UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 
 (Mark
One)
 x                                   ANNUAL
REPORT PURSUANT TO SECTION 13
 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For
the fiscal year ended December 31, 2009
 
 OR
 
  ̈                                                 TRANSITION
REPORT PURSUANT TO SECTION 13
 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the
transition period from __________ to ______________
 
 Commission
File Number: 333-141641
 
 GC
      CHINA TURBINE CORP.
                (Exact
      name of registrant as specified in its charter)Nevada
                (State
      of incorporation)
              
              98-0536305
                (I.R.S.
      Employer Identification No.)
  No.
86, Nanhu Avenue, East Lake Development Zone,
 Wuhan,
Hubei Province 430223
 People’s
Republic of China
 (Address
of principal executive offices) (Zip Code)
 
 +8627-8798-5051
 (Registrant’s
telephone number, including area code)
 
 Securities
registered pursuant to Section 12(b) of the Act:
 None
              
              None(Title
      of each class)
              
              (Name
      of each exchange on which
registered)
 
 Securities
registered pursuant to Section 12(g) of the Act:
 Common Stock, $0.001 par value
 (Title of
class)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 
  ̈           Yes                      x           No
 
 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                      x           No
 
 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 twelve 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.
 
 x           Yes                       ̈           No
 
 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 the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. ̈
 
 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 definitions of “large accelerated filer” and “small
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
accelerated filer  ̈   Accelerated
filer  ̈   Non-accelerated
filer*  ̈   Smaller
reporting company x
 *(Do not
check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
 
  ̈           Yes                      x           No
 
 The
aggregate market value of the common stock held by non-affiliates as of June 30,
2009 (the last trading day of the second quarter) was $4,476,030, based on the
last sale price of common stock sold.
 
 As of
April 12, 2010, the last practicable date, 58,970,015 shares of the registrant’s
Common Stock were outstanding at a par value of $0.001.
 
 DOCUMENTS
INCORPORATED BY REFERENCE: Exhibits incorporated by reference are referred to
under Part IV.
  
  TABLE
OF CONTENTS
 
 PagePART
      I
                                
                                1Item
      1.
                                Business.
                                1Item
      1A.
                                Risk
      Factors.
                                22Item
      1B.
                                Unresolved
      Staff Comments.
                                34Item
      2.
                                Properties.
                                35Item
      3.
                                Legal
      Proceedings.
                                35Item
      4.
                                Submission
      of Matters to a Vote of Security Holders.
                                35PART
      II
                                
                                35Item
      5.
                                Market
      For Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                35Item
      6.
                                Selected
      Financial Data.
                                38Item
      7.
                                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                                39Item
      7A.
                                Quantitative
      and Qualitative Disclosures about Market Risk
                                49Item
      8.
                                Financial
      Statements and Supplementary Data.
                                50Item
      9.
                                Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                                50Item
      9A.
                                Controls
      and Procedures.
                                50Item
      9B.
                                Other
      Information.
                                52PART
      III
                                
                                52Item
      10.
                                Directors,
      Executive Officers and Corporate Governance.
                                52Item
      11.
                                Executive
      Compensation.
                                55Item
      12.
                                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
                                57Item
      13.
                                Certain
      Relationships and Related Transactions, and Director
      Independence.
                                59Item
      14.
                                Principal
      Accounting Fees and Services.
                                60PART
      IV
                                
                                62Item
      15.
                                Exhibits,
      Financial Statement Schedules
                                62Signatures
                                65Exhibits
  
  PART
I
 
 As used in this Annual Report on
Form 10-K, unless the context indicates
or suggests otherwise,
reference to “we”, “our”, “us”, “GC China Turbine”, the “Company” or the
“Registrant” refer to GC China Turbine Corp., a Nevada corporation and its
wholly-owned subsidiaries. “Luckcharm” shall mean Luckcharm Holdings Limited and
its wholly-owned subsidiaries, including Wuhan Guoce Nordic New Energy Co.,
Ltd.
 
 Disclosure
regarding Forward-Looking Statements
 
 Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and
information we provide in our press releases, telephonic reports and other
investor communications, including those on our website, may contain
forward-looking statements with respect to anticipated future events and our
projected financial performance, operations and competitive position that are
subject to risks and uncertainties that could cause our actual results to differ
materially from those forward-looking statements and our
expectations.
 
 Except
for statements of historical facts, this Annual Report on Form 10-K contains
forward-looking statements involving risks and uncertainties. The words
“anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the
negative of these terms and similar expressions or variations thereof are
intended to be forward looking statements within the meaning of the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995. Such
statements reflect the current view of the Registrant with respect to future
events and are subject to risks, uncertainties, assumptions and other factors
(including the risks contained in the section of this Annual Report on Form 10-K
entitled “Risk Factors”) relating to the Registrant’s industry, the Registrant’s
operations and results of operations and any businesses that may be acquired by
the Registrant. Should one or more of these risks or uncertainties materialize,
or should the underlying assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated, expected, intended or
planned.
  Although
the Registrant believes that the expectations reflected in the forward looking
statements are reasonable, the Registrant cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, the
Registrant does not intend to update any of the forward-looking statements to
conform these statements to actual results. The following discussion should be
read in conjunction with the Registrant’s financial statements and the related
notes included in this report on Form 10-K.
  Such
risks and uncertainties include, without limitation, our ability to raise
capital to finance our operations, the effectiveness, profitability and the
marketability of our products, our ability to protect our proprietary
information, general economic and business conditions, the impact of
technological developments and competition, adverse results of any legal
proceedings, the impact of current, pending or future legislation and regulation
of the wind power industry, our ability to enter into acceptable relationships
with one or more of our suppliers and the ability of such suppliers to
manufacture products or components of an acceptable quality on a cost-effective
basis, our ability to attract or retain qualified senior management personnel,
including sales and marketing and technical personnel and other risks detailed
from time to time in our filings with the SEC, including those described in Item
1A below. We do not undertake any obligation to update any forward-looking
statements.
 
 ITEM
1.             BUSINESS.
 
 Overview
 
 We are a
holding company whose primary business operations are conducted through a
wholly-owned Hong Kong subsidiary, Luckcharm Holdings Limited (“Luckcharm”) and
its wholly-owned Chinese subsidiary Wuhan Guoce Nordic New Energy Co., Ltd. (“GC
Nordic”). GC Nordic is a leading manufacturer of 2-bladed wind turbines located
in Wuhan City of Hubei Province, China.  We sought to license and
develop a technology in the wind energy space that would have a high likelihood
of meeting rigorous requirements for low-cost and high reliability. We
identified a 2-bladed wind turbine technology that was developed through a 10
year research project costing over US$ 75 million. Our license to manufacture
and sell this wind turbine in China, if not renewed, will expire on June 30,
2016.  While the 2-blade technology is less commonly used in the China
wind farm market compared to 3-blade technology, the development project that
created our technology has been operating for 10 years with 97% availability
(availability is calculated as follow: [annual total hours (24×365) - turbine
downtime - maintenance time]/annual total hours ).  Further, the
2-blade technology has the benefits of lower manufacturing cost, lower
installation cost and lower operational costs. Therefore, the product is
uniquely positioned to fulfill our mission. Our launch product is a 1.0 megawatt
(“MW”) utility scale turbine with designs for a 2.5MW and 3.0MW utility scale
turbine in development.  We are developing a track record and
brand-awareness through the execution of our initial sales
contracts.
  - 1
-
  We were
incorporated under the laws of the State of Nevada on August 25, 2006 under the
name of Visa Dorada Corp. for the purpose of acquiring and developing
mineral properties.  On August 31, 2006 we changed our name to Vista Dorada
Corp. We are the registered and beneficial owner of a 100% interest in the
Mocambo Gold Claim or the “VDC Claim” situated in the Republic of
Fiji.  The VDC Claim is an unpatented mineral claim and was assigned
to us by EGM Resources Inc. on March 4, 2007 and the assignment was filed and
registered with the Mineral Resources Department of the Ministry of Energy and
Natural Resources of the government of the Republic of Fiji. We own no other
mineral property and are not engaged in the exploration of any other mineral
properties. We have not conducted any exploration work on the VDC Claim and
we have not generated any operating revenues from such
business.
 
 On May
18, 2009, we effected a 1-for-2 reverse stock split to improve trading
liquidity, and enhance overall shareholder value. In an effort to grow our
company, on May 22, 2009, we entered into a letter of intent with GC Nordic and
on June 11, 2009 we changed our name to Nordic Turbines, Inc.  We
subsequently changed our name to “GC China Turbine Corp.” on September 14,
2009.
 
 Our
Acquisition of Luckcharm and Related Financing
  On May
22, 2009, we entered into a Letter of Intent ("LOI") with GC Nordic whereby we
would purchase all of the issued and outstanding shares of GC Nordic from its
shareholders, and the shareholders of GC Nordic would receive a 54% ownership
interest in the Company.  Further on July 31, 2009, an Amended and
Restated Binding Letter of Intent ("Revised LOI") was entered among us,
Luckcharm, GC Nordic, New Margin Growth Fund L.P. ("New Margin"), Ceyuan
Ventures II, L.P. ("CV") and Ceyuan Ventures Advisors Fund II, LLC ("CV
Advisors") whereby we would purchase all of the issued and outstanding shares of
Luckcharm from the shareholders, and the shareholders of Luckcharm would receive
a 54% ownership interest in the Company. The Revised LOI further provided that
(i) upon consummation of the reverse acquisition, we would directly or
indirectly own all of the outstanding capital stock of GC Nordic; (ii) the
closing date for the reverse acquisition would be thirty days from the date GC
Nordic completed an audit of its financial statements as required under U.S.
securities laws; and (iii) the obligation of GC Nordic to consummate the reverse
acquisition was conditioned upon an additional financing of at least US$
10,000,000 into the combined entities at closing.
 
 On May
22, 2009, under the terms of the LOI we provided GC Nordic with a secured bridge
loan in the amount of US$ 1,000,000 to be applied toward legal and audit
expenses, and working capital. Upon the closing of the reverse acquisition, the
bridge loan became an intercompany loan. We had been provided these funds
through promissory notes from two foreign accredited investors, and these notes
were later assigned to Clarus Capital Ltd. (“Clarus”).
 
 On July
31, 2009, we, Luckcharm, GC Nordic, New Margin, CV and CV Advisors entered into
an amended and restated financing agreement (the "Financing Agreement"). The
Financing Agreement provided that we agreed to lend Luckcharm (i) US$ 2,500,000
before July 24, 2009 and (ii) US$ 7,500,000 before July 31, 2009. In order to
guarantee Luckcharm’s lending obligations under the Financing Agreement, New
Margin loaned US$ 5,000,000 to us and CV and CV Advisors loaned the aggregate of
US$ 5,000,000 of the above amounts to us, and we in turn loaned US$ 10,000,000
to Luckcharm for purposes of working capital.  Upon the consummation
of the reverse acquisition, the US$ 10,000,000 convertible loan made to us by
New Margin, CV and CV Advisors converted into shares of our common stock at a
conversion price equal to US$ 0.80 per share.
 
 On
September 30, 2009, we entered into a voluntary share exchange agreement
(“Exchange Agreement”) with Luckcharm, GC Nordic and Golden Wind Holdings
Limited, a company incorporated in the British Virgin Islands and the parent
entity of Luckcharm, or “Golden Wind.”
  - 2
-
  On
October 30, 2009, the reverse acquisition was consummated.  As a
result of the reverse acquisition, Luckcharm became our wholly-owned subsidiary,
and we acquired the business and operations of GC Nordic.  At the
closing of the reverse acquisition, we issued 32,383,808 shares of our common
stock to Golden Wind in exchange for 100% of the issued and outstanding capital
stock of Luckcharm and US$ 10,000,000 in previously issued convertible
promissory notes were converted into 12,500,000 shares of our common stock. Our
acquisition of Luckcharm pursuant to the share exchange agreement was accounted
for as a reverse acquisition wherein Luckcharm is considered the acquirer for
accounting and financial reporting purposes.
 
 Contemporaneous
with the reverse acquisition, we also completed a private placement pursuant to
which we issued 6,400,000 shares of our common stock, at a price of US$
1.25 per share for an aggregate offering price of US$ 8,000,000 to certain
investors (the “Investors”). Additionally, we entered into (i) a Note Purchase
Agreement with Clarus whereby Clarus agreed to loan US$ 1,000,000 to us upon the
effective date of delivery of 20 wind turbine systems by us to our customers in
the form of a convertible promissory note bearing no interest, having a maturity
date of 2 years from the date of issuance and convertible into shares of our
common stock at US$ 2.00 per share, and (ii) an amendment to a convertible
promissory note held by Clarus in the amount of US$ 1,000,000 revising the
conversion feature of such note. We have agreed with Clarus that the period
to fund the loan under the Note Purchase Agreement is extended to April 30,
2010.On the six
month anniversary upon the effective date of delivery of 20 wind turbine systems
by us to our customers, both loans held by Clarus in the aggregate amount of US$
2,000,000 will automatically convert into shares of our common stock at US$ 2.00
per share.  In connection with the private placement, we also issued
warrants to investors and placement agents to purchase an aggregate of 1,200,000
shares of our common stock with each warrant having an exercise price of US$
1.00 per share and being exercisable at any time within 3 years
from the date of issuance.
 
 In
connection with the private placement, Golden Wind entered into a make good
escrow agreement with the investors in the private placement offering, whereby
Golden Wind pledged 640,000 shares of our common stock to the investors in order
to secure our make good obligations under the private placement. In the make
good escrow agreement, we established a minimum after tax net income threshold
of US$ 12,500,000 for the fiscal year ending December 31, 2010. If the minimum
after tax net income threshold for the fiscal year 2010 is not achieved, then
the investors will be entitled to receive additional shares of our common stock
held by Golden Wind based upon a pre-defined formula agreed to between the
investors and Golden Wind. Golden Wind deposited a total of 640,000 shares of
our common stock, into escrow with Capitol City Escrow, Inc. under the make good
escrow agreement.  Additionally, if the minimum after tax net income
threshold for the fiscal year 2010 is not achieved, then the investors will be
entitled to have the exercise price of the warrants adjusted lower based upon a
pre-defined formula agreed to between the investors and us.
 
