartered in Portland, Oregon and provides mobile development and creative design services for medium and large businesses.  Storycode creates mobile applications that feature award-winning UX (user experience) and UI (user interface) design working exclusively with the Adobe DPS platform.  Storycode was founded by Katherine Topaz and Jason Porath, accomplished entrepreneurs and technology industry executives who have over 45 years ended December 31, 2013of combined experience in creative and 2012. Thedigital marketing.  Storycode employees will join the Company recorded $0 as compensation expense for stock optionspart of its expanding team of technology experts.

In consideration for the years ended December 31, 2013 and 2012, respectively.  The options expired July 12, 2013.

22. STATUTORY RESERVES

PursuantInterests, the Registrant paid the members of Storycode: cash in the amount of Three Hundred Thousand Dollars ($300,000); an additional Three Hundred Thousand Dollars ($300,000) paid in escrow to be earned by the corporate lawmembers upon the one year anniversary of the PRC effective January 1, 2006, PRC subsidiariestheir employment; an aggregate of Three Hundred Thousand (300,000) shares of the Company’s operating subsidiaries in China are required to maintain one statutory reserve by appropriating from its after-tax profit before declaration or paymentcommon stock, par value $0.00001 per share (the “Common Stock”); and additional, potential earn out shares of dividends. The statutory reserve represents restricted retained earnings.

Surplus reserve fund

The Company’s Chinese subsidiaries are required to transfer 10% of their net income, as determined under PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50%Common Stock based on Storycode’s financial performance for the three years following the closing of the Company’s registered capital. The Company’s Chinese subsidiaries are not required to make appropriation to other reserve funds and have no intentions to make appropriations to any other reserve funds. There are no legal requirements in the PRC to fund these reserves by transfer of cash to restricted accounts, and the Company’s Chinese subsidiaries do not do so.

The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.

Common welfare fund

Common welfare fund is a voluntary fund into which the Company can elect to transfer 5% to 10% of its net income.acquisition.  The Company did not make any contributionalso agreed to this fund for the years ended December 31, 2013employment agreements with Ms. Topaz and 2012.Mr. Porath.

This fund can only be utilized on capital items for the collective benefit of the Company’s employees, such as construction of dormitories, cafeteria facilities and other staff welfare facilities. This fund is non-distributable other than upon liquidation.


23. OPERATING RISKSSwellPath

On March 20, 2015 6D Global Technologies, Inc., entered into and consummated a Securities Purchase Agreement to acquire all of the issued and outstanding shares of SwellPath, Inc., (“SwellPath”) an Oregon corporation.

SwellPath is headquartered in Portland, Oregon and has an additional office in Minneapolis, Minnesota.  SwellPath is a professional services firm that delivers analytics consulting, search engine optimization and digital advertising services to medium and large scale enterprises across North America.  SwellPath enables clients to align and maximize their digital marketing initiatives by tracking both on and offline marketing campaigns and performing more effective targeting to enhance return on investment.  SwellPath complements the Company’s overall acquisition strategy to provide a full-service digital marketing solutions offering to its clients, particularly in areas where the Company’s clients have expressed needs, while leveraging the Company’s partnership with Adobe Systems Incorporated to expand its Adobe Analytics offering.

The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
The Company’s sales, purchases and expenses transactions are denominated in RMB and all of the Company’s assets and liabilities are also denominated in RMB. The RMB is not freely convertible into foreign currencies under current PRC law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require certain supporting documentation to affect the remittance.

24. CONTINGENCIES AND COMMITMENTS

The Company was required to contribute $8.45 million as additional capital to Creative Bellows by July 2012. In May 2013, the Company applied and was approved for decreasing capital contribution to RMB 122.60 million (US$19.35 million), which is equivalent to Creative Bellows current capital contribution.   

