CleanTech Innovations, Inc.
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Page
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3
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PART I. FINANCIAL INFORMATION
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Item 1.
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4
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Item 2.
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22
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Item 3.
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28
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Item 4.
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28
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PART II. OTHER INFORMATION
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Item 1.
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29
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Item 1A.
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29
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Item 2.
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29
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Item 3.
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30
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Item 4.
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30
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Item 5.
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30
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Item 6.
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30
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31
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32
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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:
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our goals and strategies;
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our future business development, financial conditions and results of operations;
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the expected growth of the market for structural towers for wind turbine products and specialty metal products;
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our expectations regarding demand for our products;
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our expectations regarding keeping and strengthening our relationships with key customers;
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our ability to stay abreast of market trends and technological advances;
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our ability to protect our intellectual property rights effectively and not infringe on the intellectual property rights of others;
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our ability to attract and retain quality employees;
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our ability to pursue strategic acquisitions and alliances;
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competition in our industry in China;
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general economic and business conditions in the regions in which we sell our products;
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relevant government policies and regulations relating to our industry; and
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market acceptance of our products.
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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. FINANCIAL INFORMATION
Item 1. Financial Statements
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
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2014
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2013
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ASSETS
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CURRENT ASSETS:
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Deposits
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$ |
- |
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$ |
270,000 |
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Total current assets
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- |
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270,000 |
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Assets of discontinued operations
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- |
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29,733,635 |
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TOTAL ASSETS
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$ |
- |
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$ |
30,003,635 |
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$ |
- |
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$ |
121,134 |
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Accrued expenses and other payables
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4,554,014 |
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4,109,499 |
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Short term loans
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10,581,731 |
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10,688,951 |
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Total current liabilities
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15,135,745 |
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14,919,584 |
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Liabilities of discontinued operations
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- |
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5,861,443 |
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Total Liabilities
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15,135,745 |
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20,781,027 |
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CONTINGENCIES AND COMMITMENTS
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STOCKHOLDERS' EQUITY:
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Common stock, $0.00001 par value, 66,666,667 shares
authorized, 3,251,139 and 8,327,607 shares issued and outstanding at June 30, 2014 and December 31, 2013
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33 |
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83 |
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Additional paid in capital
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17,353,663 |
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20,649,259 |
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Statutory reserve fund
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- |
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1,104,138 |
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Accumulated other comprehensive income
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- |
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4,105,963 |
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Accumulated deficit
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(20,305,919 |
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(16,636,835 |
) |
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(2,952,223 |
) |
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9,222,608 |
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Less: treasury stock, at cost; 5,076,468 shares of common stock
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(12,183,522 |
) |
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- |
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Total stockholders' equity (deficit)
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(15,135,745 |
) |
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9,222,608 |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ |
- |
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$ |
30,003,635 |
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The accompanying notes are an integral part of these financial statements.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2014 AND 2013
(UNAUDITED)
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Six Months ended June 30,
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Three Months ended June 30,
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2014
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2013
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2014
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2013
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Net sales
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$ |
- |
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$ |
- |
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$ |
- |
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$ |
- |
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Cost of goods sold
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- |
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- |
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- |
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- |
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Gross profit
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- |
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- |
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- |
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- |
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Operating expenses
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General and administrative
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330,035 |
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- |
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357,833 |
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- |
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Total operating expenses
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330,035 |
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- |
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357,833 |
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- |
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Loss from operations
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(330,035 |
) |
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- |
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(357,833 |
) |
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- |
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Non-operating income (expenses)
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Interest expense
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(444,515 |
) |
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(941,077 |
) |
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(222,719 |
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(599,104 |
) |
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Total non-operating expenses
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(444,515 |
) |
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(941,077 |
) |
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(222,719 |
) |
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(599,104 |
) |
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LOSS FROM CONTINUING OPERATIONS
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(774,550 |
) |
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(941,077 |
) |
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(580,552 |
) |
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(599,104 |
) |
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LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX
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(452,974 |
) |
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(1,342,692 |
) |
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(1,097,928 |
) |