 Background
and History of Luckcharm and its Operating Subsidiaries and
Affiliates
 
 Luckcharm
was originally incorporated in Hong Kong on June 15, 2009 by Fernside
Limited.  On June 29, 2009, Fernside Limited transferred all of the
equity interest of Luckcharm to Golden Wind. On August 1, 2009, Luckcharm
entered into an agreement to acquire 100% of the equity of GC Nordic from the
original nine individual shareholders (the “Founders”).  On August 5,
2009, GC Nordic received approval of this acquisition from the Bureau of
Commerce of the Wuhan City, Hubei Province, PRC.
 
 Prior to
the reverse acquisition, on September 30, 2009, each of the Founders entered
into a Call Option Agreement and a Voting Trust Agreement with Xu Hong Bing, the
sole shareholder of Golden Wind.  The Call Option Agreements provide
that, upon the achievement of certain milestones during the six years following
entry into the Call Option Agreements, the Founders can acquire from Golden Wind
shares of our common stock issued to Golden Wind in the reverse acquisition (the
“BVI Shares”), at a price per share of $US 0.0001.  The call rights
are exercisable in tranches upon the satisfaction of certain conditions set
forth in the Call Option Agreements, and if all such conditions are met, the
Founders will have the right to acquire 100% of the BVI Shares.  The
rights to acquire the BVI Shares under the Call Option Agreements are allocated
to the Founders in the same proportion as their ownership interest in GC
Nordic.  The Voting Trust Agreements create a voting trust that
provide the Founders with all rights and powers of ownership with respect to the
BVI Shares, including without limitation the right to vote and receive dividends
thereon.    Through the Voting Trust Agreements, the
Founders collectively obtained 100% voting interests with respect to the BVI
Shares, which are allocated among the Founders in the same proportion as their
ownership interest in GC Nordic.
  - 3
-
  GC Nordic
was organized in the PRC on August 21, 2006 as a limited liability company upon
the issuing of a license by the Administration for Industry and Commerce of the
Wuhan City, Hubei Province, PRC with an operating period of 30 years to August
9, 2039. On August 5, 2009, all of the outstanding equity interests of GC Nordic
were acquired by Luckcharm, and GC Nordic became a wholly-owned subsidiary of
Luckcharm. GC Nordic holds the government licenses and approvals necessary to
operate the wind turbines business in China.
 
 GC Nordic
was founded by nine individual shareholders, including Mr. Hou Tie Xin, Mr. Xu
Jia Rong, Mr. Wu Wei, Mr. Zhang Wei Jun, Mr. Bu Zheng Liang, Mr. Zuo Gang and
Mr. He Zuo Zhi, who were shareholders of Wuhan Guoce Science and Technology Corp
(“Guoce Science and Technology”), and Ms. Qi Na and Ms. Zhao Ying, who were
senior management of Guoce Science and Technology. After GC Nordic was organized
in August 2006, Mr. Hou Tiexin, Mr. Xu Jia Rong and Mr. Bu Zheng Liang remained
as chairman, general manager and engineer of Guoce Science and Technology,
respectively, Ms. Qi Na, Ms. Zhao Ying, Mr. Wu Wei and Mr. Zhang Wei Jun left
Guoce Science and Technology’s management team and focused on GC Nordic’s
management and operation. Mr. Zuo Gang and Mr. He Zuo Zhi currently do not hold
any position in either Guoce Science and Technology or GC Nordic. Guoce Science
and Technology is a leading technology provider to the Chinese utilities
industry and it has a long history as a preferred provider to the utilities
industry in China since 1995 under the former name Wuhan Guoce Electric Power
New Technology Co., Ltd. (“Guoce New Technology”). In 2002 Guoce New Technology
was restructured and was renamed as Wuhan Guoce Science and Technology Corp.
Guoce Science and Technology is a producer of hydraulic systems and electronic
control systems that enjoy dominant market share of approximately 40% in the PRC
hydro-electric generation industry. GC Nordic was founded as part of a strategy
of expanding Guoce Science and Technology’s product offerings in a business that
closely parallels its current business. Guoce Science and Technology is a
company with great reputation in the industry with businesses covering the whole
power industrial chain with productions ranging from power generation to power
transmission to every sector of power utilization.
 
 Our
Corporate Structure
 
 The
following diagram illustrates our corporate structure as of December 31,
2009:
 
 
  - 4
-
 
 (1)
              The management of GC China
      Turbine includes: Hou Tie Xin as Chairman, Qi Na as Chief Executive
      Officer and director, Zhao Ying as Chief Financial Officer, Tomas Lyrner
      as Chief Technology Officer, and Xu Jia Rong, Marcus Laun and Chris Walker
      Wadsworth as members of the board of directors. As of the date of this
      Annual Report on Form 10-K, none of the management owns any shares of GC
      China Turbine common stock. Mr. Hou, Ms. Qi, Ms. Zhao and Mr. Xu, however,
      are parties to a Call Option Agreement dated September 30, 2009 pursuant
      to which they have the right to acquire the shares of GC China Turbine
      common stock issued to the Golden Wind in connection with the Exchange
      Agreement, and to a Voting Trust Agreement dated September 30, 2009
      pursuant to which they are voting trustees under a voting trust created to
      hold all such shares.
 
 (2)
              The management of Luckcharm is
      comprised of Xu Hong Bing as the sole
  director.
 
 (3)
              The
      management of GC Nordic includes:  Hou Tie Xin as Chairman, Qi
      Na as General Manager and Director, Xu Jia Rong as Director, Zhao Ying, Wu
      Wei, Zhang Hanyun, Bailong and Zhang Weijun as Deputy General
      Managers.
 
 (4)
              The
      management of Guoce Nordic AB includes: Hou Tie Xin as Chairman, Tomas
      Lyrner as Chief Executive Officer and Director, Wu Wei and Xu Hailian are
      Directors.
 
 Our
Industry
 
 Wind
Power
 
 Wind
power is the conversion of wind energy into more useful forms of energy, such as
electricity, using wind turbines.  Humans have been using wind power
for at least 5,500 years to propel sailboats and sailing ships, and architects
have used wind-driven natural ventilation in buildings since similarly ancient
times.
 
 Compared
to the environmental effects of traditional energy sources, the environmental
effects of wind power are relatively minor. Wind power consumes no fuel, and
emits no air pollution, unlike fossil fuel power sources. The energy consumed to
manufacture and transport the materials used to build a wind power plant is
equal to the new energy produced by the plant within a few months of
operation.
 
 The power
in the wind can be extracted by allowing it to blow past moving wings that exert
torque on a rotor. The amount of power transferred is directly proportional to
the density of the air, the area swept out by the rotor, and the cube of the
wind speed. The mass flow of air that travels through the swept area of a wind
turbine varies with the wind speed and air density. Because so much power is
generated by higher wind speed, much of the average power available to a
windmill comes in short bursts.  As a general rule, wind generators
are practical where the average wind speed is 10 mph (16 km/h or 4.5 m/s) or
greater. An ideal location would have a near constant flow of non-turbulent wind
throughout the year and would not suffer too many sudden powerful bursts of
wind. An important turbine siting factor is access to local demand or
transmission capacity. The wind blows faster at higher altitudes because of the
reduced influence of drag on the surface (sea or land) and the reduced viscosity
of the air.  The increase in velocity with altitude is most dramatic
near the surface and is affected by topography, surface roughness, and upwind
obstacles such as trees or buildings.  As the wind turbine extracts
energy from the air flow, the air is slowed down, which causes it to spread out
and divert around the wind turbine to some extent.  Betz' law states
that a wind turbine can extract at most 59% of the energy that would otherwise
flow through the turbine's cross section.  The Betz limit applies
regardless of the design of the turbine.  Intermittency and the
non-dispatchable nature of wind energy production can raise costs for
regulation, incremental operating reserve, and (at high penetration levels)
could require demand-side management or storage solutions.
 
 Wind
Turbines
 
 A wind
turbine is a rotating machine which converts the kinetic energy in wind into
mechanical energy.  If the mechanical energy is used directly by
machinery, such as a pump or grinding stones, the machine is usually called a
windmill.  If the mechanical energy is then converted to electricity,
the machine is called a wind generator, wind turbine, wind power unit (WPU),
wind energy converter (WEC), or aerogenerator.
  - 5
-
  Wind
turbines require locations with constantly high wind speeds.  Wind
turbines are designed to exploit the wind energy that exists at a
location.  Small wind turbines for lighting of isolated rural
buildings were widespread in the first part of the 20th century.  The
modern wind power industry began in 1979 with the serial production of wind
turbines by Danish manufacturers Kuriant, Vestas, Nordtank, and
Bonus.  These early turbines were small by today's standards, with
capacities of 20–30 kilowatts each.  Since then, they have increased
greatly in size, while wind turbine production has expanded to many
countries.
 
 Wind
Industry
 
 The wind
industry is the world's fastest growing energy sector and offers an
excellent opportunity to begin the transition to a global economy based on
sustainable energy. A report published by The Global Wind Energy Council (“GWEC”) and Greenpeace
in October 2008 references multiple studies that indicate that the long-term
potential supply using existing technology could be double the current worldwide
electricity demand.  Prior GWEC reports indicate that there are no
technical, economic or resource barriers to supplying 12% of the world's
electricity needs with wind power alone by 2020, as compared to the challenging
projection of two thirds increase of electricity demand by 2020.
 
 According
to the GWEC’s Global Wind 2007 Report, by the end of 2007 (2008 figures not
currently available), the capacity of global wind energy installations had
reached a generation capacity level of over nearly 94,000 MW, an increase of
nearly 20,000 MW over 2006 figures and representing a worldwide investment of
over US$ 50 billion. Europe accounts for 56,500 MW or 60% of the total installed
capacity followed by the U.S. with 17.9% or 16,800 MW.  The fastest
growing market is China with 145% growth or 3,304 MW added in 2007 to over 5,900
MW by the end of 2007.  Each of these markets is expected to continue
to drive the worldwide growth of wind turbine installations.  The total
value of installed equipment worldwide in 2007 was approximately US$ 1.8 million
per MW for a turbine equipment market size of US$ 36 billion on a total
investment of US$ 50 billion.
 
 Internationally,
demand for electricity has dramatically increased as our society has become more
technologically driven.  Demand for “green” energy has also
dramatically increased due to consumers’ desire to become environmentally
conscious.  Both trends are expected to
continue.  Significant new capacity for the generation of electricity
will be required to meet anticipated demand.
 
 Most of
the world’s primary energy sources are still based on the consumption of
non-renewable resources such as petroleum, coal, natural gas and
uranium.  While still a small segment of the energy supply, renewable
sources such as wind power are growing rapidly in market share.  Wind
power delivers multiple environmental benefits.  It operates without
emitting any greenhouse gases and has one of the lowest greenhouse gas lifecycle
emissions of any power technology.  Wind power does not result in any
harmful emissions, extraction of fuel, radioactive or hazardous wastes or use of
water to steam or cool. Wind projects are developed over large areas, but their
carbon footprint is light.  Farmers, ranchers and most other land
owners can continue their usual activities after wind turbines are installed on
their property.
 
 According
to the U.S. Department of Energy, Energy Information Administration’s
publication “Renewable Resources in the U.S. Electricity Supply,” wind power
generation was and is projected to increase eight-fold between 1990 and 2010, a
rate of 10.4% per year.  Annual growth in the wind power industry for
the past 10 years has exceeded 28% per year according to the
GWEC.  Although wind power produces under 1% of electricity worldwide
according to the GWEC’s Global Wind 2007 Report, it is a leading renewable
energy source and accounts for 19% of electricity production in Denmark
(according to the U.S. Department of Energy’s Energy Facts web page), 10% in
Spain and 7% in Germany (according to the GWEC’s Europe region web
page).
  - 6
-
  Chinese
Wind Industry
 
 Wind-power
generation is a mature technology that is embraced in China due to its
relatively low cost (compared to other renewable energy sources such as solar
power) and abundance of wind resources.  Satisfying rocketing
electricity demand and reducing air pollution are also main driving forces
behind the development of wind energy in China.  Given the country’s
substantial coal resources and still relatively low cost of coal-fired
generation, cost reduction of wind power is an equally crucial
issue.  This is being addressed through the development of large scale
projects and boosting local manufacturing of turbines.  The Chinese
government believes that the localization of wind turbine manufacturing brings
benefits to the local economy and helps keep costs down.  Moreover,
since most good wind sites are located in remote and poorer rural areas, wind
farm construction benefits the local economy through the annual income tax paid
to county government, local economic development, grid extension for rural
electrification as well as employment in wind farm construction and
maintenance.
 
 Current
Chinese government guideline published in PRC National Development and Reform
Commission’s China Renewable Energy Development Plan 2007 mandates that 30,000
MW of wind power be installed by 2020. The Brussels-based GWEC reported that in
2008, China added more than 6,000 MW of wind-power generation capacity, bringing
China’s total installed wind-power generating capacity to over 12,000MW.
Moreover, the Chinese government has mandated that 70% of wind components be
sourced domestically by 2010.  The wind manufacturing industry in
China is booming.  In the past, imported wind turbines dominated the
market, but this is changing rapidly as the growing market and clear policy
direction have encouraged domestic production.  At the end of 2007,
there were 40 Chinese manufacturers involved in wind energy, accounting for
about 56% of the equipment installed during the year, an increase of 21% over
2006.  This percentage is expected to increase substantially in the
future.  Total domestic manufacturing capacity is now about 8,000 MW,
and expected to reach about 12 GW by 2010.
 
 Wind
energy resources are widely distributed in China, with rich resources broken
into the southeast coastal areas, the three northern regions (northeast, north,
and northwest) and inland regions.
 
 Presently,
the thriving locations for the development of wind farms are the three northern
regions.  However, inland regions where wind resources are abundantly
distributed are at an early development stage, and thus the market potential is
large.  Further, some provinces in the inland regions have planned or
promulgated preferential policies for the development of wind power, and thus
the inland wind power industry may also become the new thriving points for
China‘s wind power development.
 