25. LITIGATION

As of March 31, 2012, Creative Bellows had a case pending in arbitrationpurchase price for the recovery of approximately one million RMB. Creative Bellows filed the arbitration proceeding for a breach of contract by Dongbei Jincheng Construction Co., Ltd., a plant construction contractor. On March 14, 2013, Dongbei JinCheng filed a complaint in the Tieling Intermediate People's Court against the Company, alleging that the Company owes it construction costsSwellPath Shares was comprised of: (i) cash in the amount of RMB 2,400,099.82 plus RMB 700,000 interest and RMB 28,176 arbitration expenses. On March 19, 2013, the company filed a counterclaim against Dongbei JinCheng, alleging that Dongbei JinCheng breached the contract by failing to complete the construction work according to quality specifications. The Company sought in RMB 2,197,131.53 monetary damages. On October 9, 2013, Dongbei JinCheng was ordered by the court to pay RMB 27,000 examination fee, RMB 77,413.89 repair costs and RMB 13,000 design and appraisal costs to the Company. On October 10, 2013, the Company filed an appeal against Dongbei JinCheng to Liaoning High People's Court in order to obtain higher damages. As of April 4, 2014, this case is under review by Liaoning High People's Court.
On January 5, 2012, the Company filed an amended complaint in the United States District Court for the Southern District of New York against the NASDAQ Stock Market, LLC and NASDAQ OMX Group, referred to collectively as NASDAQ. The Company alleged that NASDAQ’s actions resulted in a violationThree Hundred Thousand Dollars ($300,000); (ii) Three Hundred Thousand (300,000) shares of the Company’s equal protection rights undercommon stock, par value $0.00001 per share (the “Common Stock”); and (iii) up to an additional Three Hundred Thousand (300,000) shares of Common Stock and Six Hundred Fifty Thousand Dollars ($650,000), based upon the United States Constitution, amounted to selective prosecutionachievement by SwellPath of certain performance milestones within the first and intentionally breachedsecond anniversaries of the Company’s attorney-client privilege.  The Company sought a permanent injunction enjoining NASDAQ from using its discriminatory policies againstclosing of the transaction.  In addition, the Company acquired all of the goodwill associated with SwellPath from its founder, Adam Ware, for cash in the amount Three Hundred Thousand Dollars ($300,000).  Also, the Company agreed to an employment agreement with Mr. Ware to serve as Vice-President, containing customary terms, conditions and also sought at least $300 million in monetary damages.  On January 31, 2012, the amended complaint was dismissed on the basis of a lack of subject matter jurisdiction. The Company decided not to appeal to the Second Circuit Court of Appeals so it could focus on its appeal to the SEC of NASDAQ Listing Qualifications determination to delist the Company’s common stock.covenants for such an agreement.”

The Company applied to the SEC for a review of the final delisting decision made by NASDAQ Listing Qualifications. Among other reasons for review, the Company claimed inherent procedural unfairness attendant to the decision to overturn a remand to NASDAQ’s Hearings Panel for further fact finding on the matter based on alleged “ex-parte communication.”  The Company sought to have the delisting decision to be overturned. On July 11, 2013, the SEC reversed the 2011 delisting of the Company’s stock on the NASDAQ Stock Market, LLC, and ordered the Company’s stock listed on the NASDAQ Stock Market.Incentive Plan

On March 21, 2012, Fensterstock & Partners LLP, filed a complaint inJanuary 22, 2015, the Supreme CourtBoard approved the Company’s 2015 Omnibus Incentive Plan (the “Plan”) pursuant to which the Company is authorized to issue up to 4,800,000 shares of Common Stock to qualified participants.  On January 27,2015, NYGG (Asia), Ltd., Kang Kapital LLC, Kang Family LLC, and TKO, LLC, who collectively own 58,400,444 shares of Common Stock (representing 75.28 percent of the State of New York against the Company, and others, seeking $400,808 in unpaid legal fees in connection with Fensterstock’s representationvoting power of the Company in its suit againston such date) executed a written consent adopting the NASDAQ Stock Market, LLC and NASDAQ OMX Group.Plan (the “Written Consent”).   The Company filed and commenced mailing of an answerInformation Statement on Schedule 14C on February 5, 2015, disclosing the adoption of the Plan by the Board and by the stockholders pursuant to the complaint, denying the material allegationsWritten Consent.  In accordance with Rule 14c-2 of the complaint. Fensterstock filed a motion for partial summary judgmentExchange Act, the Plan became effective on its claim for “account stated" and the Company then filed papers in opposition to Fensterstock’s motion for partial summary judgment. On October 9, 2012, the court awarded a judgment in favor of Fensterstock & Partners LLP of 423,333.26 (original due of $400,808 plus accrued interest from March 1, 2012 through August 24, 2012) plus interest at 9% until paid in full, the Company accrued $66,315 interest expense as of December 31, 2013.
February 25, 2015.
 