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(774,824 |
) |
LOSS ON DISPOSAL OF SUBSIDIARIES
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(10,711,186 |
) |
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- |
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(10,711,186 |
) |
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- |
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Net loss
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(11,938,710 |
) |
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(2,283,769 |
) |
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(12,389,666 |
) |
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|
(1,373,928 |
) |
Foreign currency translation gain
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|
|
- |
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|
|
601,097 |
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|
|
- |
|
|
|
507,690 |
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|
|
|
|
|
|
|
|
|
|
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Comprehensive loss
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$ |
(11,938,710 |
) |
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$ |
(1,682,672 |
) |
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$ |
(12,389,666 |
) |
|
$ |
(866,238 |
) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic and diluted weighted average shares outstanding
|
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7,766,672 |
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8,327,607 |
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7,211,900 |
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8,327,607 |
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|
|
|
|
|
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|
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|
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Basic and diluted loss per share from continuing operations
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$ |
(0.10 |
) |
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$ |
(0.11 |
) |
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$ |
(0.08 |
) |
|
$ |
(0.07 |
) |
Basic and diluted loss per share from discontinued operations
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|
$ |
(1.44 |
) |
|
$ |
(0.16 |
) |
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$ |
(1.64 |
) |
|
$ |
(0.09 |
) |
Basic and diluted loss per share
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|
$ |
(1.54 |
) |
|
$ |
(0.27 |
) |
|
$ |
(1.72 |
) |
|
$ |
(0.16 |
) |
The accompanying notes are an integral part of these financial statements
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(UNAUDITED)
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Six Months ended June 30,
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2014
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2013
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ |
(11,938,710 |
) |
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$ |
(2,283,769 |
) |
Adjustments to reconcile net loss to net cash
provided by operating activities:
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Depreciation and amortization
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|
270,852 |
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|
335,119 |
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Amortization of interest expense
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22,888 |
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29,844 |
|
Changes in bad debt allowance
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(426,885 |
) |
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672,474 |
|
Provision for inventory impairment
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|
885,611 |
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|
107,863 |
|
Loss from disposal of subsidiaries
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|
10,711,186 |
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|
- |
|
(Increase) decrease in assets:
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|
|
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Accounts receivable
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|
694,034 |
|
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(186,321 |
) |
Retentions receivable
|
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|
677,605 |
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|
1,056,793 |
|
Notes receivable
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|
735,534 |
|
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|
367,888 |
|
Other receivables, deposits and prepayments
|
|
|
636,527 |
|
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|
30,209 |
|
Advances to suppliers
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|
|
93,804 |
|
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|
(231,888 |
) |
Inventories
|
|
|
(901,607 |
) |
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|
(600,271 |
) |
Increase (decrease) in liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
(448,596 |
) |
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|
(429,579 |
) |
Accrued expenses and other payables
|
|
|
342,080 |
|
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|
1,188,440 |
|
Advance from customers
|
|
|
(100,834 |
) |
|
|
544,484 |
|
Taxes payable
|
|
|
(21,124 |
) |
|
|
(132,070 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,232,365 |
|
|
|
469,216 |
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|
|
|
|
|
|
|
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CASH FLOWS FROM INVESTING ACTIVITIES:
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|
|
|
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Restricted cash
|
|
|
243,585 |
|
|
|
- |
|
Acquisition of property & equipment
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|
|
(38,794 |
) |
|
|
(12,161 |
) |
Long term investment receipt
|
|
|
- |
|
|
|
96,134 |
|
Cash disposed with discontinued operations
|
|
|
(177,483 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
27,308 |
|
|
|
83,973 |
|
|
|
|
|
|
|
|
|
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CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Due from shareholder
|
|
|
- |
|
|
|
(89,517 |
) |
Advances from shareholder
|
|
|
990,459 |
|
|
|
- |
|
Repayment of short term loans
|
|
|
(2,255,639 |
) |
|
|
(384,535 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(1,265,180 |
) |
|
|
(474,052 |
) |
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGE ON CASH & EQUIVALENTS
|
|
|
(2,671 |
) |
|
|
1,333 |
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS
|
|
|
(8,178 |
) |
|
|
80,470 |
|
|
|
|
|
|
|
|
|
|
CASH & EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
8,178 |
|
|
|
42,996 |
|
|
|
|
|
|
|
|
|
|
CASH & EQUIVALENTS, END OF PERIOD
|
|
$ |
- |
|
|
$ |
123,466 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash flow data:
|
|
|
|
|
|
|
|
|
Income tax paid
|
|
$ |
- |
|
|
$ |
- |
|
Interest paid
|
|
$ |
71,082 |
|
|
$ |
154,290 |
|
The accompanying notes are an integral part of these financial statements.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Background of the Company
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.
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.
The Exchange Agreement and the Divesture
On June 11, 2014, CleanTech entered into a Divesture and Exchange Agreement (the “Exchange Agreement”) with certain controlling shareholders of CleanTech, including Ping Chen, Shengfen Lin, Wenge Chen, Bei Lu and Dianfu Lu (collectively, the “Controlling Shareholders”). Bei Lu and Dianfu Lu were also officers and directors of the Company. The Controlling Shareholders collectively own 15,229,403 shares (pre-Reverse Split) of the Company’s common stock (the “Controlling Shares”), or 61.0% of the total number of the Company’s outstanding shares.
Pursuant to the Exchange Agreement, the Controlling Shareholders agree to transfer all of the Controlling Shares to the Company in exchange for the transfer by the Company of its wholly owned Chinese subsidiaries, Creative Wind Power and Creative Bellows (collectively the, “China Subsidiaries”) to the Controlling Shareholders or their designees. The China Subsidiaries represent all of the Company’s China-based business. We refer to these transfers as the "Divesture".
The Exchange Agreement is subject to various conditions, including that the Controlling Shares and the Company's ownership interests in Creative Bellows and Creative Wind Power (the “Subsidiary Interests”) be deposited into and held in escrow pursuant to the terms of a separately-executed escrow agreement (the “Escrow Agreement”). The release of the Controlling Shares and the Subsidiary Interests and consummation of the Exchange Agreement is further subject to the requirement that the Company promptly form a wholly owned British Virgin Islands corporation (the “BVI Subsidiary”). Upon formation of the BVI Subsidiary, the Company was required to effectuate the transfer of the Subsidiary Interests to the BVI Subsidiary followed by its transfer of all of the Company’s ownership interest in the BVI Subsidiary to the Controlling Shareholders. The Exhange Agreement is also subject to customary representations and warranties of the parties and provides for cross-indemnification to either party in the case of certain liabilities to either party. As of June 30, 2014, the BVI Subsidiary was formed; the Subsidiary Interests and the Controlling Shares were deposited into the escrow account on June 12, 2014; the Controlling Shareholders were no longer the shareholders of the Company commencing June 12, 2013; for accounting purposes, the disposal of the China Subsidiaries was closed on June 12, 2014 and has been accounted for in these financial statements.
On June 11, 2014, in consideration of the Exchange Agreement and the related transactions, the Company’s largest creditor, NYGG (Asia) Ltd., a British Virgin Islands corporation (“NYGG”), entered into a Forbearance and Waiver Agreement with the Company (the “Forbearance Agreement”). Pursuant to the Forbearance Agreement, NYGG and its affiliates agree to forbear from exercising certain of their respective rights and remedies related to the Company’s debt obligations to them and certain events of default thereunder. The forbearance period extends from June 11, 2014 until the first to occur of: (i) September 10, 2014, (ii) the transfer of the Controlling Shares to the Company in exchange for the transfer of the Subsidiary Interests to the Controlling Shareholders; and (iii) the termination of the Exchange Agreement. Upon the earlier to occur of (i) the occurrence of a forbearance default under the Forbearance Agreement (which includes any failure by the Company to comply with and/or diligently pursue the Exchange Agreement) or (ii) the expiration of the forbearance period, NYGG’s agreement to forbear shall immediately terminate and it shall thereafter be entitled to exercise all of its rights and remedies with respect to the Company’s debt obligations to it. Further to the Forbearance Agreement, NYGG also agrees to unconditionally release each of the China Subsidiaries from all of their debt obligations to NYGG. The terms of NYGG’s release and waiver are set forth in a separately-executed Release and Waiver Agreement between NYGG and each of the China Subsidiaries (the “Waiver Agreement”).
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
The Merger Agreement
On June 13, 2014, CleanTech entered into an Agreement and Plan of Share Exchange (the “Merger Agreement”) with Six Dimensions and the shareholders of Six Dimensions, pursuant to which, subject to certain conditions, Six Dimensions will become a wholly-owned subsidiary of the Company (the “Merger”).