 According
to the 2008 China Wind Power Development Report, published by China
Environmental Science Press in Beijing, abundant wind energy resource areas
along the southeast coast and its coastal areas mainly include Shandong,
Jiangsu, Shanghai, Zhejiang, Fujian, Guangdong, Guangxi and Hainan and other
provinces and cities’ coastal zones of nearly 10km wide with annual wind
power density above 200 w/m2 and wind power density line parallels to the
coastlines.
 
 Abundant
wind energy resource areas distributed in north areas mainly include, three
north provinces, Hebei, Inner Mongolia, Gansu, Ningxia and Xinjiang and other
provinces and districts’ of nearly 200 km wide with wind power density above
200—300 w/m2, some of which could up to 500 w/m2 more, such as Alashankou, Daban
City, Huitengxile, Huitengliang of Xilinhaote, Chengde and
Weichang.
 
 Abundant
wind energy resource areas distributed in inland areas mainly include, Hunan,
Hubei, Jiangxi, Shanxi, Henan, Chongqing, Yunnan and other areas, with a general
wind power density of 100—200 w/m2.  Wind energy resources are also
abundant in some areas due to the impacts by the lakes and topography.
Technological accepted development capacity for wind power in inland areas
exceeds 12,000,000 kilowatts.
 
 China
Wind Power Potential
 
 Today,
wind power in China is developing rapidly and receives particularly strong
government support. The new Renewable Energy Law and its detailed incentive
policies reflect the Chinese government’s intention to build up this industry.
By 2020, China plans to have 30 gigawatts of wind power.  European
companies dominate China’s wind power equipment market. Among U.S. companies,
only GE Wind Power is active in China. In 2005, GE Wind Power occupied 3% of the
in-grid wind turbine market in China.
  - 7
-
  According
to the China Academy of Meteorological Sciences, the country possesses a total
235 gigawatts of practical onshore wind power potential that can be utilized at
10 meters above the ground.  Annual potential production from wind
power could reach 632.5 gigawatts if the annual, full-load operation reaches
2,000-2,500 hours. A detailed survey is needed, however, for economically
utilizable wind power resources.  The potential for offshore wind
power is even greater, estimated at 750 gigawatts.  Offshore wind
speed is higher and more stable than onshore wind, and offshore wind farm sites
are closer to the major electricity load centers in eastern
China.  Areas rich in wind power resources are mainly concentrated in
two areas: northern China’s grasslands and Gobi desert, stretching from Inner
Mongolia, Gansu and Xinjiang provinces; and in the east coast from Shangdong and
Liaoning and the southeast coast in Fujian and Guangdong provinces.
 
 In 1986,
China built its first wind farm in Rongcheng, Shandong Province. From 1996 to
1999, in-grid wind power developed very quickly, entering a localization stage.
By the end of 2004, there were 43 wind farms with 1291 wind turbines in China,
with 764 MW of installed capacity. Liaoning, Xinjiang, Inner Mongolia and
Guangdong experienced the fastest wind power development, representing 60% of
the installed power generating capacity of national wind power. Currently,
Xinjiang’s Dabancheng is the largest wind farm in China, with 100 MW of
installed power generating capacity. Most generators range from 500 kilowatts to
1 MW, accounting for 84% of China’s wind turbine generators.
 
 Our
Products
 
 Our
Company’s core product is the 2-bladed wind turbine which is designed with
technologies of soft concept, compact transmission chain, overall damping,
condition monitoring and other proprietary technologies that reduce vibration
and overheating, lower installation and transportation cost as well as improve
service life and utilization rate with the ultimate benefits of improving wind
turbine quality and lowering the costs of manufacturing, installation and
maintenance.
 
 We use
“soft technology” which is a combination of a passive yaw system, teeter style
hub and the soft tower. By using the soft technology as a damping system for the
vibration and loads of the system, we can produce a transmission chain that does
not have to absorb those forces.  Therefore, the transmission chain is
more compact, cheaper, proprietary, and more reliable than other
designs.  The technology offers a new approach and significant
opportunities for large scale wind farms including remote onshore and offshore
installations.  Additionally, constant feedback ensures we achieve the
highest efficiency.
 
 The key
advantages of the 2-bladed wind turbine with influences on costs by proprietary
technologies are as follows:
  Proprietary
                                      Technologies
                                    
                                    Design
      Features
                                    
                                    Influence
      on Costs and BenefitsSoft
                                      technology
                                    
                                    Passive
      yaw system
                                    
                                    ·Yaw is a term used to describe the mechanical system of aiming the
      turbine blades into the wind.
                                      ·GC China Turbine has a passive yaw system, eliminating the need for
      mechanical yaw braking system.
                                      ·The passive yaw reduces loads on the tower and foundation thereby
      allowing for a lighter tower and smaller foundation as well as reducing
      the manufacturing costs for a complete machine.Teeter-style
      hub
                                    
                                    ·The teeter-style hub reduces the negative effects of imbalanced air
      pressure on the blades not unlike the function of rubber engine mounts in
      a motor vehicle. The rubber bushings greatly reduce twisting loads on the
      transmission chain, tower and other components and increase the service
      lives of these components. This technology is characterized by rubber
      mountings of the blades to the main gearbox.Soft
      tower
                                    
                                    ·The soft tower is lighter than a stiff tower so as to directly save
      raw material costs. This is achieved by designing a tower that is allowed
      to flex during operation. This is partially possible because the turbine
      and blades are significantly lighter than a 3-blade
  system.
  - 8
-
 
 Compact
                                      transmission
                                      chain
                                    
                                    Support
      tube
                                    
                                    ·Generator, gearbox and high-speed shaft are directly connected
      which greatly improves the service lives of the key components in
      transmission chain.Integrated
      gearbox
                                    
                                    ·Because GC China Turbine’s design eliminates the main shaft and
      main bearing of 3-bladed designs, the Company enjoys a lower cost profile
      and eliminates a significant component sourcing bottleneck.
                                      ·Integrated main shaft has a longer service life, improves the
      availability rate and reduces maintenance costs.Overall
                                      damping
                                      design
                                    
                                    Teeter
      and hub rubber elements, nacelle chassis rubber elements
                                    
                                    ·Significantly reduces fatigue loads on all moving parts, extends
      the service life and reduces operational costs.Condition
                                      monitoring
                                    
                                    Conducts
      maintenance according to actual conditions, instead of preventive and
      post-fault maintenance
                                    
                                    ·Extends service life of wind turbine and reduces maintenance
      costs.
 
 Our
products also face following challenges and we are working to improve our
2-blade wind turbine.
  Challenges
                                        
                                        Details
                                        
                                        SolutionsNoise
                                        
                                        Slightly louder than 3-blade wind
      turbine
                                        
                                         Wind farm is normally far away from
      residential areas.
                                           GC China Turbine’s 2-blade 1.0MW wind
      turbine fully complies with IEC 61400-11 standard set by
      IEC.Efficiency
                                        
                                        Slightly lower than pitch-control turbines under
      low wind (<3.5 meter per second) and high wind (>23.5 meter per
      second) conditions
                                        
                                        We will upgrade our turbines to pitch-control
      model.
 
 As shown
in the table above, GC China Turbine's 2-blade 1.0MW wind turbine is designed
with proprietary technologies of soft concept, compact transmission chain,
overall damping, condition monitoring and other proprietary technologies that
reduce vibration and operating temperature as well as improve service life and
utilization rate.  The resulting benefits are
  1)   High
Wind Turbine Quality
  Our wind
turbine quality standard is to achieve high generating capacity with low cost.
Compared to other wind turbines with same generating capacity, our 2-blade wind
turbine’s cost is lower and availability is higher.
  2)   Low
Manufacturing Cost
  The
manufacturing cost of our 2-blade 1.0MW wind turbine and the tower is 70% and
77.6% of the cost of typical China-made 3-blade 1.5MW wind turbine.
  3)   Cheaper
Installation.
  The
foundation cost and transportation cost of our 2-blade 1.0MW wind turbine are
about 37% of the cost of typical China-made 3-blade 1.5MW wind
turbine.
  - 9
-
  Our
Company’s advantage is a combination of simple design that makes it cost
effective and that advantage will be enhanced by the replacement of imported
components with high quality Chinese components, which in many cases, come from
well established state-owned enterprises and public companies, and part of which
come from our Company’s European component manufacturers.  In order to
sustain the low-cost advantage, the Company has also been actively seeking and
identifying domestic suppliers of all key components that In order to sustain
the low-cost advantage, the Company has also been actively seeking and
identifying domestic suppliers of all key components that made it 100%
Chinese-content wind turbines in 2009 with full distribution into the market by
end of 2009.  These efforts will greatly reduce our manufacturing
costs and will help to further enhance the low-cost advantage of our
product.
 
 Our
Sales and Marketing
 
 The
Company will continue to compete in the mainstream wind farm bids as well as
seek out more niche projects where the light weight and easy transportation and
installation of our 2-bladed wind turbine offers additional advantages over the
competition. These projects would include mountainous areas. The Company intends
to bid for offshore application wind turbine bids when the research and
development for 3.0MW wind turbines is completed.
 
 We divide
the Chinese market into 3 segments:
 
 1)      Northeast and northwest wind
farms
 
 The wind
resource in this area is allocated between 5 large utility companies. It is
currently deploying product into the Daqing project within this
market.
 
 2)      Inland wind farms
 
 Inland
wind farms have less wind resources and more mountainous terrain that will give
GC China Turbine additional advantages over the competition.
 
 3)      Coastal and offshore wind
farms
 
 This area
has good wind resource and involves technically more difficult
installations.  Thus, the simpler installation of 2-blade turbines has
an advantage over the 3-blade turbine.
 
 China is
actively pursuing a plan to increase the percentage of energy supplied by
renewable means. We have a healthy pipeline of wind farm projects on which to
bid.  GC Nordic has established a good relationship with local and
central government departments through its relationship with Guoce Science and
Technology to source potential contracts. Given that all the potential wind
farms projects have to be pre-approved by the central National Development and
Reform Commission (the “NDRC”) or the NDRC at the provincial level, our
relationship with the government will provide us with first hand information of
the potential wind farm projects in our targeted markets and allow us to compete
for such projects.
 
 The
Company intends to create production facilities in many provinces so that it can
enjoy the privileges of being a local manufacturer across many markets. The
Company can create numerous manufacturing facilities efficiently as warehouse
space is inexpensive and the production of these turbines is not labor
intensive. Labor costs for production is approximately 1% of COGS.
 
 The first
step of the selling process includes setting up initial communications with the
owner and obtaining wind conditions, terrain and other project specifications.
Once we have obtained the bidding information on a project, we can begin the
design process. This would include working with the farm developer to make sure
that the GC Nordic is included in the specifications as a possible turbine type.
At this stage it is crucial that the owner understands the characteristics and
advantages of our products before making a selection. The average sales process
for a wind farm takes 6 to 9 months.
  - 10
-
  The
Company is also planning to adopt a “Resources Exchange Model” to win bids for
potential wind farm projects. The Company sometimes signs wind farm projects
directly with the government and then invites the investors to buy, invest or
co-invest in the projects. As a condition for invitation, these wind farm
projects have to purchase and use of our 2-blade wind turbines.
  As a
newcomer to the industry, due to the lack of actual turbines in use, some
cautious customers were taking a wait and see approach to making purchase
decisions from our Company.  Now that our wind turbines have been
running steadily for over one year in Daqing wind farm with positive operating
results, buyers will be more confident in our Company and brand.
  Currently,
there are 12 members of the sales team, handling the following responsibilities:
planning, project management, technical support and
administration.  In the future, we will increase the size of the
planning, project management and technical support teams as necessary to support
these functions.
 
 Our sales
goals and targeted milestones from 2010 to 2015 are as follows:
 
 2010
 
 ·
              Using the model project of Daqing
      wind farm, we will target inland wind farms as the entry point to gain a
      foothold in the market, with a goal of being one of the top three
      producers in that market.
 
 ·
              Further exploring
      northeast/northwest wind farm opportunity starting in 2009, and adopting
      resources exchange model to conduct the market development and striving to
      compete against large manufacturers with our low-cost
      advantage.
 
 ·
              Launch offshore markets and
      overseas markets.
 
 2011-2013
 
 ·
              Set up 2 to 3 production and
      research bases in coastal areas, achieving top 3 production status and
      selling approximately 1,500 MW of installed energy
      capacity.
 
 ·
              Develop equipment for a number of
      projects in Eastern Europe, Africa and South America markets, striving to
      become a top 5 exporter of Chinese turbines and annually exporting
      approximately 25 MW of installed energy capacity.  Although our
      license of 2-blade 1.0MW wind turbine is limited for use in China, we will
      work to expand the current license and we have established a research
      center in December 2009 in Sweden to develop 1.5MW, 2.5MW and 3.0MW
      turbines which will not be restricted to use in
    China.
 
 2013-2015
 
 ·
              Continue to extend inland market
      share.
 
 ·
              To
      have top 3 market share in the coastal wind farm market, achieving 15%
      market share and selling approximately 75 MW of installed energy capacity
      per year.
 
 Our
Customers
 
 We are
currently executing four contracts with the following entities: Daqing Longjiang
Wind Power Co., Ltd (“ Daqing Longjiang ”), Wuhan Kaidi Electric Engineering
Co., Ltd (“ Wuhan Kaidi ”), Kelipu Wind Power Co., Ltd. (“ Kelipu ”) and
Shenzhen Guohan Investment Group (“Shenzhen Guohan”).
  - 11
-
  1.      Daqing
Longjiang
 
 Daqing
Longjiang has signed a wind turbine purchasing contract dated  August
30, 2007 (the “DL Contract") with GC Nordic for 50 units of 1.0MW wind turbines.
These wind turbines will be installed in Daqing City, Heilongjiang
Province.  Daqing Longjiang was established in 2007 and is a company
within the Daqing Ruihao Energy Group specializing in the research, development,
construction and operation of wind power generation. The company is mainly
engaged in wind power project operations of new energy and high efficient
energy-saving technology and environmental protection technology and currently
possesses the exclusive development right of wind power in Dumeng
County.
 