 
F-23

PART III
Table of ContentsItem 15. – Exhibits, Financial Statement Schedules
31.1*
31.2*
32.1**
32.2**
101.INS*XBRL Instance Document
101.SCH*XBRL Taxonomy Extension Schema
101.CAL*XBRL Taxonomy Extension Calculation Linkbase
101.DEF*XBRL Taxonomy Extension Definition Linkbase
101.LAB*XBRL Taxonomy Extension Label Linkbase
101.PRE*XBRL Taxonomy Extension Presentation Linkbase
* Filed Herewith
** Furnished Herewith


 
SIGNATUSignRESatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 CLEANTECH INNOVATIONS, INC.
(Registrant)6D Global Technologies Inc. 
    
Date: April 15, 2014
Dated: March 30, 2015
By:/s/ Bei LvTejune Kang 
  
Bei Lv
Tejune Kang, Chief Executive Officer
(Principal Executive Officer)

Power of Attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Bei Lv his or her attorney-in-fact for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature TitleDate
/s/ Bei Lv
Chairman and Chief Executive Officer
(Principal Executive Officer)
April 15, 2014
Bei Lv  
/s/ Fengjun Sun
Chief Financial Officer
(Principal Financial and AccountingExecutive Officer)
April 15, 2014
Fengjun Sun 
    
/s/ Dianfu LvDirectorApril 15, 2014
Dianfu Lv
/s/ Terry K. McEwenDirectorApril 15, 2014
Terry K. McEwen
/s/ Shuyuan LiuDirectorApril 15, 2014
Shuyuan Liu
/s/ Zili ZhaoDirectorApril 15, 2014
Zili Zhao