Pursuant to Merger Agreement, the Company will acquire all of the shares of Six Dimensions in exchange for an aggregate of 88,929,203 (post-Reverse Split) newly issued shares (the “Exchange Shares”) of the Company’s common stock, par value $0.00001 per share (the “Common Stock”) issued to Six Dimensions’ shareholders in accordance with their pro rata ownership of Six Dimensions equity. In addition, the shares to be exchanged pursuant to the Merger Agreement will be adjusted to reflect the Reverse Split (described below).
On June 12, 2014 the Company obtained shareholder approval to (i) amend its Articles of Incorporation to (A) change its authorized shares of Common Stock, par value $0.00001 per share, from 66,666,667 to 400,000,000 and (B) change the name of the Company to “6D Global Technologies, Inc.”; (ii) authorize the conversion of the Company into a corporation organized under the laws of the State of Delaware; (iii) complete the Divesture; and (iv) obtain NYGG’s consent to convert all of its notes, debts and other liabilities made to or on behalf of the Company, into 80,844,730 shares of the Company’s Common Stock. As of date of filing this report, except for the disposition of all of the Company’s China-based operations and assets in exchange for the satisfaction and/or assumption of all liabilities, none of these events has taken place.
Six Dimensions is not obligated to consummate the transactions under the Merger Agreement unless aggregate gross proceeds of not less than $3 million and not more than $5.1 million received pursuant to a private placement (the “Private Placement”) of the Common Stock at $0.90 per share are held in an escrow account, on terms satisfactory to Six Dimensions and the Company, and the conditions to closing the Private Placement are satisfied. In addition, the Company must maintain the listing of its common stock on the NASDAQ Stock Market.
The completion of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, without limitation, (i) the raising and placement into escrow of the proceeds from the Private Placement; (ii) approval by the Company’s shareholders and Board of Directors of the Merger Agreement and other transactions contemplated in connection with the Merger; (iii) the approval by Six Dimensions' Board of Directors and the Six Dimensions Shareholders of the Merger Agreement and other transactions contemplated thereunder; (iv) the provision by the Company to Six Dimensions of certain financial statements of the Company; and (v) the provision by Six Dimensions to the Company of certain financial statements of Six Dimensions.
The Merger Agreement contains certain termination rights for both Six Dimensions and the Company. In addition, either party may terminate the Exchange Agreement if the Exchange is not consummated by December 31, 2014. The Exchange has not been completed as of June 30, 2014 and as of the date of filing this report.
The foregoing description of the Merger Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of such agreement filed on June 17, 2014 as an annex to the Company’s Current Report on Form 8-K, which is hereby incorporated into this Quarterly Report on Form 10-Q by reference.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
The Reverse Stock Split
On July 31, 2014, the Company filed a Certificate of Change pursuant to Section 78.209 of the Nevada Revised Statutes (the “Certificate of Change”) with the Secretary of State of the State of Nevada to effect a one (1)-for-three (3) reverse stock split (the “Reverse Split”) of the authorized and issued and outstanding shares of the Common Stock, par value $0.00001 per share, of the Company. Pursuant to the Certificate of Change, the Reverse Split was effective at 5:00 a.m. Eastern Standard Time on July 14, 2014.
The Reverse Split was duly approved by the Board of Directors of the Company without shareholder approval, in accordance with the authority conferred by Section 78.207 of the Nevada Revised Statutes. At the Effective Time, the Company's Articles of Incorporation were deemed amended and the authorized number of shares of the Company decreased from two hundred million (200,000,000) shares to sixty-six million, six hundred and sixty-six thousand, six hundred and sixty-seven (66,666,667) shares.
The foregoing description of the Reverse Split does not purport to be complete, and is qualified in its entirety by reference to the full text of such certificate filed on July 3, 2014 as an annex to the Company’s Current Report on Form 8-K, which is hereby incorporated into this Quarterly Report on Form 10-Q by reference.
The consolidated interim financial information as of June 30, 2014 and for the six and three month periods ended June 30, 2014 and 2013 was prepared without audit, pursuant to the rules and regulations of the Security and Exchange Commission (“SEC”). Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), were not included. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, that were filed with the SEC.
In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of June 30, 2014, its consolidated results of operations and cash flows for the six and three month periods ended June 30, 2014 and 2013, as applicable, were made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.
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 had accumulated deficit of $20.31 million as of June 30, 2014 and the Company incurred a net loss of $11.94 million (including $10.71 million loss on the disposal of the China Subsidiaries) for the six months ended June 30, 2014. In addition, the Company had promissory notes of $10 million and $50,000 with total of $4.06 million accrued interest that are past due. As of June 30, 2014, the Company also had an outstanding balance of $0.54 million including accrued interest under a credit line. The Company has not been able 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 seeks to obtain additional funds by equity financing and/or through a business combination transaction; however there is no assurance of additional funding being available.
Principles of Consolidation
The consolidated financial statements include the accounts of CleanTech and its wholly owned subsidiaries, Creative Bellows and Creative Wind Power, up to June 12, 2014; the Company disposed all of its equity interest in Creative Bellows and Creative Wind Power on June 12, 2014 and recognized a $10.71 million loss on the disposal of the China Subsidiaries. All intercompany transactions and account balances were eliminated in consolidation.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
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.
The retention generally was 10% of the sales price with a one-year term, but no later than the termination of the warranty period.
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:
Buildings
|
40
|
|
|
Years
|
Machinery
|
5
|
-
|
15
|
Years
|
Vehicles
|
5
|
|
|
Years
|
Office equipment
|
5
|
|
|
Years
|
Testing equipment
|
10
|
|
|
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.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
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 customer receipt of the product. In case of sales contracts 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 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 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. After the warranty period, the Company charges for after-sales services on its products. Such revenue is recognized when the service is provided.
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.
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).
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
The warrants and options to purchase up to 1,987,500 and 2,821,310 shares of common stock (pre-Reverse Split) were anti-dilutive during the six and three months ended June 30, 2014 and 2013, respectively.
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.
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, 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) in the consolidated statements of operations.
The RMB to USD exchange rates in effect as of June 30, 2014 and December 31, 2013, were $1 = RMB 6.1528 and $1 = RMB 6.0969, respectively. The average RMB to USD exchange rates in effect for the six months ended June 30, 2014 and 2013, were $1 = RMB 6.1180 and $1 = RMB 6.2413, respectively. The exchange rates used in translation from RMB to USD were published by the People’s Bank of China.
Comprehensive Income (Loss)
The Company uses SFAS No. 130 “Reporting Comprehensive Income” (codified in FASB ASC Topic 220). Comprehensive income is comprised 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 income (loss) for the six and three months ended June 30, 2014 and 2013 included net income (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 based 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.