 Under the
terms of the DL Contract, GC Nordic was obligated to deliver ten of the wind
turbines within four months after signing the DL Contract, and the balance of 40
wind turbines are to be delivered within ten months after receiving notice from
Daqing Longjiang requesting them.  GC Nordic delivered the first ten
wind turbines and upon request by Daqing Longjiang , agreed not to deliver the
remaining 40 wind turbines until requested by Daqing Longjiang. The total
contract is valued at approximately US$46 million.
 
 2.      Wuhan
Kaidi
 
 Wuhan
Kaidi has signed a purchase contract in September 2008 (the “WK Contract”) with
GC Nordic for 50 units of 1.0MW wind turbines. These wind turbines will be
installed in Pinglu City, Shanxi Province. Wuhan Kaidi is joint-stock high-tech
enterprise registered at Wuhan East Lake High-Tech Development Zone, and it is a
subsidiary of Wuhan Kaidi Holding Investment Co., Ltd. The company was
established in 2004 with businesses in coal-fired power generation, biomass
power generation, wind power, hydropower and other power construction including
power plant consulting, design, equipment procurement, construction,
installation and commissioning and commercial operation.
 
 Under the
terms of the WK Contract, GC Nordic is obligated to deliver 50 wind turbines for
Wuhan Kaidi’s Kaidi Power Pinglu Wind Farm project.  The purchase
price is due in several installments.  GC Nordic delivered the first
ten wind turbines and upon request by Wuhan Kaidi agreed not to deliver the
remaining 40 wind turbines until requested by Wuhan Kaidi.  The total
contract is valued at approximately US$47 million.
 
 3.      Kelipu
 
 Kelipu
executed a purchase contract with GC Nordic for 50 units of 1.0MW wind turbines
in July 2009.  These wind turbines will be installed at Kelipu’s wind
farm located in Tu Quan County of Inner Mongolia.  However, as of date
of this report, Kelipu has applied for but has not yet received final approval
of its wind farm entry procedure from the local
government.  Therefore, implementation of this contract with Kelipu
may be delayed until it has received the relevant approvals from the local
government.
 
 4.      Shenzhen
Guohan Investment Group
 
 Shenzhen
Guohan signed a purchase contract with GC Nordic in December 2009 for 10 units
of 1.0MW.  The total contract is valued at approximately US$8
million.
 
 Production
and Quality Control
 
 The
Company is using production of the 1.0 MW turbines to grow market share by
exploiting its low-cost advantage. Concurrently the Company is investing in
research and development for its larger turbines. The Company is targeting
production of its large turbines for 2010.
 
 The
Company implements quality control in respect of purchasing, production, and
provision and after sale services as follows:
 
 (1)
              Purchasing: We choose reliable
      suppliers and require complete background information and test data from
      such suppliers to make sure their supplies meet our rigorous
      standards.
  - 12
-
  (2)
              Production: We run inspections
      throughout the whole manufacturing and production process. We conduct
      follow-up inspections and use specialized instruments to guarantee the
      specifications of moment of force and gap. We implement several check
      points throughout the process from component manufacturing to provision,
      such as a check point for the size and flatness of the bottom portion of
      the turbine, a check point for the yaw gear gap of 0.7mm to 0.9 mm, a
      check point for the moment of force of the binding bolt, and a check point
      for parameters in operation. We keep detailed test data of the check
      points and keep a detailed profile of such
    information.
 
 (3)
              Provision and after sale
      services: We strictly follow guidelines in adjustment of lubrication,
      hydraulic cooling and hydro-electric control
  system.
 
 The
Company conformed to the quality management system standard ISO 9001:2000 for
the process of manufacturing and servicing wind turbines on September 10,
2008.
 
 Our Suppliers
 
 The
Chinese government’s support of the wind turbine industry has created
significant capacity for components. The Company has signed contracts with all
domestic component suppliers. For key components, GC China Turbine has
investigated several alternative suppliers, 2 to 3 of which will be selected to
sign supply contracts with us, thereby ensuring the supply of components for
future production needs.  After components are successfully trial produced
by the suppliers, components will then be tested by the original manufacturers,
and each component is also tested by GC China Turbine for performance before
installation into our wind turbines.  All of our principal Chinese
suppliers are Yong Jin Gear Co., Ltd., Chuan Run Stock Co., Ltd., Xiang Tan
Generator Stock Co., Ltd., Jiangsu Tianming Machinery Group, China Erzhong Group
(Deyang) Heavy Industries Co., Ltd., Nanfang Ventilator Industries Co., Ltd.,
Xi’an Dun’an Electric Co., Ltd. and Zhong Neng Wind Power Device Co.,
Ltd.  Our only foreign principal supplier is Mita—Teknik
A/S.
 
 Logistics
and Inventory
 
 Because a
wind turbine is a product with a high unit price, we keep low inventory and
follow a make-to-order policy. We make annual orders with our suppliers at the
beginning of the year based on the forecast of our sales. We start production of
the wind turbines upon execution of sales contracts with our customers and upon
receipt of a deposit on such contracts. We generally hold a 10% inventory in
case of unexpected demand.
 
 Seasonality
 
 Our
Company’s operating results are not affected by seasonality.
 
 Competition
 
 The wind
power market is rapidly evolving and is expected to become intensively
competitive. According to the Chinese wind turbine ranking published
independently by Beijing JiPeng Information and Consultancy Co., Ltd., GC Nordic
ranked 13th in
2008.  Some of our competitors have established a market position more
prominent than ours and if we fail to attract and retain customers and establish
a successful distribution network for our wind turbines, we may be unable to
increase our sales and market share.  We compete with major
international and PRC companies including Dongfang Steam Turbine, Dalian Huarui,
Gold Wind, CSIC, Spanish Gamesa, and Indian Suzion.  Some of these
companies are more experienced and more established than us with mature
manufacturing capabilities.  Some of these companies are
well-capitalized and benefit from earlier development advantages.  We
also expect that our future competition will include new entrants to the wind
power market offering new technological solutions.
 
 However,
we believe that the cost and performance of our technologies, products and
services will have advantages compared to competitive technologies, products and
services.  Some of our competitors are large enterprises resulting in
inflexible operations.  Some of our competitors receive less
government support.  We also have the following advantages over our
competitors:
  - 13
-
  1.      Our
Cost Advantage
 
 We
believe our 2-bladed wind turbine and technological process provides for lower
manufacturing costs resulting from significantly more efficient material usage,
use of fewer parts and fewer manufacturing steps for our product as compared to
our competitors, which commonly use a 3-bladed wind turbine.  The
installation costs of our product are also significantly lower as compared to
our competitors because our 2-bladed wind turbine has a simple structure,
lighter total weight and can be more easily installed at less cost than the cost
of installation of 3-bladed wind turbines used by our
competitors.  Further, use of our 2-bladed wind turbine can also
significantly reduce overall maintenance costs for a wind farm because it is
equipped with condition monitoring system which monitors the operational
condition of the wind turbine, and signals for maintenance based on actual
turbine condition, increasing revenue and reducing maintenance
costs.  These cost advantages greatly reduce the initial investment,
installation costs and maintenance costs of wind farm for owners using our
2-bladed wind turbine.
 
 2.      Our
Relationship with Guoce Science and Technology
 
 Since GC
China Turbine Group was formed by certain founders and management of Guoce
Science and Technology, some of these individuals, including Mr. Hou Tie Xin,
Mr. Xu Jia Rong, Ms. Qi Na, Ms. Zhao Ying, also form our core management team,
we have the advantage of initial strategic guidance and the supply of necessary
start-up resources. The main businesses of Guoce Science and Technology’s
include research and development, production, sales, and system engineering
services of power testing instrument, computer-based monitoring system for
hydropower station, hydropower governor, hydropower station excitation, direct
current system, substation automation, power dispatching automation, network
monitoring, cluster server, and computer storage technology.
 
 Guoce
Science and Technology has a strong reputation as a provider of technology
services in the energy industry.  Its businesses cover the whole power
industrial chain with products ranging from power generation to power
transmission to every sector of power utilization. With the complete product
framework, it expects to hold the leading position in the industry for a long
time.
 
 Our
relationship with Guoce Science and Technology has many benefits
including:
 
 ·
              access to engineering
      prowess
 
 ·
              access to established technology
      in the turbine control arena
 
 ·
              access to the utilities industry
      in China as it has large market share for their
      products
 
 ·
              credibility within the utilities
      industry because it has long-standing relationships and operating history
      within the industry
 
 The
entire wind power industry also faces competition from other power generation
sources, both conventional and emerging technologies.  Large utility
companies dominate the energy production industry.  Coal continues to
dominate as the primary resource for electricity production.  Other
conventional resources, including natural gas, oil and nuclear compete with wind
energy in generating electricity.  Wind power has some advantages and
disadvantages when compared to other power generating
technologies.  Wind power is plentiful and widely
distributed.  It is a renewable source of energy.  Since
wind power does not generate greenhouse gases, it does not contribute to global
warming.  Wind power produces no water or air pollution that can
contaminate the environment because no chemical processes are involved in wind
power generation.  As a result, wind power reduces toxic atmospheric
gas emissions.  However, wind turbines require locations with
constantly high wind speeds and since wind is unpredictable, wind power is not
predictably available.
 
 Research
and Development
 
 GC China
Turbine identified a 2-bladed wind turbine technology that was developed through
a 10 year research project costing over US$ 75 million. While the 2-bladed
technology is relatively less commonly used in the market, the development
project that created GC China Turbine’s technology has been operating for 10
years with 97% availability (for generation). Further, the 2-bladed technology
has the benefits of lower manufacturing cost, lower installation cost and lower
operational costs.
  - 14
-
  The
2-bladed wind turbine was developed by a firm called Deltawind AB
(“Deltawind”).   GC China Turbine has a 10 year license with
Deltawind, with opportunity for renewal, which allows us to manufacture and
distribute these turbines in the Chinese markets.  This license, if
not renewed, will expire on June 30, 2016.  Some former personnel of
Deltawind joined GC China Turbine and those personnel are assisting in the
research and development efforts as well as the testing of the new Chinese
components.  There are no employment or retention agreements with any
former Deltawind employee.  Deltawind was subsequently purchased by a
U.S. licensee of the technology named Nordic Windpower Ltd.
 
 In
December 30, 2009, GC Nordic jointly established Guoce Nordic AB with Tomas
Lyrner in Sweden, of which 85% of the shares of Guoce Nordic AB is held by GC
Nordic and 15% by Mr. Lyrner. Guoce Nordic AB is the research and development
center of GC Nordic will contribute to GC Nordic all of the intellectual rights
developed. In 2010, the R&D center will focus on the development of 2.5MW
and 3.0MW wind turbines.
 
 Our
launch product is a 1.0MW utility scale turbine with designs for a 2.5W and
3.0MW utility scale turbine in development.  The Company is using
production of the 1.0 MW turbines to grow market share by exploiting its
low-cost advantage.  For fiscal years 2008 and 2009, we have spent US$
94,300 and US$ 90,437, respectively, on research and development expenses. The
Company plans to continue investing more in research and development for its
larger turbines. The Company is targeting production of its 2.5MW and 3.0MW
turbines for 2010.
 
 Intellectual
Properties and Licenses
 
 The
following table describes the intellectual property currently owned by GC
Nordic:
 
 Type
              
              Name
              
              Category
      Number and Description
              
              Issued
      By
              
              Duration
              
              DescriptionTrademark
              
              GC-NORDIC
              
              39
      (transport; packaging and storage of goods; travel
      arrangement)
              
              State
      Trademark Administration
              
              September
      28, 2009 to September 27, 2019
              
              N/ATrademark
              
              Nordic
              
              39
      (transport; packaging and storage of goods; travel
      arrangement)
              
              State
      Trademark Administration
              
              June
      21, 2009 to June 20, 2019
              
              N/ATrademark
              
              诺德
              
              7
      (Machines and machine tools; motors and engines (except for land
      vehicles); machine coupling and transmission components (except for land
      vehicles); agricultural implements other than hand-operated; incubators
      for eggs)
              
              State
      Trademark Administration
              
              June
      7, 2009 to June 6, 2019
              
              N/A
 
 GC China
Turbine takes all necessary precautions to protect our intellectual
property.  Aside from registering our trademarks with the State
Trademark Administration to protect our intellectual property, our marketing
team also diligently conducts market research to ensure that our intellectual
property is not being violated. However, we cannot assure you that we will be
able to protect or enforce our intellectual property rights.  In the
event of any infringement upon our intellectual property rights, we will pursue
all legal rights and remedies.
 
 China
Economic Incentive Policies
 
 To
support the development of wind power technology and growth of the in-grid wind
power market, the Chinese government has implemented a series of projects and
also stipulated a series of economic incentive policies.  We will
attempt to join the applicable projects and apply for all applicable
incentives.
  - 15
-
  Ride
the Wind Program
 
 To import
technology from foreign companies and to establish a high-quality Chinese wind
turbine generator sector, the former State Development and Planning Commission
(“SDPC”)
initiated the “Ride the Wind Program” in 1996. This initiative led to two joint
ventures, NORDEX (Germany) and MADE (Spain).  These joint ventures
effectively introduced a 600 kilowatts wind turbine generator manufacturing
technology into China.
 
 National
Debt Wind Power Program
 
 To
encourage the development of domestic wind power equipment manufacturing, the
former State Economic & Trade Commission (“SETC”) implemented
the “National Debt Wind Power Program.”  This program required the
purchase of qualified, locally-made wind power components for new generation
projects.  China’s government provided bank loans with subsidized
interest to wind farm owners as compensation for the risk of using locally-made
wind turbine generators.  These loans funded construction of
demonstration project wind farms with a total installed capacity of
8MW.  This program has been completed.
 
 Wind
Power Concession Project
 
 The NDRC
initiated the “Wind Power Concession Project” in 2004 with a 20-year operational
period.  This program aims to reduce the in-grid wind power tariff by
building large capacity wind farms and achieving economies of scale. Each of the
wind farms built under this program must reach a 100MW capacity. By 2006, NDRC
had approved 5 wind farms, in Jiangsu, Guangdong, Inner Mongolia, and Jilin
Province.
 