EXHIBIT INDEX

Exhibit No.Description
2.1Share Exchange Agreement and Plan of Reorganization by and between Liaoning Creative Bellows Co., Ltd. and CleanTech Innovations, Inc., dated July 2, 2010 (Incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 2, 2010)
2.2Return to Treasury Agreement by and between CleanTech Innovations, Inc. and Jonathan Woo, dated July 2, 2010 (Incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 2, 2010)
2.3Agreement and Plan of Merger by and between Everton Capital Corporation and CleanTech Innovations, Inc., dated June 18, 2010 (Incorporated herein by reference to Exhibit 2.3 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on November 4, 2010)
2.4First Amendment to Share Exchange Agreement and Plan of Reorganization by and between Liaoning Creative Bellows Co., Ltd. and CleanTech Innovations, Inc., dated February 17, 2011, and effective as of July 2, 2010 (Incorporated herein by reference to Exhibit 2.4 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
3.1Articles of Incorporation (Incorporated herein by reference to Exhibit 3.1 to the Company’s Form SB-2 (File No. 333-138995) filed on November 29, 2006)
3.2Amended and Restated Bylaws (Incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 2, 2010)
3.3Articles of Merger between Everton Capital Corporation and CleanTech Innovations, Inc. amending the Articles of Incorporation filed with the Secretary of State of the State of Nevada on June 18, 2010 (Incorporated herein by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 2, 2010)
3.4Articles of Exchange of Liaoning Creative Bellows Co., Ltd. and CleanTech Innovations, Inc. filed with the Secretary of State of the State of Nevada on July 2, 2010 (Incorporated herein by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 2, 2010)
4.1Specimen Stock Certificate (RESCINDED) (Incorporated herein by reference to Exhibit 4.1 to the Company’s Form SB-2 (File No. 333-138995) filed on November 29, 2006)
4.2Form of Warrant (Incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 2, 2010)
4.3Form of Registration Rights Agreement (Incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 14, 2010)
4.4Specimen Stock Certificate (Incorporated herein by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on July 29, 2010)
4.5Form of Warrant (Incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 16, 2010)
4.6Form of Registration Rights Agreement (Incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 16, 2010)
4.7Form of First Amendment to Registration Rights Agreement (Incorporated herein by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on January 11, 2011)
10.1Jade Claim (Incorporated herein by reference to Exhibit 10.1 to the Company’s Form SB-2 (File No. 333-138995) filed on November 29, 2006)
10.2Trust Agreement (Incorporated herein by reference to Exhibit 10.2 to the Company’s Form SB-2 (File No. 333-138995) filed on November 29, 2006)
10.3Wind Turbine Tower Cylinder Purchase Contract for the Huaneng Panjin Binhai Wind Power Generation Project by and between Huaneng Panjin Wind Power Generation Co. Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated January 5, 2010 (Incorporated herein by reference to Exhibit 10.3 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on September 20, 2010)
10.4Wind Turbine Tower Cylinder Purchase Contract for the Huaneng Tieling Pingdingbao Wind Power Generation Project by and between Huaneng Tieling Wind Power Generation Co. Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated April 9, 2010 (Incorporated herein by reference to Exhibit 10.4 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on September 20, 2010)
10.5Wind Turbine Tower Cylinder Purchase Contract for the Huaneng Tieling Changtu Laochengzhen Wind Power Generation Project by and between Huaneng Tieling Wind Power Generation Co. Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated April 9, 2010 (Incorporated herein by reference to Exhibit 10.5 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on September 20, 2010)
10.6Intellectual Property Transfer Agreement by and between Liaoning Creative Bellows Co., Ltd. and Bei Lv, dated September 8, 2010 (Incorporated herein by reference to Exhibit 10.6 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on September 20, 2010)
10.7Wind Turbine Tower Purchase Contract for the China Guodian Beipiao Beisijia Wind Power Generation Project by and between China Guodian Beipiao Wind Power Generation Co. Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated March 21, 2010 (Incorporated herein by reference to Exhibit 10.7 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on October 13, 2010)
10.8Technology Transfer Agreement by and between Shenyang Industry University and Liaoning Creative Bellows Co., Ltd., dated August 15, 2008 (Incorporated herein by reference to Exhibit 10.8 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on October 13, 2010)
10.9Short Term Loan Agreement between Strong Growth Capital Ltd. and CleanTech Innovations, Inc., dated October 14, 2010 (Incorporated herein by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q (File No. 000-53511) filed on November 3, 2010)
10.10Patent License Agreement by and between Shenyang Industry University and Liaoning Creative Bellows Co., Ltd., dated July 15, 2008 (Incorporated herein by reference to Exhibit 10.10 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on November 4, 2010)
10.11Wind Turbine Tower Cylinder Purchase Contract for the Huaneng Tongliao Halunhuduga Wind Power Generation Project by and between Huaneng Tongliao Wind Power Generation Co. Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated September 7, 2010 (Incorporated herein by reference to Exhibit 10.11 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on November 4, 2010)
10.12Wind Turbine Tower Cylinder Purchase Contract for the Huaneng Tongliao Distributed Access Wind Power Generation Project by and between Huaneng Tongliao Wind Power Generation Co. Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated September 7, 2010 (Incorporated herein by reference to Exhibit 10.12 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on November 4, 2010)
#10.13Standard Labor Contract by and between Bei Lv and Liaoning Creative Bellows Co., Ltd., dated July 2, 2010 (Incorporated herein by reference to Exhibit 10.13 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on November 4, 2010)
#10.14Standard Labor Contract by and between Nan Liu and Liaoning Creative Bellows Co., Ltd., dated September 28, 2010 (Incorporated herein by reference to Exhibit 10.14 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on November 4, 2010)