Management determined the Company’s product lines – wind towers, bellows expansion joints and pressure vessels – constitute a single reportable segment under ASC 280. The Company operates exclusively in one business: the design and manufacture of highly engineered metal components for heavy industry. The manufacturing processes for each of the Company’s products, principally the rolling and welding of raw steel materials, make use of 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.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
As a result, management views the Company’s business and operations for all product lines as a blended gross margin when determining future growth, return on investment and cash flows. Accordingly, management concluded the Company had one reportable segment under ASC 280 because: (i) all 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 margins of all product lines have been converging and should continue to converge.
Following is a summary of sales by products for the six months ended June 30, 2014 and 2013:
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Bellows expansion joints and related
|
|
$
|
398,165
|
|
|
$
|
324,999
|
|
Pressure vessels (heat exchanger)
|
|
|
287,129
|
|
|
|
555,714
|
|
Wind tower
|
|
|
-
|
|
|
|
905,466
|
|
Other – high temperature compensators
|
|
|
279,796
|
|
|
|
-
|
|
Other – resale of raw materials
|
|
|
160,379
|
|
|
|
1,297,469
|
|
Forging products
|
|
|
1,397,027
|
|
|
|
-
|
|
Total
|
|
$
|
2,522,496
|
|
|
$
|
3,083,648
|
|
Following is a summary of sales by products for the three months ended June 30, 2014 and 2013:
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Bellows expansion joints and related
|
|
$
|
137,963
|
|
|
$
|
205,850
|
|
Pressure vessels (heat exchanger)
|
|
|
47,166
|
|
|
|
555,714
|
|
Wind tower
|
|
|
-
|
|
|
|
905,466
|
|
Other – high temperature compensators
|
|
|
218,746
|
|
|
|
-
|
|
Other – resale of raw materials
|
|
|
160,379
|
|
|
|
1,163,799
|
|
Forging products
|
|
|
30,649
|
|
|
|
-
|
|
Total
|
|
$
|
594,903
|
|
|
$
|
2,830,829
|
|
New Accounting Pronouncements
In January 2014, FASB issued Accounting Standards Update 2014-05, Service Concession Arrangements (Topic 853). The objective of this Update is to specify that an operating entity should not account for a service concession arrangement within the scope of this Update as a lease in accordance with Topic 840, Leases. Service concession arrangements may become more prevalent in the United States as public-sector entities seek alternative ways to provide public services on a more efficient and cost-effective basis. The amendments apply to an operating entity of a service concession arrangement entered into with a public-sector entity grantor when the arrangement meets certain conditions. The amendments in this Update should be applied on a modified retrospective basis to service concession arrangements that exist at the beginning of an entity’s fiscal year of adoption. The modified retrospective approach requires the cumulative effect of applying this Update to arrangements existing at the beginning of the period of adoption to be recognized as an adjustment to the opening retained earnings balance for the annual period of adoption. The amendments are effective for a public business entity for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The adoption of this ASU will not affect the Company’s financial statements.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
Reclassification
Each asset and liability of Creative Bellows and Creative Wind Power (the discontinued operations) as of December 31, 2013 has been reclassified into the total assets and liabilities of discontinued operations in conformity with the presentation of the current period. The assets and liabilities of Creative Bellows and Creative Wind Power as of December 31, 2013 consisted of the following:
Cash
|
|
$
|
8,178
|
|
Restricted cash
|
|
|
244,427
|
|
Accounts receivable, net
|
|
|
2,000,914
|
|
Advance to suppliers, net
|
|
|
466,878
|
|
Other receivable, net
|
|
|
2,488,253
|
|
Retentions receivable, net
|
|
|
1,051,227
|
|
Inventories, net
|
|
|
6,061,974
|
|
Notes receivable
|
|
|
738,080
|
|
Advance for equipment purchase
|
|
|
336,822
|
|
Long-term prepayment
|
|
|
321,248
|
|
Property and equipment, net
|
|
|
11,853,575
|
|
Intangible assets, net
|
|
|
4,162,058
|
|
Total assets
|
|
$
|
29,733,634
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
(2,599,862
|
)
|
Other payable and accrued expenses
|
|
|
(243,903
|
)
|
Tax payable
|
|
|
(68,234
|
)
|
Advance from customers
|
|
|
(243,171
|
)
|
Short-term loans
|
|
|
(2,263,446
|
)
|
Long-term payable
|
|
|
(442,827
|
)
|
Total liabilities
|
|
$
|
(5,861,443
|
)
|
3. DEPOSITS
Deposits mainly represented retainer for legal expense at December 31, 2013.
4. ACCRUED EXPENSES AND OTHER PAYABLES
As of June 30, 2014 and December 31, 2013, the Company had $400,808 payable for legal expense and $84,203 and $66,315 accrued interest, respectively, for unpaid legal fees to a law firm in connection with the representation of the Company in its lawsuit against NASDAQ Stock Market, LLC and NASDAQ OMX Group.
Accrued interest included interest on $400,808 owed for legal expenses described above, and interest on short-term loans (promissory notes and line of credit) in the amount of $4,069,003 and $3,642,376 at June 30, 2014 and December 31, 2013, respectively (See Note 5).
5. SHORT-TERM LOANS
On December 13, 2010, the Company entered into a loan with NYGG for $10 million (the “2010 Loan”). At NYGG’s option, the principal amount of the 2010 Loan 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. The 2010 Loan bore interest at 10% payable in advance at the beginning of each quarter with a maturity date of March 1, 2012. Subsequently, the 2010 Loan was amended to extend the maturity date to March 1, 2013 and to decrease the interest rate to 8.5%, effective March 1, 2012, which interest was to be payable quarterly in advance. From March 1, 2012 through August 13, 2013, the Company was in default on the interest payments that it was required to pay in advance; the Company was also in default in payment of the principal amount of $10 million due on March 1, 2013. Therefore, the interest rate from the date of the default was at the lesser of 24% or the maximum applicable legal rate. The Company used 24% as the default interest rate from March 1, 2012 through August 13, 2013. After August 13, 2013, the interest rate on the 2010 Loan was 8.5% according to the Line of Credit Agreement described below. The Company had interest payable of $4.05 million as of June 30, 2014.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
Through a new Line of Credit Agreement entered with the same lender on August 17, 2013, this default became payable upon NYGG’s request at the interest rate of 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. NYGG deposits the required amount into an escrow account each time before disbursement, and the escrow agent disburses some or all of the deposit from time to time, as directed in writing by NYGG, as advances to the Company to pay expenses that are approved by NYGG. 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, maturing upon NYGG’s request. The promissory note has a default rate of 24%. As of June 30, 2014, the Company borrowed $0.53 million from the credit line and accrued interest of $10,000 which has not yet been paid.