 In
February 2005, China’s Renewable Energy Law was formulated and was put into
effect on January 1, 2006.  The law stipulates that the power grid
company must sign a grid connection agreement with the wind power generating
company and purchase the full amount of the wind power generated by
it.  The wind power tariff will be determined by the wind farm project
tendering.  The winner’s quoted tariff will be the tariff of that wind
farm project.
 
 Wind
power is a priority “National Clean Development Mechanism Project” of the
Chinese government.  Wind farm developers can sell Certified Emission
Reduction Certificates (“CER’s”) to developed
countries under the terms of the Kyoto Protocol.
 
 Governmental
Regulations
 
 This
section sets forth a summary of the most significant regulations or requirements
that affect our business activities in China.
 
 Compliance with Circular 75,Circular 106 and the 2006 M&A
Regulations
 
 China’s
State Administration of Foreign Exchange (“SAFE”) issued a
public notice known as “Circular 75” in October 2005, requiring PRC residents to
register with the local SAFE branch before establishing or acquiring the control
of any company outside of China for the purpose of financing that offshore
company with assets or equity interest in a PRC company. PRC residents that are
shareholders of offshore special purpose companies established before November
1, 2005 were required to conduct the overseas investment registration with the
local SAFE branch before March 31, 2006, and once the special purpose vehicle
has a major capital change event (including overseas equity or convertible bonds
financing), the residents must conduct a registration relating to the change
within 30 days of occurrence of the event. On May 29, 2007, the SAFE issued an
additional notice known as “Circular 106,” clarifying some outstanding issues
and providing standard operating procedures for implementing the prior notice.
According to the new notice, SAFE sets up seven schedules that track
registration requirements for offshore fundraising and roundtrip
investments.
 
 Likewise,
the “Provisions on Acquisition of Domestic Enterprises by Foreign Investors,”
issued jointly by the Ministry of Commerce (“MOFCOM”), State-owned
Assets Supervision and Administration Commission, State Taxation Bureau, State
Administration for Industry and Commerce, China Securities Regulatory Commission
and SAFE in September 2006, impose approval requirements from MOFCOM for
“round-trip” investment transactions, including acquisitions in which equity was
used as consideration.
  - 16
-
  Dividend
Distribution
 
 The
principal laws, rules and regulations governing dividends paid by our PRC
operating subsidiary include the Company Law of the PRC (1993), as amended in
2006, Wholly Foreign Owned Enterprise Law (1986), as amended in 2000, and Wholly
Foreign Owned Enterprise Law Implementation Rules (1990), as amended in 2001.
Under these laws and regulations, our PRC subsidiary may pay dividends only out
of its accumulated profits, if any, determined in accordance with PRC accounting
standards and regulations. In addition, our PRC subsidiary is required to set
aside at least 10% of its after-tax profit based on PRC accounting standards
each year to its statutory surplus reserve fund until the accumulative amount of
such reserve reaches 50% of its respective registered capital. These reserves
are not distributable as cash dividends.  The board of directors of a
wholly foreign-owned enterprise has the discretion to allocate a portion of its
after-tax profits to its staff welfare and bonus funds.  After the
allocation of relevant welfare and funds, the equity owners can distribute the
rest of the after-tax profits provided that all the losses of the previous
fiscal year have been made up.
 
 Taxation
 
 The
applicable tax laws, regulations, notices and decisions (collectively referred
to as “Applicable Tax
Law”) related to foreign investment enterprises and their investors
include the follows:
 
 ·
              Enterprise Income Tax Law of the
      People’s Republic of China issued by the National People’s Congress of
      China on January 1, 2008;
 
 ·
              Implementing Rules of the
      Enterprise Income Tax Law of the People’s Republic of China promulgated by
      the State Council of China, which came into effect on January 1,
      2008;
 
 ·
              Interim Regulations of the
      People’s Republic of China Concerning Value-added Tax promulgated by the
      State Council came into effect on January 1,
  2009;
 
 ·
              Implementation Rules of The
      Interim Regulations of the People’s Republic of China Concerning
      Value-added Tax promulgated by the Treasury Department of China came into
      effect on January 1, 2009;
 
 ·
              Business Tax Interim Regulations
      of the People’s Republic of China promulgated by the State Council came
      into effect on January 1,
2009;
 
 ·
              Implementation Rules of The
      Business Tax Interim Regulations of the People’s Republic of China
      promulgated by the Treasury Department of China came into effect on
      January 1, 2009.
 
 Income
Tax on Foreign Investment Enterprises
 
 GC Nordic
is subject to income tax at a rate of 25.0% of their taxable income starting
from January 1, 2008 according to the Enterprise Income Tax Law and its
Implementation Rules of People’s Republic of China.
 
 Before
the implementation of the Enterprise Income Tax (“EIT”) law (as discussed
below), Foreign Invested Enterprises established in the People’s Republic of
China are generally subject to an EIT rate of 33.0%, which includes a 30.0%
state income tax and a 3.0% local income tax.  On March 16, 2007, the
National People’s Congress of China passed the new Corporate Income Tax Law
(“CIT Law”), and on November 28, 2007, the State Council of China passed the
Implementation Rules for the CIT Law (“Implementation Rules”) which took effect
on January 1, 2008. The CIT Law and Implementation Rules impose a unified EIT of
25.0% on all domestic-invested enterprises and foreign invested enterprises
(“FIEs”), unless they qualify under certain limited exceptions. Therefore,
nearly all FIEs are subject to the new tax rate alongside other domestic
businesses rather than benefiting from the old tax laws applicable to FIEs, and
its associated preferential tax treatments, beginning January 1,
2008.
  - 17
-
  Value-added
Tax
 
 The new
Interim Regulations of the People’s Republic of China on Value-added Tax
promulgated by the State Council came into effect on January 1, 2009 and its
Implementation Rules promulgated by the Treasury Department of China came into
effect on January 1, 2009.  Under these regulation and rules,
value-added tax is imposed on goods sold in or imported into the PRC and on
processing, repair and replacement services provided within the
PRC.
 
 Value-added
tax payable in the PRC is charged on an aggregated basis at a rate of 13% or 17%
(depending on the type of goods involved) on the full price collected for the
goods sold or, in the case of taxable services provided, at a rate of 17% on the
charges for the taxable services provided but excluding, in respect to both
goods and services, any amount paid in respect of value-added tax included in
the price or charges, and less any deductible value-added tax already paid by
the taxpayer on purchases of goods and service in the same financial
year.
 
 Business
Tax
 
 The new
Interim Regulations  on Business Tax of the People’s Republic of China
promulgated by the State Council came into effect on January 1, 2009, providing
that the business tax rate for a business that provides services, assigns
intangible assets or sells immovable property will range from 3% to 5% of the
charges of the services provided, intangible assets assigned or immovable
property sold, as the case may be except that the entertainment industry shall
pay a business tax at a rate ranging from 5% to 20% of the charges of the
services provided.
 
 Tax
on Dividends from PRC Enterprise with Foreign Investment
 
 According
to the Enterprise Income Tax Law, income resulting from rental properties,
royalties and profits in the PRC derived by a foreign enterprise which has no
establishment in the PRC or has establishment but the income has no relationship
with such establishment is subject to a 10% withholding tax, subject to
reduction as provided by any applicable double taxation treaty, unless the
relevant income is specifically exempted from tax under the Enterprise Income
Tax Law.
 
 Wholly
foreign-owned enterprise
 
 Wholly
foreign-owned enterprises are governed by the Law of the People’s Republic of
China Concerning Enterprises with Sole Foreign Investments, which was
promulgated on 12th April, 1986 and amended on 31 October 2000, and its
Implementation Regulations promulgated on 12th December, 1990 and amended on 12
April 2001 (together the “Foreign Enterprises
Law”).
 
 (a)   Procedures for establishment of a
wholly foreign-owned enterprise
 
 The
establishment of a wholly foreign-owned enterprise will have to be approved by
the Ministry of Commerce of the PRC (“MOC”) (or its
delegated authorities).  If two or more foreign investors jointly
apply for the establishment of a wholly foreign-owned enterprise, a copy of the
contract between the parties must also be submitted to the MOC (or its delegated
authorities) for its record.  A wholly foreign-owned enterprise must
also obtain a business license from the State Administration for Industry &
Commerce of the PRC (“SAIC”) before it can
commence business.
 
 (b)   Nature
 
 A wholly
foreign-owned enterprise is a limited liability company under the Foreign
Enterprises Law.  It is a legal person which may independently assume
civil obligations, enjoy civil rights and has the right to own, use and dispose
of property.  It is required to have a registered capital contributed
by the foreign investor(s).  The liability of the foreign investor(s)
is limited to the amount of registered capital contributed.  A foreign
investor may make its contributions by installments and the registered capital
must be contributed within the period as approved by the MOC (or its delegated
authorities) in accordance with relevant regulations.
  - 18
-
  (c)   Profit distribution
 
 The
Foreign Enterprise Law provides that after payment of taxes, a wholly
foreign-owned enterprise must make contributions to a reserve fund, an
enterprise development fund and an employee bonus and welfare
fund.  The allocation ratio for the employee bonus and welfare fund
may be determined by the enterprise.  However, at least 10% of the
after-tax profits must be allocated to the reserve fund. If the cumulative total
of allocated reserve funds reaches 50% of an enterprise’s registered capital,
the enterprise will not be required to make any additional contribution. The
reserve fund may be used by a wholly foreign-owned enterprise to make up its
losses and with the consent of the examination and approval authority, can also
be used to expand its production operations and to increase its capital. The
enterprise is prohibited from distributing dividends unless the losses (if any)
of previous years have been made up. The development fund is used for expanding
the capital base of the company by way of capitalization issues. The employee
bonus and welfare fund can only be used for the collective benefit and
facilities of the employees of the wholly foreign-owned enterprise.
 
 Environmental
Protection Regulations
 
 The PRC
has expressed a concern about pollution and other environmental hazards.
Although we believe that we comply with current national and local government
regulations, if it is determined that we are in violation of these regulations,
we can be subject to financial penalties as well as the loss of our business
license, in which event we would be unable to continue in business. Further, if
the national or local government adopts more stringent 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. Any failure by us to
control the use of, or to restrict adequately the discharge of, hazardous
substances could subject us to potentially significant monetary damages and
fines or suspensions in our business operations.
 
 Renewable
Energy Regulations
 
 China
formulated and promulgated the “Renewable Energy Law of the People’s Republic of
China” in February 28, 2005 (“Renewable Energy
Law”) which has been carried out from January 1, 2006 to further
facilitate the development and utilization of renewable energy including wind
energy, increase the energy supply, protect the environment, and improve energy
structure. Following the promulgation of the Renewable Energy Law, the PRC
Government has also successively carried out various relevant ancillary
measures, including the “Circular Regarding Requirements of Administration of
Wind Power Construction,” the “Relevant Provisions for Administration of
Renewable Energy Resource Electricity Generation,” the “Renewable Energy
Industry Development Guidance Catalogue” and the “Trial Measures for
Administration of Renewable Energy Power Generation Pricing and Expenses
Sharing” to lay down special rules and regulations to facilitate the development
of wind power industry in the PRC.
 
 China
promulgated the “Renewable Energy Law of People’s Republic of China, as amended”
on December 26, 2009, to be implemented from April 1, 2010. The promulgation of
such act is for the purpose of improving the Renewable Energy Law, and provide
further legal protections to renewable energies including wind, solar energy and
others.
 
 The
Ministry of the PRC issued the “Provisional Measures for Administration of
Special Capital on Developing Renewable Energy Resources," stipulating the
establishment of “Special Capital on Developing Renewable Energy Resources” by
utilization of the central budget to promote the development of renewable
energy, especially on the local production of the mechanical equipments for the
development and utilization of renewable energy.
 
 In 2006,
the State Council promulgated “National Guideline on Medium-and Long-Term
Program for Scienceand Technology
Development (2006-2020)” (the “Guideline”),
stipulating the priority research on large types of wind power facilities in
terms of the low-cost and large-scale of the development and utilization of
renewable energy resources. Following the above-mentioned Guideline, in 2007,
the PRC Development and Reform Committee promulgated the ancillary notice the
“Eleventh Five-Year Plan of High Technology Industry” to promote the research,
commercial use, industrialization of the wind turbines and its key
assembly.
  - 19
-
  Foreign
Exchange Controls
 
 In August
2008, the Foreign Exchange Bureau issued the Foreign Exchange Administration
Regulation, as amended. Under the Regulation, the Renminbi (“RMB”) is freely
convertible for current account items, including the distribution of dividends,
interest payments, trade and service-related foreign exchange transactions, but
not under the “capital account,” which includes foreign direct investment, loans
and investments in securities outside of China, unless the prior approval of the
SAFE is obtained and prior registration with the SAFE is made. These limitations
could affect the PRC company’s ability to obtain foreign exchange through debt
or equity financing. This could negatively impact our financial performance as
it may limit our ability to reallocate capital and to take advantage of market
opportunities.
 
 On August
29, 2008, SAFE promulgated a notice entitled Circular 142, regulating the
conversion by a foreign-invested company of foreign currency into RMB by
restricting the use of converted RMB. The notice requires that the registered
capital of a foreign-invested company settled in RMB converted from foreign
currencies may only be used for purposes within the business scope stated in the
business license and may not be used for equity investments within PRC. In
addition, SAFE strengthened its supervision of the flow and use of the
registered capital of a foreign-invested company settled in RMB converted
from foreign currencies. The use of such RMB capital may not be changed without
SAFE’s prior approval, and may not in any case be used to repay RMB loans if the
proceeds of such loans have not been used.
 
 Since a
significant amount of our future revenue will be denominated in RMB, any
existing and future restrictions on currency exchange may limit our ability to
utilize revenue generated in RMB to fund our business activities outside China
that are denominated in foreign currencies. We cannot be certain that the
Chinese regulatory authorities will not impose more stringent restrictions on
the convertibility of the RMB.
 