10.15Loan Agreement between NYGG (Asia), Ltd. and CleanTech Innovations, Inc., dated December 13, 2010 (Incorporated herein by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 16, 2010)
10.1610% Promissory Note, dated December 13, 2010 (Incorporated herein by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 16, 2010)
10.17Wind Turbine Tower Purchase Contract for the Guodian Inner Mongolia Xilinguole Tianhe Wind Power Plant Stage One Project by and between Xilinguole Tianhe Wind Power Generation Co., Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated September 7, 2010 (Incorporated herein by reference to Exhibit 10.17 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.18Wind Power Unit Purchase Order for Guodian Beizhen Phase II (Jiazi Mountain) Wind Power Project by and between Guodian Hefeng Wind Power Development Co., Ltd and Liaoning Creative Wind Power Equipment Co., Ltd., dated September 2010 (Incorporated herein by reference to Exhibit 10.18 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.19Subcontract of Gezhouba Inner Mongolia Wind Tower Tube Manufacturing Project by and between Gezhouba Inner Mongolia Wind Power Equipment Co., Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated October 20, 2010 (Incorporated herein by reference to Exhibit 10.19 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.20Wind Turbine Tower Cylinder Purchase Contract for the Huaneng Tongyu Xinhua 1A Wind Farm Project by and between Huaneng Tongyu Xinhua Wind Power Generation Co. Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated January 14, 2011 (Incorporated herein by reference to Exhibit 10.20  to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.21Wind Turbine Tower Cylinder Purchase Contract for the Huaneng Tongyu Xinhua 1B Wind Farm Project by and between Huaneng Tongyu Xinhua Wind Power Generation Co. Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., dated January 14, 2011 (Incorporated herein by reference to Exhibit 10.21 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.22Form of Nonqualified Stock Option Agreement (Incorporated herein by reference to Exhibit 10.22 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.23Waiver and Release between CleanTech Innovations, Inc. and Bei Lv, dated as of October 27, 2010 (Incorporated herein by reference to Exhibit 10.23  to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.24Waiver and Release between CleanTech Innovations, Inc. and Dianfu Lv, dated as of October 27, 2010 (Incorporated herein by reference to Exhibit 10.24 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.25Waiver and Release between CleanTech Innovations, Inc. and Wenge Chen, dated as of October 27, 2010 (Incorporated herein by reference to Exhibit 10.25 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
10.26Waiver and Release between CleanTech Innovations, Inc. and Wonderful Limited, dated as of October 27, 2010 (Incorporated herein by reference to Exhibit 10.26 to the Company’s Form 10K (File No. 001-35002) filed on February 22, 2011)
#10.27Standard Labor Contract by and between Sheng Ma and Liaoning Creative Bellows Co., Ltd., dated August 1, 2011 (Incorporated herein by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10Q (File No. 001-35002) filed on November 14, 2011)
10.28First Amendment to the Loan Agreement and Promissory Note between NYGG (Asia), Ltd. and CleanTech Innovations, Inc., dated March 1, 2012  (Incorporated herein by reference to Exhibit 10.28 to the Company’s Current Report on Form 8K (File No. 001-35002) filed on March 2, 2012 )
14.1Code of Conduct (Incorporated herein by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 14, 2010)
16.1Letter from Malone & Bailey, PC, dated April 23, 2009 (Incorporated herein by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on April 24, 2009)
21.1Subsidiaries of the Company (Incorporated herein by reference to Exhibit 21.1 to the Company’s Current Report on Form 8-K (File No. 000-53511) filed on July 2, 2010)
†31.1
†31.2
†32.1
†32.2
99.1Amended and Restated Audit Committee Charter (Incorporated herein by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on July 29, 2010)
99.3Compensation Committee Charter (Incorporated herein by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on July 29, 2010)
99.4Nominating and Corporate Governance Committee Charter (Incorporated herein by reference to Exhibit 99.4 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on July 29, 2010)
99.5Notice of Approval of Change in Ownership Application for Connecting Bend Pipe Patent from the State Intellectual Property Office of the PRC, dated July 23, 2010 (Incorporated herein by reference to Exhibit 99.5 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on September 20, 2010)
99.6Certificate of Patent Licensing Agreement Record from the State Intellectual Property Office of the PRC, dated April 30, 2010 (Incorporated herein by reference to Exhibit 99.6 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on October 13, 2010)
99.7Enterprise Legal Person Business License issued to Liaoning Creative Bellows Co., Ltd. by the Tieling Administration Bureau of Industry and Commerce, dated October 15, 2010 (Incorporated herein by reference to Exhibit 99.7 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-168385) filed on November 4, 2010)
99.8Lock-Up Agreement between Bei Lv and CleanTech Innovations, Inc., dated July 2, 2010 (Incorporated herein by reference to Exhibit 99.8 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 17, 2010)
99.9Lock-Up Agreement between Dianfu Lv and CleanTech Innovations, Inc., dated July 2, 2010 (Incorporated herein by reference to Exhibit 99.9 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 17, 2010)
99.10Lock-Up Agreement between Wenge Chen and CleanTech Innovations, Inc., dated July 2, 2010 (Incorporated herein by reference to Exhibit 99.10 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 17, 2010)
99.11Lock-Up Agreement between Ping Chen and CleanTech Innovations, Inc., dated July 2, 2010 (Incorporated herein by reference to Exhibit 99.11 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 17, 2010)
99.12Lock-Up Agreement between Shengfen Lin and CleanTech Innovations, Inc., dated July 2, 2010 (Incorporated herein by reference to Exhibit 99.12 to the Company’s Current Report on Form 8-K (File No. 001-35002) filed on December 17, 2010)

# Management contract or compensatory plan, contract or arrangement
† Filed herewith
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