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 June 30, 2014, the Company had accrued interest of $7,438 on this note. The note is past due with default interest at 6% accrued subsequent to February 1, 2012.
At June 30, 2014 and December 31, 2013, the short-term loans consisted of the following; the accrued interest on these loans was included in accrued expenses (Note 4):
|
|
2014
|
|
|
2013
|
|
Promissory Note
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
Loan
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
Credit line payable
|
|
|
531,731
|
|
|
|
638,951
|
|
Total short term loan
|
|
$
|
10,581,731
|
|
|
$
|
10,688,951
|
|
6. 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 to the China Subsidiaries, was incorporated in the U.S. and has net operating losses (“NOL”) for income tax purposes. CleanTech has NOL of $17.36 million as of June 30, 2014, 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 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.
The following table reconciles the U.S. statutory rates to the Company’s consolidated effective tax rate for the six months ended June 30, 2014 and 2013:
|
|
2014
|
|
|
2013
|
|
U.S. statutory rates (benefit)
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
Tax rate difference
|
|
|
10.4
|
%
|
|
|
5.3
|
%
|
Utilization of NOL
|
|
|
(6.9
|
) %
|
|
|
-
|
%
|
Valuation allowance
|
|
|
30.5
|
%
|
|
|
28.7
|
%
|
Effective income tax rate
|
|
|
-
|
%
|
|
|
-
|
%
|
The following table reconciles the U.S. statutory rates to the Company’s consolidated effective tax rate for the three months ended June 30, 2014 and 2013:
|
|
2014
|
|
|
2013
|
|
U.S. statutory rates (benefit)
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
Tax rate difference
|
|
|
10.5
|
%
|
|
|
5.1
|
%
|
Utilization of NOL
|
|
|
(5.2
|
) %
|
|
|
-
|
%
|
Valuation allowance
|
|
|
28.7
|
%
|
|
|
28.9
|
%
|
Effective income tax rate
|
|
|
-
|
%
|
|
|
-
|
%
|
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
7. STOCKHOLDERS’ EQUITY
Common Stock with Warrants Issued for Cash
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 (pre-Reverse Split) 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 (pre-Reverse Split) of the Company’s common stock at $4.00 per share (pre-Reverse Split). For its assistance in the private placement of equity, the Company paid a placement agent $1,000,000 and issued it warrants to purchase 300,000 shares (pre-Reverse Split) of the Company’s common stock under the same terms as the warrants issued in the private placement. The Company also paid the placement agent $100,000 for its assistance in arranging the loan. The FV of the warrants was calculated using the Black-Scholes model and the following assumptions: estimated life of five years, volatility of 88%, 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 $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 NYGG for $10 million (See Note 5).
Following is a summary of the warrant activity:
|
|
Number of
Shares (pre- Reverse Split)
|
|
|
Weighted Average
Exercise
Price per Share (pre- Reverse Split)
|
|
|
Weighted
Average
Remaining
Contractual
Term in Years
|
|
Outstanding at January 1, 2014
|
|
|
1,987,500
|
|
|
$
|
4.00
|
|
|
|
1.95
|
|
Exercisable at January 1, 2014
|
|
|
1,987,500
|
|
|
$
|
4.00
|
|
|
|
1.95
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2014
|
|
|
1,987,500
|
|
|
$
|
4.00
|
|
|
|
1.45
|
|
Exercisable at June 30, 2014
|
|
|
1,987,500
|
|
|
$
|
4.00
|
|
|
|
1.45
|
|
8. STATUTORY RESERVES
Pursuant to the corporate law of the PRC effective January 1, 2006, the Company’s China Subsidiaries are required to maintain one statutory reserve by appropriating from their after-tax profit before declaration or payment of dividends. The statutory reserve represents restricted retained earnings.
Surplus reserve fund
The Company’s China 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% of the Company’s registered capital. The Company’s China 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 China 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.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
Common Welfare Fund
The common welfare fund is a voluntary fund into which the Company can elect to transfer 5% to 10% of its net income. The Company did not make any contribution to this fund for the six and three months ended June 30, 2014 and 2013.
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.
9. DISPOSAL OF SUBSIDIARIES
On June 11, 2014, CleanTech entered into the Divesture and Exchange Agreement (the “Exchange Agreement”) with certain controlling shareholders of CleanTech, including Ping Chen, Shengfen Lin, Wenge Chen, Bei Lu,and Dianfu Lu (collectively, the “Controlling Shareholders”). Bei Lu and Dianfu Lu were also officers and directors of the Company. The Controlling Shareholders collectively own 15,229,403 shares (pre-Reverse Split) of the Company’s common stock (the “Controlling Shares”), or 61.0% of the total number of the Company’s outstanding shares.
Pursuant to the Exchange Agreement, the Controlling Shareholders agree to transfer all of the Controlling Shares to the Company in exchange for the transfer by the Company of its wholly owned Chinese subsidiaries, Creative Bellows and Creative Wind Power (collectively, the “China Subsidiaries”) to the Controlling Shareholders or their designees. The China Subsidiaries represent all of the Company’s China-based business.
On June 12, 2014, the Subsidiary Interests and the Controlling Shares were deposited into an escrow account, and the Controlling Shareholders were no longer deemed to be shareholders of the Company. For accounting purposes only, the Divesture of the Chinese Subsidiaries occurred on June 12, 2014 and has been accounted for in the accompanying unaudited interim financial statements. The stock price on June 12, 2014 was $0.8 per share, the fair value of all 15,229,403 of the Controlling Shares (pre-Reverse Split), was $12,183,522.
The following table summarizes the fair values of the assets and liabilities disposed at the date of the Divesture. The excess of the FV of the net assets disposed over the fair value of shares surrendered of $10,711,186 was recorded as loss on disposal.