 Employees
 
 The
following table sets forth the number of our employees for each of our areas of
operations and as a percentage of our total workforce as of March 24,
2010:
 
 Number of
                      Employees
                    
                    
                    % of
                      EmployeesManagement
                    
                    
                    8
                    
                    
                    
                    6.67
                    %GM
      Office
                    
                    
                    7
                    
                    
                    
                    5.83
                    %Engineering
                    
                    
                    8
                    
                    
                    
                    6.67
                    %Finance
                    
                    
                    6
                    
                    
                    
                    5.00
                    %Financing
      and Investment
                    
                    
                    4
                    
                    
                    
                    3.33
                    %Technology
                    
                    
                    12
                    
                    
                    
                    10.00
                    %Quality
      Assurance
                    
                    
                    4
                    
                    
                    
                    3.33
                    %Marketing
                    
                    
                    12
                    
                    
                    
                    10.00
                    %Purchasing
                    
                    
                    8
                    
                    
                    
                    6.67
                    %Production
                    
                    
                    43
                    
                    
                    
                    35.83
                    %Logistics
                    
                    
                    8
                    
                    
                    
                    6.67
                    %TOTAL
                    
                    
                    120
                    
                    
                    
                    100
                    %
 
 The
Company has 120 employees, most of whom have signed employment contracts and
confidentiality agreements with the Company. Generally, the employment contract
is 5 to 10 years for senior management personnel; 3 years for middle management
personnel, marketing staff, technicians and other special staff; and 2 years for
the rest. For non-experienced staff, the employment contract is 1 year. We
believe that our relationship with our employees is good.
  - 20
-
  We are in
full compliance with Chinese labor laws and regulations and are committed to
providing safe and comfortable working conditions and accommodations for
our employees.  We believe in the importance of
maintaining our social responsibilities, and we are committed to
providing employees with a safe, clean and comfortable working
environment and accommodations. Our employees are also entitled to time off
during public holidays. In addition, we frequently monitor contract
manufacturers’ working conditions to ensure their compliance with related labor
laws and regulations. We are in full compliance with our obligations to provide
pension benefits to our workers, as mandated by the PRC government. We strictly
comply with Chinese labor laws and regulations, and offer reasonable wages, life
insurance and medical insurance to our workers.
 
 Compliance
with Environmental Laws
 
 We are
required to comply with several domestic environmental protection laws and
regulations, including Environmental Protection Law of the People’s Republic of
China, Law of the People’s Republic of China on Prevention and Control of
Water  Pollution, Law of the People’s Republic of China on the
Prevention and Control of Atmospheric Pollution, Law of the People’s Republic of
China on the Prevention and Control of Environmental Pollution by Solid Waste,
Law of the People’s Republic of China on Prevention and Control of Pollution
From Environmental Noise, Law of the People’s Republic of China on Appraising of
Environment Impact and Regulations on the Administration of Construction Project
Environmental Protection.
 
 In
accordance with the Environmental Protection Law of the People’s Republic of
China adopted by the Standing Committee of the National People’s Congress on
December 26, 1989, the bureau of environmental protection of the State Council
sets the national guidelines for the discharge of pollutants. The provincial and
municipal governments of provinces, autonomous regions and municipalities may
also set their own guidelines for the discharge of pollutants within their own
provinces or districts in the event that the national guidelines are inadequate.
The subdivision environmental protection laws on control of pollution of water,
air, solid waste and noise set more detailed rules, standards and specifications
with respect to their areas of regulation.
 
 Pursuant
to the Environmental Protection Law and its subdivision laws, a company or
enterprise which causes environmental pollution and discharges other polluting
materials which endanger the public should implement environmental protection
methods and procedures into their business operations. This may be achieved by
setting up a system of accountability within the company’s business structure
for environmental protection; adopting effective procedures to prevent
environmental hazards such as waste gases, water and residues, dust powder,
radioactive materials and noise arising from production, construction and other
activities from polluting and endangering the environment. The environmental
protection system and procedures should be implemented simultaneously with the
commencement of and during the operation of construction, production and other
activities undertaken by the company. Any company or enterprise which discharges
environmental pollutants should report and register such discharge with relevant
bureaus of environmental protection and pay any fines imposed for the discharge.
A fee may also be imposed on the company for the cost of any work required to
restore the environment to its original state. Companies which have caused
severe pollution to the environment are required to restore the environment or
remedy the effects of the pollution within a prescribed time limit.
 
 In
addition, the Law of the People’s Republic of China on Appraising of Environment
Impact Issued by the National People’s Congress of China which came into effect
on September 1, 2003 provides the methods and institutions for analyzing,
predicting and appraising the impact of operation and construction projects that
might incur after they are carried out. In case a construction project of any
company or enterprise fails to pass the examination, the construction may not be
started. Regulations on the Administration of Construction Project Environmental
Protection Issued by the State Council of China which came into effect on
November 29, 1998 provide that the building of construction projects having
impacts on the environment within the territory of the People's Republic of
China shall compile or submit a report on environmental impact, a statement
on environmental impact or  a registration form on environmental
impact in accordance with the extent of environmental impact of construction
projects.
 
 Where
you can find more information
 
 We are
required to file annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and other information with the Securities and
Exchange Commission (SEC). You may read and copy any document that we file at
the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our filings can also be reviewed by
accessing the SEC’s website at http://www.sec.gov.
  - 21
-
  ITEM
1A.  RISK FACTORS.
 
 Disclosure
regarding Forward-Looking Statements
 
 Except
for statements of historical facts, this Annual Statement on Form 10-K contains
forward-looking statements involving risks and uncertainties. The words
“anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the
negative of these terms and similar expressions or variations thereof are
intended to be forward looking statements. Such statements reflect the current
view of the Registrant with respect to future events and are subject to risks,
uncertainties, assumptions and other factors relating to the Registrant’s
industry, the Registrant’s operations and results of operations and any
businesses that may be acquired by the Registrant. Should one or more of these
risks or uncertainties materialize, or should the underlying assumptions prove
incorrect, actual results may differ significantly from those anticipated,
believed, estimated, expected, intended or planned.
  Although
the Registrant believes that the expectations reflected in the forward looking
statements are reasonable, the Registrant cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, the
Registrant does not intend to update any of the forward-looking statements to
conform these statements to actual results. The following discussion should be
read in conjunction with the Registrant’s financial statements and the related
notes included in this report on Form 10-K.
 
 RISK
FACTORS
 
 You
should carefully consider the risks described below together with all of the
other information included in our public filings before making an investment
decision with regard to our securities. The statements contained in or
incorporated into this Annual Report on Form 10-K that are not historic facts
are forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements. While the risks described below are the
ones we believe are most important for you to consider, these risks are not the
only ones that we face.  If any of the following events described
in these risk factors actually occurs, our business, financial
condition or results of operations could be harmed. In that case, the trading
price of our common stock could decline, and you may lose all or part of your
investment.
 
 Risks
Relating to Our Business and Industry
 
 Factors,
Risks and Uncertainties That May Affect our Business
 
 With the exception of historical
facts stated herein, the matters discussed in this Annual Report on
Form 10-K are “forward looking” statements that involve risks and uncertainties that
could cause actual results to differ materially from projected results.
Such “forward looking” statements include, but are not necessarily limited to
statements regarding anticipated levels of future revenues and earnings from
the operations of GC China Turbine Corp. and its subsidiaries, projected costs and
expenses related to our operations, liquidity, capital resources, and
availability of future equity capital on commercially reasonable terms.
Factors that could cause actual results to differ materially are discussed
below. We disclaim any intent or obligation to publicly update these “forward
looking” statements, whether as a result of new information, future events or
otherwise.
 
 Our
limited operating history makes it difficult to evaluate our future prospects
and results of operations.
 
 GC
Nordic, which commenced business in 2006, has a limited operating history.
Accordingly, you should consider our future prospects in light of the risks and
uncertainties experienced by early-stage companies in evolving industries in
China.  Some of these risks and uncertainties relate to our ability
to:
 
 ·
              maintain our market
      position;
 
 ·
              respond to competitive market
      conditions;
  - 22
-
  ·
              increase awareness of our
      brand;
 
 ·
              respond to changes in our
      regulatory environment;
 
 ·
              maintain effective control of our
      costs and expenses;
 
 ·
              raise sufficient capital to
      sustain and expand our business;
and
 
 ·
              attract, retain and motivate
      qualified personnel.
 
 If we are
unsuccessful in addressing any of these risks and uncertainties, our business
may be materially and adversely affected.
 
 If
we fail to implement our business strategy, our financial performance and our
growth could be materially and adversely affected.
 
 Our
future financial performance and success are dependent in large part upon our
ability to implement our business strategy successfully. Our business strategy
envisions several initiatives, including driving revenue growth and enhancing
operating results by increasing adoption of our products by targeting
high-growth segments, establishing successful distribution networks in our
target markets for our products, anticipating customer needs in the development
of system-level solutions, strengthening our technology leadership while
lowering cost and pursuing targeted strategic acquisitions and alliances. We may
not be able to implement our business strategy successfully or achieve the
anticipated benefits of our business plan. If we are unable to do so, our
long-term growth and profitability may be adversely affected. Even if we are
able to implement some or all of the initiatives of our business plan
successfully, our operating results may not improve to the extent we anticipate,
or at all. Implementation of our business strategy could also be affected by a
number of factors beyond our control, such as increased competition, legal
developments, government regulation, general economic conditions or increased
operating costs or expenses. In addition, to the extent we have misjudged the
nature and extent of industry trends or our competition; we may have difficulty
in achieving our strategic objectives. Any failure to implement our business
strategy successfully may adversely affect our business, financial condition and
results of operations. In addition, we may decide to alter or discontinue
certain aspects of our business strategy at any time.
 
 If
we are unable to raise additional funds to expand our operations, we may not be
able to operate profitably or at all.
 
 In
connection with the development and expansion of our business, we will incur
significant capital and operational expenses. We do not presently have any
funding commitments other than our present credit arrangements which we do not
believe is sufficient to enable us to satisfy our purchase commitments and to
otherwise expand our business. If we are unable to obtain additional funding to
pay our purchase commitments and we cannot find alternative financing we may be
unable to expand our business or finance the growth of our existing business,
which may impair our ability to operate profitably.
 
 Because
of the worldwide economic downturn, we may not be able to raise any additional
funds that we require on favorable terms, if any.  The failure to
obtain necessary financing may impair our ability to manufacture our products
and continue in business.
 
 If
a substantial market for wind power does not develop, there may be no market for
the wind power industry products in which we are investing heavily.
 
 Our wind
turbines business is based on the assumption that wind power will become a more
significant source of power in the PRC and elsewhere. At present wind power
accounts for an insignificant percentage of China’s energy needs, and we cannot
assure you that wind power will ever become a significant source of energy in
China. Since our growth plan is based on developing and providing equipment and
components for that industry, our business will be impaired if the market for
wind power generation equipment does not develop or if the market develops but
our products are not accepted by the market. We are making the financial and
manpower commitment in our belief that there will be an increased demand for
wind power in China and elsewhere. We cannot assure you that we will be able to
develop this business, and our failure to develop the business will have a
material adverse effect on our overall financial condition and the results of
our operations.
  - 23
-
  Because
we sell capital equipment, our business is subject to our customers’ capital
budget and we may suffer delays or cancellations of orders as a result of the
effects of the worldwide economic downturn.
 
 Our
customers purchase our equipment as part of their capital budget. As a result,
we are dependent upon receiving orders from companies that are either expanding
their business, commencing a new business, upgrading their capital equipment or
who otherwise require capital equipment. Our business is therefore dependent
upon both the economic health of these industries and our ability to offer
products that meet regulatory requirements, including environmental requirements
of these industries and are cost justifiable, based on potential cost savings in
using our equipment in contrast to existing equipment or equipment offered by
others.   We cannot predict the extent that the market for capital
equipment in the wind power industries will be affected.  However, any
economic slowdown can affect all purchasers and manufactures of capital
equipment, and we cannot assure you that our business will not be significantly
impaired as a result of the worldwide economic downturn.
 
 We
are subject to particularly lengthy sales cycles which may have an adverse
effect on our financial results.
 
 We are
subject to lengthy sale cycles that may last over nine months.  These
lengthy and challenging sales cycles may mean that it could take longer before
our sales and marketing efforts result in revenue, if at all, and may have
adverse effects on our operating results, financial condition, cash flows and
stock price.
 
 The
nature of our products creates the possibility of significant product liability
and warranty claims, which could harm 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. We cannot be certain that our products will be completely free from
defects. Moreover, we do not have any product liability insurance and may not
have adequate resources to satisfy a judgment in the event of a successful claim
against us. The successful assertion of product liability claims against us
could result in potentially significant monetary damages and require us to make
significant payments. In addition, because the insurance industry in China is
still in its early stages of development, business interruption insurance
available in China offers limited coverage compared to that offered in many
other countries. We do not have any business interruption insurance. Any
business disruption or natural disaster could result in substantial costs and
diversion of resources.
 
 Our
ability to sell our products to wind farms is dependent upon designing equipment
that enables our customers to meet environmental requirements.
 
 We mainly
market wind power equipment to operators of wind farms. Our ability to market
these products is dependent upon the continued growth of wind farms and our
ability to offer products that enable the operators of the wind farms to produce
electricity through a cleaner process than would otherwise be available at a
reasonable cost. To the extent that government regulations are adopted that
require the wind farms to reduce or eliminate polluting discharges from wind
farms, our equipment would need to be designed to meet such
requirements.
 
 If
we fail to introduce enhancements to our existing products or to keep abreast of
technological changes in our markets, our business and results of operations
could be adversely affected.
 
 We
believe our future success depends in part on our ability to enhance our
existing products and develop new products in order to continue to meet customer
demands. Our failure to introduce new or enhanced products on a timely and
cost-competitive basis, or the development of processes that make our existing
technologies or products obsolete, could harm our business and results of
operations.
  - 24
-
  Because
we face intense competition from other companies for our operating segment, many
of which have greater resources than we do, we may not be able to compete
successfully and we may lose or be unable to gain market share.
 