Cash
|
|
$
|
177,483
|
|
Accounts receivable
|
|
|
2,318,621
|
|
Advance to suppliers
|
|
|
703,124
|
|
Other receivable
|
|
|
1,480,731
|
|
Retentions receivable
|
|
|
367,905
|
|
Inventories
|
|
|
6,022,805
|
|
Long-term prepayment
|
|
|
315,413
|
|
Property and equipment, net
|
|
|
11,528,374
|
|
Intangible assets, net
|
|
|
4,085,590
|
|
Accounts payable
|
|
|
(2,250,632
|
)
|
Other payable and accrued expenses
|
|
|
(361,535
|
)
|
Tax payable
|
|
|
(46,610
|
)
|
Advance from shareholder
|
|
|
(984,999
|
) |
Long-term payable
|
|
|
(461,562
|
) |
Disposal loss
|
|
|
(10,711,186
|
) |
Fair value of shares surrendered
|
|
$
|
12,183,522
|
|
10. PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On June 13, 2014, CleanTech Innovations entered into an Agreement and Plan of Share Exchange (the “Merger Agreement”) with Six Dimensions and the shareholders of Six Dimensions, pursuant to which, subject to certain conditions, Six Dimensions will become a wholly-owned subsidiary of the Company (the “Merger”).
Pursuant to the terms of the Merger, the Company will acquire all of the shares of Six Dimensions in exchange for an aggregate of 88,929,203 (post-Reverse Split) newly issued shares (the “Exchange Shares”) of the Company’s common stock, par value $0.00001 per share (the “Common Stock”) issued to Six Dimensions’ shareholders in accordance with their pro rata ownership of Six Dimensions equity.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
On June 12, 2014 the Company obtained shareholder approval to (i) amend its Articles of Incorporation to (A) change its authorized shares of Common Stock, par value $0.00001 per share, from 66,666,667 to 400,000,000 and (B) change the name of the Company to “6D Global Technologies, Inc.”; (ii) authorize the conversion of the Company into a corporation organized under the laws of the State of Delaware; (iii) complete the Divesture; and (iv) obtain NYGG’s consent to convert all of its notes, debts and other liabilities made to or on behalf of the Company, into 80,844,730 shares of the Company’s Common Stock. As of the date of filing this report, except for the disposition of all of the Company’s China-based operations and assets in exchange for the satisfaction and/or assumption of all liabilities, none of these events had taken place.
Six Dimensions is not obligated to consummate the transactions under the Merger Agreement unless aggregate gross proceeds of not less than $3 million and not more than $5.1 million received pursuant to a private placement (the “Private Placement”) of the Common Stock at $0.90 per share are held in an escrow account, on terms satisfactory to Six Dimensions and the Company, and the conditions to closing the Private Placement are satisfied. In addition, the Company must maintain the listing of its common stock on the NASDAQ Stock Market.
The completion of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, without limitation, (i) the raising and placement into escrow of the proceeds from the Private Placement; (ii) approval by the Company’s shareholders and Board of Directors of the Merger Agreement and other transactions contemplated in connection with the Merger; (iii) the approval by Six Dimensions' Board of Directors and the Six Dimensions Shareholders of the Merger Agreement and other transactions contemplated thereunder; (iv) the provision by the Company to Six Dimensions of certain financial statements of the Company; and (v) the provision by Six Dimensions to the Company of certain financial statements of Six Dimensions.
The following pro forma consolidated statements of operations present the accounts of CleanTech and Six Dimensions for the three months ended March 31, 2014, and for the year ended December 31, 2013, as if the acquisition occurred on January 1, 2013, and January 1, 2014, for the purpose of the statements of operations, respectively. The accompanying pro forma consolidated balance sheet presents the accounts of CleanTech and Six Dimensions as if the acquisition of Six Dimensions by CleanTech occurred on March 31, 2014.
For accounting purposes, the transaction has been accounted for as a reverse acquisition of CleanTech by Six Dimensions. The shares issued to Six Dimensions’ shareholder have been accounted for as a recapitalization of Six Dimensions because after the Exchange, Six Dimensions’ shareholder will own the majority of the Company’s shares and will exercise significant influence over the operating and financial policies of the consolidated entity. Pursuant to SEC rules, this is considered a capital transaction in substance, rather than a business combination.
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
CleanTech Innovations, Inc. and Six Dimensions
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
CleanTech Innovations
|
|
|
Disposal of China Subsidiaries (1)
|
|
|
Six Dimensions
|
|
|
Adjustments for The
Merger with Six Dimensions
|
|
|
Note
|
|
|
Company Pro Forma
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$ |
414,097 |
|
|
$ |
(414,097 |
) |
|
$ |
42,302 |
|
|
$ |
3,000,000 |
|
|
b |
|
|
$ |
3,042,302 |
|
Restricted cash
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Accounts receivable, net
|
|
|
2,235,719 |
|
|
|
(2,235,719 |
) |
|
|
1,206,874 |
|
|
|
- |
|
|
|
|
|
|
1,206,874 |
|
Unbilled revenues
|
|
|
|
|
|
|
|
|
|
|
181,076 |
|
|
|
- |
|
|
|
|
|
|
181,076 |
|
Other receivables and deposits, net
|
|
|
2,568,041 |
|
|
|
(2,298,041 |
) |
|
|
80,822 |
|
|
|
(270,000 |
) |
|
a |
|
|
|
80,822 |
|
Retentions receivable, net
|
|
|
532,603 |
|
|
|
(532,603 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Advances to suppliers, net
|
|
|
166,291 |
|
|
|
(166,291 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Inventories, net
|
|
|
6,467,863 |
|
|
|
(6,467,863 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Notes receivable
|
|
|
15,604 |
|
|
|
(15,604 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Unbilled revenues
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Prepaid expenses and other current assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
12,400,218 |
|
|
|
(12,130,218 |
) |
|
|
1,511,074 |
|
|
|
2,730,000 |
|
|
|
|
|
|
4,511,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, net
|
|
|
11,595,758 |
|
|
|
(11,595,758 |
) |
|
|
23,116 |
|
|
|
- |
|
|
|
|
|
|
23,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
- |
|
|
|
- |
|
|
|
110,534 |
|
|
|
- |
|
|
|
|
|
|
110,534 |
|
Advances for equipment purchase
|
|
|
351,842 |
|
|
|
(351,842 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Prepayments
|
|
|
316,598 |
|
|
|
(316,598 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Security deposits
|
|
|
- |
|
|
|
- |
|
|
|
23,707 |
|
|
|
- |
|
|
|
|
|
|
23,707 |
|
Capitalized software, net
|
|
|
- |
|
|
|
- |
|
|
|
140,735 |
|
|
|
- |
|
|
|
|
|
|
140,735 |
|
Land use rights and patents, net
|
|
|
4,101,536 |
|
|
|
(4,101,536 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Assets
|
|
|
4,769,976 |
|
|
|
(4,769,976 |
) |
|
|
274,976 |
|
|
|
- |
|
|
|
|
|
|
274,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$ |
28,765,952 |
|
|
$ |
(28,495,952 |
) |
|
$ |
1,809,166 |
|
|
$ |
2,730,000 |
|
|
|
|
|
$ |
4,809,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholder’s Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
2,357,223 |
|
|
$ |
(2,317,840 |
) |
|
$ |
827,065 |
|
|
$ |
(39,383 |
) |
|
a |
|
|
$ |
827,065 |
|
Accrued expenses and other payables
|
|
|
4,517,883 |
|
|
|
(186,589 |
) |
|
|
- |
|
|
|
(4,331,294 |
) |
|
a |
|
|
|
- |
|
Advances from customers
|
|
|
299,197 |
|
|
|
(299,197 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Advances from shareholder
|
|
|
929,679 |
|
|
|
(929,679 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Tax payable
|
|
|
63,233 |
|
|
|
(63,233 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Security deposit payable
|
|
|
- |
|
|
|
- |
|
|
|
30,000 |
|
|
|
- |
|
|
|
|
|
|
30,000 |
|
Due to factor
|
|
|
- |
|
|
|
- |
|
|
|
782,831 |
|
|
|
- |
|
|
|
|
|
|
782,831 |
|
Current maturities of capital lease liability
|
|
|
- |
|
|
|
- |
|
|
|
48,182 |
|
|
|
- |
|
|
|
|
|
|
48,182 |
|
Current maturities of notes payable
|
|
|
- |
|
|
|
- |
|
|
|
586,600 |
|
|
|
- |
|
|
|
|
|
|
586,600 |
|
Short term loans
|
|
|
10,688,951 |
|
|
|
- |
|
|
|
- |
|
|
|
(10,688,951 |
) |
|
a |
|
|
|
- |
|
Short term payable, net of unamortized interest
|
|
|
453,992 |
|
|
|
(453,992 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
19,310,158 |
|
|
|
(4,250,530 |
) |
|
|
2,274,678 |
|
|
|
(15,059,628 |
) |
|
|
|
|
|
2,274,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease liability, net of current maturities
|
|
|
- |
|
|
|
- |
|
|
|
121,875 |
|
|
|
- |
|
|
|
|
|
|
121,875 |
|
Notes payable, net of current maturities
|
|
|
- |
|
|
|
- |
|
|
|
58,370 |
|
|
|
- |
|
|
|
|
|
|
58,370 |
|
Other liabilities
|
|
|
- |
|
|
|
- |
|
|
|
68,518 |
|
|
|
- |
|
|
|
|
|
|
68,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Liabilities
|
|
|
- |
|
|
|
- |
|
|
|
248,763 |
|
|
|
- |
|
|
|
|
|
|
248,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
19,310,158 |
|
|
|
(4,250,530 |
) |
|
|
2,523,441 |
|
|
|
(15,059,628 |
) |
|
|
|
|
|
2,523,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitment and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder’s Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
33 |
|
|
|
- |
|
|
|
3,000 |
|
|
|
(1,328 |
) |
|
a, b, c |
|
|
|
1,755 |
|
Additional paid in capital
|
|
|
20,649,309 |
|
|
|
(2,971,444 |
) |
|
|
- |
|
|
|
(14,676,570 |
) |
|
a, c |
|
|
|
3,001,245 |
|
Statutory reserve fund
|
|
|
1,104,138 |
|
|
|
(1,104,138 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Accumulated other comprehensive income
|
|
|
3,888,194 |
|
|
|
(3,888,194 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Accumulated Deficit
|
|
|
(16,185,880 |
) |
|
|
(4,098,124 |
) |
|
|
(717,275 |
) |
|
|
20,284,004 |
|
|
a |
|
|
|
(717,275 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,455,794 |
|
|
|
(12,061,900 |
) |
|
|
(714,275 |
) |
|
|
5,606,106 |
|
|
|
|
|
|
2,285,725 |
|
Less: treasury stock, at cost; 15,229,403 shares of common stock
|
|
|
- |
|
|
|
(12,183,522 |
) |
|
|
- |
|
|
|
12,183,522 |
|
|
|
|
|
|
- |
|
Total Stockholder’s Equity (Deficit)
|
|
|
9,455,794 |
|
|
|
(24,245,422 |
) |
|
|
(714,275 |
) |
|
|
17,789,628 |
|
|
|
|
|
|
2,285,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholder’s Equity (Deficit)
|
|
$ |
28,765,952 |
|
|
$ |
(28,495,952 |
) |
|
$ |
1,809,166 |
|
|
$ |
2,730,000 |
|
|
|
|
|
$ |
4,809,166 |
|
Note to Pro Forma Adjustments:
1. See Note 9 for the Divesture of the China Subsidiaries.
a.
|
To effectuate the reverse merger of CleanTech with Six Dimensions, elimination of CleanTech capital accounts and accumulated deficit as a result of recapitalization, and reflect the satisfaction of all the liabilities in excess of $500.
|
b.
|
To record the private placement equity offering to raise between $3,000,000 and $5,100,000 at $0.30 per share (pre-Reverse Split), the minimum financing amount has been assumed.
|
c.
|
To reflect 266,787,609 new shares (pre-Reverse Split) to be issued to the shareholder of Six Dimensions, 17,729,403 shares (pre-Reverse Split) to be retired at the reverse merger, and conversion by NYGG (Asia) Ltd. of all of its notes, debts and other liabilities made to or on behalf of the Company, into 242,534,190 (pre-Reverse Split) shares of the Company’s common stock.