 The
markets for products in our business segments are intensely competitive. Many of
our competitors have established more prominent market positions, and if we fail
to attract and retain customers and establish successful distribution networks
in our target markets for our products, we will be unable to increase our sales.
Many of our existing and potential competitors have substantially greater
financial, technical, manufacturing and other resources than we do. Our
competitors’ greater size in some cases provides them with a competitive
advantage with respect to manufacturing costs because of their economies of
scale and their ability to purchase raw materials at lower prices, as well as
securing supplies at times of shortages. Many of our competitors also have
greater brand name recognition, more established distribution networks and
larger customer bases. In addition, many of our competitors have
well-established relationships with our current and potential customers and have
extensive knowledge of our target markets. As a result, they may be able to
devote greater resources to the research, development, promotion and sale of
their products or respond more quickly to evolving industry standards and
changes in market conditions than we can. Our failure to adapt to changing
market conditions and to compete successfully with existing or new competitors
may materially and adversely affect our financial condition and results of
operations.
 
 Compliance
with environmental regulations can be expensive, and noncompliance with these
regulations may result in adverse publicity and potentially significant monetary
damages and fines.
 
 As our
manufacturing processes generate noise, wastewater, gaseous and other industrial
wastes, we are required to comply with all national and local regulations
regarding protection of the environment. If we fail to comply with present or
future environmental regulations, we may be required to pay substantial fines,
suspend production or cease operations. We use, generate and discharge toxic,
volatile and otherwise hazardous chemicals and wastes in our research and
development and manufacturing activities. Any failure by us to control the use
of, or to restrict adequately, the discharge of, hazardous substances could
subject us to potentially significant monetary damages and fines or suspensions
in our business operations.
 
 Failure
to successfully reduce our production costs may adversely affect our financial
results.
 
 A
significant portion of our strategy relies upon our ability to successfully
rationalize and improve the efficiency of our operations. In particular, our
strategy relies on our ability to reduce our production costs in order to remain
competitive. If we are unable to continue to successfully implement cost
reduction measures, especially in a time of a worldwide economic downturn, or if
these efforts do not generate the level of cost savings that we expect going
forward or result in higher than expected costs, there could be a material
adverse effect on our business, financial condition, results of operations or
cash flows.
 
 If
we are unable to make necessary capital investments or respond to pricing
pressures, our business may be harmed.
 
 In order
to remain competitive, we need to invest in research and development,
manufacturing, customer service and support and marketing. From time to time, we
also have to adjust the prices of our products to remain competitive. We may not
have available sufficient financial or other resources to continue to make
investments necessary to maintain our competitive position.
 
 We
must obtain sufficient supply of component materials to conduct our
business.
 
 Our
component and materials suppliers may fail to meet our needs.  We
intend to manufacture all of our wind power products using materials and
components procured from a limited number of third-party
suppliers.  We do not currently have long-term supply contracts with
our suppliers.  This generally serves to reduce our commitment risk
but does expose us to supply risk and to price increases that we have to pass on
to its customers.  In some cases, supply shortages and delays in
delivery may result in curtailed production or delays in production, which can
contribute to an increase in inventory levels and loss of profit.  We
expect that shortages and delays in deliveries of some components will occur
from time to time.  If we are unable to obtain sufficient components
on a timely basis, we may experience manufacturing delays, which could harm our
relationships with current or prospective customers and reduce our
sales.  We also depend on a small number of suppliers for certain
supplies that we use in our business.  If we are unable to continue to
purchase components from these limited source suppliers or identify alternative
suppliers, our business and operating results would be materially and adversely
affected.  We may also not be able to obtain competitive pricing for
some of our supplies compared to its competitors.  We also cannot
assure that the component and materials from domestic suppliers will be of
similar quality or quantity as those imported component and materials which may
lead to rejections of component and materials by our customers. In the event the
domestic component and materials do not perform as well as the imported
component and materials or do not perform at all, our business, financial
condition and results of operations could be adversely
affected.
  - 25
-
  A
small number of customers account for all of our sales, and the loss of any one
of them as a customer would substantially harm our financial
results.
  For the
fiscal year ended 2009, two customers account for all of our sales
revenue.  Revenues and outstanding accounts receivable in 2008 were
solely from one customer. As a result, currently we are substantially dependent
upon the continued participation of these customers in order to maintain and
continue to grow our total revenues. Significantly reducing our dependence on
these customers is likely to take a long time and there can be no guarantee that
we will succeed in reducing that dependence.  There is no assurance
that any of these customers will continue to contribute to our total sales
revenue in subsequent years.  Under present conditions, the loss of
any one of these customers could have a material effect on our performance,
liquidity and prospects.
 
 The
inherent volatility in the market price of electricity could impact our
profitability.
 
 Our
ability to generate revenue has exposure to movements in the market price of
electricity, as sales to the power market are likely to be made at prevailing
market prices.  The market price of electricity is sensitive to
cyclical changes in demand and capacity supply, and in the economy, as well as
to regulatory trends and developments impacting electricity market rules and
pricing, and other external factors outside of our control.  Energy
from wind generating facilities must be taken “as delivered” which necessitates
the use of other system resources to keep the demand and supply of electric
energy in balance.  The inherent volatility in the market price of
electricity could impact our potential revenue, income and cash flow, which
could impact our profitability.
 
 Reduction
or elimination of government subsidies and economic incentives for the wind
power industry could cause demand for our products to decline, thus adversely
affecting our business prospects and results of operations.
 
 Growth of
the wind power market depends largely on the availability and size of government
subsidies and economic incentives.  At present, the cost of wind power
substantially exceeds the cost of conventional power provided by electric
utility grids in many locations around the world. Various governments have used
different policy initiatives to encourage or accelerate the development and
adoption of wind power and other renewable energy sources. Renewable energy
policies are in place in the European Union, most notably Germany and Spain,
certain countries in Asia, including China, Japan and South Korea, and many of
the states in Australia and the United States.  Examples of
government-sponsored financial incentives include capital cost rebates, feed-in
tariffs, tax credits, net metering and other incentives to end-users,
distributors, system integrators and manufacturers of wind power products to
promote the use of wind power and to reduce dependency on other forms of energy.
Governments may decide to reduce or eliminate these economic incentives for
political, financial or other reasons.  Government subsidies have been
reduced in a few countries and are expected to be further reduced or eliminated
in the future.  Reductions in, or eliminations of, government
subsidies and economic incentives before the wind power industry reaches a
sufficient scale to be cost-effective in a non-subsidized marketplace could
reduce demand for our products and adversely affect our business prospects and
results of operations.  In addition, reductions in, or eliminations
of, government subsidies and economic incentives may cause the prices for the
products of our customers to decline and we may in turn face increased pressure
to reduce the sale price of our products.  To the extent any price
decline cannot be offset by further reduction of our costs, our profit margin
will suffer.
  - 26
-
  Unforeseen
or recurring operational problems at our facilities may cause significant lost
production, which could have a material adverse effect on our business,
financial condition, results of operations and cash flow.
 
 Our
manufacturing processes could be affected by operational problems that could
impair our production capability. Our facilities contain complex and
sophisticated machines that are used in our manufacturing process. Disruptions
at our facilities could be caused by maintenance outages; prolonged power
failures or reductions; a breakdown, failure or substandard performance of any
of our machines; the effect of noncompliance with material environmental
requirements or permits; disruptions in the transportation infrastructure,
including railroad tracks, bridges, tunnels or roads; fires, floods, earthquakes
or other catastrophic disasters; labor difficulties; or other operational
problems. Any prolonged disruption in operations at our facilities could cause
significant lost production, which would have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
 
 We
do not own our facilities or have long- term leases for our facilities which
means that we can be removed from our location without notice or warning which
could cause significant disruption to our business.
 
 Our
manufacturing facility is 36,000 square meters situated in the Donghu
Development District, Wuhan, China. Currently we lease the land under our
facility. There is no expiration date for the lease, which is provided free of
charge by the Administrative Committee of Donghu Development District. We also
lease our office facilities which is provided free of charge by the Wuhan Donghu
New Technology Development Co., Ltd. Because our facilities are provided by the
government free of charge, we can be removed from our location without notice or
warning which could cause significant disruption to our business and
manufacturing process and add unplanned expenses for us to relocate to new
offices and facilities. In the event we get evicted from our current facilities
and we are unable to immediately relocate, our business, financial condition and
results of operations will be adversely affected.
 
 Our
business depends substantially on the continuing efforts of our executive
officers and our ability to maintain a skilled labor force and our business may
be severely disrupted if we lose their services.
 
 Our
future success depends substantially on the continued services of our executive
officers, especially Mr. Hou Tie Xin, the chairman of our board of directors. We
do not maintain key man life insurance on any of our executive officers and
directors. If one or more of our executive officers are unable or unwilling to
continue in their present positions, we may not be able to replace them readily,
if at all. Therefore, our business may be severely disrupted, and we may incur
additional expenses to recruit and retain new officers. In addition, if any of
our executives joins a competitor or forms a competing company, we may lose some
of our customers. Our executive officers and chairman are parties to employment
agreements as described elsewhere in this Annual Report on Form 10-K. However,
if any disputes arise between our executive officers and us, we cannot assure
you, in light of uncertainties associated with the Chinese legal system, the
extent to which any of these agreements could be enforced in China, where some
of our executive officers reside and hold some of their assets.
 
 If
we are unable to attract, train and retain technical and financial personnel,
our business may be materially and adversely affected.
 
 Our
future success depends, to a significant extent, on our ability to attract,
train and retain technical and financial personnel. Recruiting and retaining
capable personnel, particularly those with expertise in our chosen industries,
are vital to our success. There is substantial competition for qualified
technical and financial personnel, and there can be no assurance that we will be
able to attract or retain our technical and financial personnel. If we are
unable to attract and retain qualified employees, our business may be materially
and adversely affected.
  Litigation
may adversely affect our business, financial condition and results of
operations.
 
 On
December 4, 2009, Nordic Windpower USA, Inc. ("Nordic Windpower")
filed a lawsuit against GC China Turbine Corp., f.k.a. Nordic Turbines, Inc., in
the U.S. District Court for the Northern District of California, alleging
trademark infringement, trademark dilution, unfair competition and trade dress
infringement. We have had and expect to continue to have discussions with Nordic
Windpower to attempt to resolve any remaining claims it may
assert.  We cannot guarantee that any such remaining claims will
be resolved amicably in the near future, or ever. Such litigation may result in
liability material to our financial statements as a whole or may negatively
affect our operating results if changes to our business operation are required.
The cost to defend such litigation may be significant and may require a
diversion of our resources. There also may be adverse publicity associated with
litigation that could negatively affect customer perception of our business,
regardless of whether the allegations are valid or whether we are ultimately
found liable. As a result, litigation may adversely affect our business,
financial condition and results of operations. See "Legal Proceedings" for
further details regarding this pending matter.
  - 27
-





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





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





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





Corporate
insiders or their affiliates may be able to exercise significant control matters
requiring a vote of our stockholders and their interests may differ from the
interests of our other stockholders.




Pursuant
to the Call Option Agreement and Voting Trust Agreement entered into by and
between Golden Wind and certain of our officers and directors on September 30,
2009, such officers and directors have the opportunity to acquire, as well as to
vote, all of the shares of GC China Turbine issued to Golden Wind as part of the
reverse acquisition, which shares comprise of 54% of our issued and outstanding
common stock. As a result, these officers and directors may be able to exercise
significant control over matters requiring approval by our stockholders. Matters
that require the approval of our stockholders include the election of directors
and the approval of mergers or other business combination transactions. Certain
transactions are effectively not possible without the approval of these officers
and directors by virtue of their control over the shares held by Golden Wind,
including, proxy contests, tender offers, open market purchase programs or other
transactions that can give our stockholders the opportunity to realize a premium
over the then-prevailing market prices for their shares of our common
stock.




We
may be required to incur significant costs and require significant management
resources to evaluate our internal control over financial reporting as required
under Section 404 of the Sarbanes-Oxley Act, and any failure to comply or any
adverse result from such evaluation may have an adverse effect on our stock
price.




We will
be required to evaluate our internal control over financial reporting under
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404 ”).





We are a
smaller reporting company as defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended. Section 404 requires us to include an internal control
report with this Annual Report on Form 10-K. This report must include
management’s assessment of the effectiveness of our internal control over
financial reporting as of the end of the fiscal year. This report must also
include disclosure of any material weaknesses in internal control over financial
reporting that we have identified. Failure to comply, or any adverse results
from such evaluation could result in a loss of investor confidence in our
financial reports and have an adverse effect on the trading price of our debt
and equity securities.  As of December 31, 2009, the management of the
Company assessed the effectiveness of the Company’s internal control over
financial reporting based on the criteria for effective internal control over
financial reporting established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“ COSO
”) and SEC guidance on conducting such assessments.  Management
concluded, during the year ended December 31, 2009, that its internal controls
and procedures were not effective to detect the inappropriate application of
U.S. GAAP rules.  Management realized there were deficiencies in the
design or operation of our internal control that adversely affected
our  internal controls which management considers to be material
weaknesses including those described below:


- 28
-




i)
            We
      lack personnel with the experience to properly analyze and record complex
      transactions in accordance with U.S.
GAAP.


ii)
            We
      have insufficient quantity of dedicated resources and experienced
      personnel involved in reviewing and designing internal controls. As a
      result, a material misstatement of the interim and annual financial
      statements could occur and not be prevented or detected on a timely
      basis.


iii)
            We
      have not achieved the optimal level of segregation of duties relative to
      key financial reporting functions.


iv)
            We
      do not have an audit committee or an independent audit committee financial
      expert. While not being legally obligated to have an audit committee or
      independent audit committee financial expert, it is the management’s view
      that to have an audit committee, comprised of independent board members,
      and an independent audit committee financial expert is an important
      entity-level control over our financial
  statements.


v)
            We
      did not perform an entity level risk assessment to evaluate the
      implication of relevant risks on financial reporting, including the impact
      of potential fraud related risks and the risks related to non-routine
      transactions, if any, on our internal control over financial
      reporting.  Lack of an entity-level risk assessment constituted an
      internal control design deficiency which resulted in more than a remote
      likelihood that a material error would not have been prevented or
      detected, and constituted a material
weakness.




For the
fiscal year ending December 31, 2010, our independent registered public
accounting firm will be required to issue a report on management’s assessment of
our internal control over financial reporting and their evaluation of the
operating effectiveness of our internal control over financial reporting. Our
assessment requires us to make subjective judgments and our independent
registered public accounting firm may not agree with our
assessment.