The Reverse Split effected on July 14, 2014 was retroactively restated for the period presented, and reflected for the shares being issued and retired for the Exchange. Upon completion of the Exchange with Six Dimensions, CleanTech has 533,575,218 shares outstanding (pre-Reverse Split), equivalent to 173,025,073 post Reverse Split shares.
|
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
CleanTech Innovations, Inc. and Six Dimensions
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
CleanTech
Innovations
|
|
|
Disposal of China
Subsidiaries (1)
|
|
|
Six Dimensions
|
|
|
Adjustments for the
Exchange with Six Dimensions
|
|
|
Note
|
|
|
Company Pro Forma
|
|
Revenues
|
|
$ |
5,894,264 |
|
|
$ |
(5,894,264 |
) |
|
$ |
9,200,313 |
|
|
$ |
- |
|
|
|
|
|
$ |
9,200,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
8,062,625 |
|
|
|
(8,062,625 |
) |
|
|
6,074,067 |
|
|
|
- |
|
|
|
|
|
|
6,074,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (loss)
|
|
|
(2,168,361 |
) |
|
|
2,168,361 |
|
|
|
3,126,246 |
|
|
|
- |
|
|
|
|
|
|
3,126,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
2,859,057 |
|
|
|
(2,097,944 |
) |
|
|
3,789,228 |
|
|
|
(761,113 |
) |
|
a |
|
|
|
3,789,228 |
|
Bad debt
|
|
|
7,911,884 |
|
|
|
(7,911,884 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
10,770,941 |
|
|
|
(10,009,828 |
) |
|
|
3,789,228 |
|
|
|
(761,113 |
) |
|
|
|
|
|
3,789,228 |
|
Loss from operations
|
|
|
(12,939,302 |
) |
|
|
12,178,189 |
|
|
|
(662,982 |
) |
|
|
761,113 |
|
|
|
|
|
|
(662,982 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
730 |
|
|
|
(730 |
) |
|
|
129 |
|
|
|
- |
|
|
|
|
|
|
129 |
|
Interest expense
|
|
|
(3,635,046 |
) |
|
|
377,994 |
|
|
|
(154,549 |
) |
|
|
3,257,052 |
|
|
a |
|
|
|
(154,549 |
) |
Other income
|
|
|
610,759 |
|
|
|
(610,759 |
) |
|
|
4,839 |
|
|
|
- |
|
|
|
|
|
|
4,839 |
|
Other expense
|
|
|
(468,461 |
) |
|
|
468,461 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating expense, net
|
|
|
(3,492,018 |
) |
|
|
234,966 |
|
|
|
(149,581 |
) |
|
|
3,257,052 |
|
|
|
|
|
|
(149,581 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax expense
|
|
|
(16,431,320 |
) |
|
|
12,413,155 |
|
|
|
(812,563 |
) |
|
|
4,018,165 |
|
|
|
|
|
|
(812,563 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(16,431,320 |
) |
|
|
12,413,155 |
|
|
|
(812,563 |
) |
|
|
4,018,165 |
|
|
|
|
|
|
(812,563 |
) |
Basic and diluted weighted average shares outstanding
|
|
|
8,327,607 |
|
|
|
5,076,468 |
|
|
|
- |
|
|
|
172,273,933 |
|
|
b |
|
|
|
175,525,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share
|
|
$ |
(1.97 |
) |
|
$ |
2.45 |
|
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
|
|
|
$ |
(0.00 |
) |
Note to Pro Forma Adjustments:
1. See Note 9 for the Divesture of the China Subsidiaries.
a.
|
To effectuate the Exchange between CleanTech and Six Dimensions.
|
b.
|
The Reverse Split effective on July 14, 2014 was retroactively restated for the period presented, and reflected for the shares being issued and retired for the Exchange. Upon completion of the Exchange with Six Dimensions, CleanTech has 33,575,218 shares outstanding (pre-Reverse Split), equivalent to 173,025,072 post Reverse Split shares.
|
CLEANTECH INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013
CleanTech Innovations, Inc. and Six Dimensions
Unaudited Prof Forma Statement of Operations
For the Three Months Ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
CleanTech
Innovations
|
|
|
Disposal of China
Subsidiaries (1)
|
|
|
Six Dimensions |
|
|
Adjustments for The
Merger with Six Dimensions
|
|
|
Note
|
|
|
Company Pro Forma
|
|
Revenues
|
|
$ |
1,927,593 |
|
|
$ |
(1,927,593 |
) |
|
$ |
2,654,575 |
|
|
$ |
- |
|
|
|
|
|
$ |
2,654,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
1,538,078 |
|
|
|
(1,538,078 |
) |
|
|
1,565,966 |
|
|
|
- |
|
|
|
|
|
|
1,565,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
389,515 |
|
|
|
(389,515 |
) |
|
|
1,088,609 |
|
|
|
- |
|
|
|
|
|
|
1,088,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
371,428 |
|
|
|
(399,226 |
) |
|
|
797,939 |
|
|
|
27,798 |
|
|
a |
|
|
|
797,939 |
|
Reverse of bad debt allowance
|
|
|
(709,595 |
) |
|
|
709,595 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(338,167 |
) |
|
|
310,369 |
|
|
|
797,939 |
|
|
|
27,798 |
|
|
|
|
|
|
797,939 |
|
Income (loss) from operations
|
|
|
727,682 |
|
|
|
(699,884 |
) |
|
|
290,670 |
|
|
|
(27,798 |
) |
|
|
|
|
|
290,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
235 |
|
|
|
(235 |
) |
|
|
46,526 |
|
|
|
- |
|
|
|
|
|
|
46,526 |
|
Interest expense
|
|
|
(279,499 |
) |
|
|
57,703 |
|
|
|
(56,700 |
) |
|
|
221,796 |
|
|
a |
|
|
|
(56,700 |
) |
Other income
|
|
|
27,076 |
|
|
|
(27,076 |
) |
|
|
10,000 |
|
|
|
- |
|
|
|
|
|
|
10,000 |
|
Other expense
|
|
|
(24,538 |
) |
|
|
24,538 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
Loss on disposal of China Subsidiaries
|
|
|
- |
|
|
|
12,061,900 |
|
|
|
- |
|
|
|
(12,061,900 |
) |
|
a |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating expense, net
|
|
|
(276,726 |
) |
|
|
54,930 |
|
|
|
(174 |
) |
|
|
221,796 |
|
|
|
|
|
|
(174 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
450,956 |
|
|
|
(644,954 |
) |
|
|
290,496 |
|
|
|
193,998 |
|
|
|
|
|
|
290,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
450,956 |
|
|
|
(644,954 |
) |
|
|
290,496 |
|
|
|
193,998 |
|
|
|
|
|
|
290,496 |
|
Basic and diluted weighted average shares outstanding
|
|
|
8,327,607 |
|
|
|
5,076,468 |
|
|
|
300,000 |
|
|
|
171,973,933 |
|
|
b |
|
|
|
175,525,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share
|
|
$ |
0.05 |
|
|
$ |
(0.13 |
) |
|
$ |
0.97 |
|
|
$ |
0.00 |
|
|
|
|
|
$ |
0.00 |
|