Achieving
continued compliance with Section 404 may require us to incur significant costs
and expend significant time and management resources. We cannot assure you that
we will be able to fully comply with Section 404 or that, we and our
independent registered public accounting firm would be able to conclude that our
internal control over financial reporting is effective at fiscal year end. As a
result, investors could lose confidence in our reported financial information,
which could have an adverse effect on the trading price of our securities, as
well as subject us to civil or criminal investigations and penalties. In
addition, our independent registered public accounting firm may not agree with
our management’s assessment or conclude that our internal control over financial
reporting is operating effectively.





Risks
Related to Our Corporate Structure





If
our acquisition of GC Nordic New Energy Co., Ltd is determined to constitute a
Round-trip Investment under the 2006 M&A Rules, the acquisition may be
invalidated, which would materially and adversely affect our business and
financial performance.





Prior to
obtaining the approval from the Commerce Bureau of Wuhan City on August 5, 2009
and the business license from the Wuhan Administration for Industry and Commerce
on August 10, 2009, pending the full payment of the purchase price, and prior to
Luckcharm Holdings Limited purchasing 100% capital stock of GC Nordic (the
“GC Nordic
Acquisition”), GC Nordic was a PRC business whose shareholders were
nine PRC individuals, of which Hou Tie Xin was the controlling
shareholder holding 54.86% of its shares. When Luckcharm was incorporated on
June 15, 2009 and when the GC Nordic Acquisition was approved, none of the
shareholders of Luckcharm was a PRC citizen. After the GC Nordic Acquisition,
Luckcharm became the sole shareholder of GC Nordic. On September 30, 2009,
Luckcharm, the Company, Golden Wind and a significant stockholder and former
officer and director of the Company executed the Exchange Agreement and
immediately after the consummation of the reverse acquisition between Luckcharm
and the Company, Golden Wind, which held 100% of the equity interests of
Luckcharm, became our controlling shareholder. Mr. Hou Tie Xin, Ms. Qi Na, Ms.
Zhao Ying and Mr. Xu Jia Rong, who are PRC nationals and who have become
officers and directors of the Company in connection with the reverse
acquisition, are parties to a Call Option Agreement with Golden Wind, pursuant
to which these individuals have the opportunity to acquire the shares of the
Company’s common stock issued to Golden Wind as part of the reverse acquisition
(the “Shares”).
These individuals are additionally parties to a Voting Trust Agreement with
Golden Wind, pursuant to which they have the right to vote the Shares on behalf
of Golden Wind. The Call Option Agreement and Voting Trust Agreement were
executed in conjunction with the GC Nordic Acquisition.


- 29
-


Article
11 and Section 4.3 of PRC 2006 M&A Rules require that an acquisition of a
domestic company by an overseas company, established or controlled by a domestic
company, enterprise or individual which is affiliated to the target domestic
company, should be reported to the Ministry of Commerce (“MOFCOM”) for approval.
Because, through the Call Option Agreement and Voting Agreement, the PRC
individuals could collectively become the effective controlling party of a
foreign entity, which owns Luckcharm that has acquired ownership of a PRC entity
(GC Nordic), MOFCOM may take the view that the GC Nordic Acquisition, Exchange
transaction, the Call Option Agreement and Voting Trust Agreement are part of an
overall series of arrangements which constitute a round-trip investment
under PRC 2006 M&A Rules.




In the
opinion of our PRC legal counsel, Global Law Office, the GC Nordic Acquisition
and Call Option Agreement and Voting Trust Agreement do not constitute a round
trip investment under PRC 2006 M&A Rules, and therefore no additional
approval or registration is required except for the registration and approval
which GC Nordic has obtained as specified in this risk factor. However, if the
GC Nordic Acquisition is found to be in violation of any existing or future PRC
laws and regulations, the relevant PRC authorities, including MOFCOM, which is
the primary regulator of foreign investment in China, the State Administration
of Foreign Exchange (“SAFE”) and the State Administration of Industry and
Commerce (“SAIC”) would have broad discretion in dealing with these violations,
including: discontinuing or restricting GC Nordic’s operations, requiring us or
GC Nordic to restructure the relevant ownership structure, restricting or
prohibiting our use of the proceeds of our private placement to finance our
business and operations in China, or imposing conditions or requirements with
which we or GC Nordic may not be able to comply. The imposition of any of these
penalties would result in a material and adverse effect on our ability to
conduct our business.





Risks
Related to Doing Business in China





Because
our assets are located overseas, shareholders may not receive distributions that
they would otherwise be entitled to if we were declared bankrupt or
insolvent.





All of
our assets are located in the PRC. Because our assets are located overseas, our
assets may be outside of the jurisdiction of U.S. courts to administer if we are
the subject of an insolvency or bankruptcy proceeding. As a result, if we
declared bankruptcy or insolvency, our shareholders may not receive the
distributions on liquidation that they would
otherwise be entitled to if our assets were to be located within the
U.S., under U.S. Bankruptcy law.





Adverse
changes in economic and political policies of the PRC government could have a
material adverse effect on the overall economic growth of China, which could
adversely affect our business.





All of
our business operations are currently conducted in the PRC, under the
jurisdiction of the PRC government. Accordingly, our results of operations,
financial condition and prospects are subject to a significant degree to
economic, political and legal developments in China. China’s economy differs
from the economies of most developed countries in many respects, including with
respect to the amount of government involvement, level of development, growth
rate, and control of foreign exchange and allocation of resources. While the PRC
economy has experienced significant growth in the past 20 years, growth has been
uneven across different regions and among various economic sectors of China. The
PRC government has implemented various measures to encourage economic
development and guide the allocation of resources. Some of these measures
benefit the overall PRC economy, but may also have a negative effect on us. For
example, our financial condition and results of operations may be adversely
affected by government control over capital investments or changes in tax
regulations that are applicable to us. Since early 2004, the PRC government has
implemented certain measures to control the pace of economic growth. Such
measures may cause a decrease in the level of economic activity in China, which
in turn could adversely affect our results of operations and financial
condition.


- 30
-


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





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





New
labor laws in the PRC may adversely affect our results of
operations.




On
January 1, 2008, the PRC government promulgated the Labor Contract Law of
the PRC, or the New Labor Contract Law. The New Labor Contract Law imposes
greater liabilities on employers and significantly impacts the cost of an
employer’s decision to reduce its workforce. Further, it requires certain
terminations to be based upon seniority and not merit. In the event we decide to
significantly change or decrease our workforce, the New Labor Contract Law could
adversely affect our ability to enact 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.




Unprecedented
rapid economic growth in China may increase our costs of doing business, and may
negatively impact our profit margins and/or profitability.





Our
business depends in part upon the availability of relatively low-cost labor and
materials. Rising wages in China may increase our overall costs of production.
In addition, rising raw material costs, due to strong demand and greater
scarcity, may increase our overall costs of production. If we are not able to
pass these costs on to our customers in the form of higher prices, our profit
margins and/or profitability could decline.





Governmental
control of currency conversion may affect the value of your
investment.





The
Chinese government imposes controls on the convertibility of RMB into foreign
currencies and, in certain cases, the remittance of currency out of China. We
receive substantially all of our revenues in RMB. Under our current structure,
our income is primarily derived from payments from GC Nordic. Shortages in the
availability of foreign currency may restrict the ability of our Chinese
subsidiaries and our affiliated entity to remit sufficient foreign currency to
pay dividends or other payments to us, or otherwise satisfy their foreign
currency denominated obligations. Under existing Chinese foreign exchange
regulations, payments of current account items, including profit distributions,
interest payments and expenditures from trade-related transactions, can be made
in foreign currencies without prior approval from China State Administration of
Foreign Exchange by complying with certain procedural requirements. However,
approval from appropriate government authorities is required where RMB is to be
converted into foreign currency and remitted out of China to pay capital
expenses such as the repayment of bank loans denominated in foreign currencies.
The Chinese government may also at its discretion restrict access in the future
to foreign currencies for current account transactions. If the foreign exchange
control system prevents us from obtaining sufficient foreign currency to satisfy
our currency demands, we may not be able to pay dividends in foreign currencies
to our stockholders.





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





The value
of RMB against the U.S. dollar and other currencies may fluctuate and is
affected by, among other things, changes in political and economic conditions.
Our revenues and costs are mostly denominated in RMB, while a significant
portion of our financial assets are also denominated in RMB. We rely entirely on
fees paid to us by our affiliated entity in China. Any significant fluctuation
in the value of RMB may materially and adversely affect our cash flows,
revenues, earnings and financial position, and the value of, and any dividends
payable on, our stock in U.S. dollar. For example, an appreciation of RMB
against the U.S. dollar would make any new RMB denominated investments or
expenditures more costly to us, to the extent that we need to convert U.S.
dollar into RMB for such purposes.


- 31
-


Health
epidemics and other outbreaks could adversely effect our business.




Our
business could be adversely affected by the effects of an epidemic outbreak,
such as the SARS epidemic in April 2004 and recent swine flu pandemic. Any
prolonged recurrence of such adverse public health developments in China may
have a material adverse effect on our business operations. For instance, health
or other government regulations adopted in response may require temporary
closure of our stores or offices. Such closures would severely disrupt our
business operations and adversely affect our results of operations. We have not
adopted any written preventive measures or contingency plans to combat any
future outbreak of SARS, swine flu or any other epidemic.





Risks
Related to an Investment in Our Securities





Our
stock is categorized as a penny stock. Trading of our stock may be restricted by
the SEC’s penny stock regulations which may limit a shareholder’s ability to buy
and sell our stock.





Our stock
is categorized as a penny stock. The SEC has adopted Rule 15g-9 which generally
defines “penny stock” to be any equity security that has a market price (as
defined) less than US$ 5.00 per share or an exercise price of less than US$ 5.00
per share, subject to certain exceptions. Our securities are covered by the
penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer’s
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these 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 agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.





FINRA sales
practice requirements may also limit a shareholder’s ability to buy and sell our
stock.





In
addition to the “penny stock” rules described above, FINRA has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer’s financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. The FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.




We
expect to experience volatility in our stock price, which could negatively
affect shareholders’ investments.





The
market price for shares of our common stock may be volatile and may fluctuate
based upon a number of factors, including, without limitation, business
performance, news announcements or changes in general market
conditions.




- 32
-





Other
factors, in addition to the those risks included in this section, that may have
a significant impact on the market price of our common stock include, but are
not limited to:




·
            receipt of substantial orders or
      order cancellations of
products;





·
            quality deficiencies in services
      or products;





·
            international developments, such
      as technology mandates, political developments or changes in economic
      policies;





·
            changes in recommendations of
      securities analysts;





·
            shortfalls in our backlog,
      revenues or earnings in any given period relative to the levels expected
      by securities analysts or projected by
  us;





·
            government regulations, including
      stock option accounting and tax
  regulations;





·
            energy
      blackouts;





·
            acts of terrorism and
      war;





·
            widespread
      illness;





·
            proprietary rights or product or
      patent litigation;





·
            strategic transactions, such as
      acquisitions and
divestitures;





·
            rumors or allegations regarding
      our financial disclosures or practices;
  or





·
            earthquakes or other natural
      disasters concentrated in Hubei, China where a significant  portion
      of our operations are
based.





In the
past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its
securities.  Due to changes in the volatility of our common stock
price, we may be the target of securities litigation in the
future.  Securities litigation could result in substantial costs and
divert management’s attention and resources.





To
date, we have not paid any cash dividends and no cash dividends will be paid in
the foreseeable future.





We do not
anticipate paying cash dividends on our common stock in the foreseeable future
and we may not have sufficient funds legally available to pay
dividends.  Even if the funds are legally available for distribution,
we may nevertheless decide not to pay any dividends.  We presently
intend to retain all earnings for our operations.





Our
common shares are currently traded at low volume, and you may be unable to sell
at or near ask prices or at all if you need to sell or liquidate a substantial
number of shares at one time.





We cannot
predict the extent to which an active public market for our common stock will
develop or be sustained.  However, we do not rule out the possibility
of applying for listing on the NYSE Amex (formerly known as American Stock
Exchange) or NASDAQ Capital Market or other markets.


- 33
-





Our
common shares are currently traded, but currently with low volume, based on
quotations on the “Over-the-Counter Bulletin Board”, meaning that the number of
persons interested in purchasing our common shares at or near bid prices at any
given time may be relatively small or non-existent.  This situation is
attributable to a number of factors, including the fact that we are a small
company which is still relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable.  As a
consequence, there may be periods of several days or more when trading activity
in our shares is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price.  We cannot
give you any assurance that a broader or more active public trading market for
our common stock will develop or be sustained, or that trading levels will be
sustained.





Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
“penny stocks” has suffered in recent years from patterns of fraud and
abuse.  Such patterns include (1) control of the market for the
security by one or a few broker-dealers that are often related to the promoter
or issuer; (2) manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask differential
and markups by selling broker-dealers; and (5) the wholesale dumping of the same
securities by promoters and broker-dealers after prices have been manipulated to
a desired level, along with the resulting inevitable collapse of those prices
and with consequent investor losses.  Our management is aware of the
abuses that have occurred historically in the penny stock market and we do not
expect to be in a position to dictate the behavior of the market or of
broker-dealers who participate in the market.  The occurrence of these
patterns or practices could increase the future volatility of our share
price.




Our
corporate actions are substantially controlled by our principal shareholders and
affiliated entities, which give these parties substantial control over matters
such as the election of directors and approval of major corporate transactions
and may make it difficult for shareholders to approve any matters not supported
by management.




Through
the Call Option Agreement and Voting Trust Agreement entered into by and between
Golden Wind and certain of our officers and directors on September 30, 2009, our
principal shareholders, which includes our officers and directors, and their
affiliated entities, own approximately 54% of our outstanding shares of common
stock. These shareholders, acting individually or as a group, could exert
substantial influence over matters such as electing directors and approving
mergers or other business combination transactions.  In addition,
because of the percentage of ownership and voting concentration in these
principal shareholders and their affiliated entities, elections of our board of
directors will generally be within the control of these shareholders and their
affiliated entities. While all of our shareholders are entitled to vote on
matters submitted to our shareholders for approval, the concentration of shares
and voting control presently lies with these principal shareholders and their
affiliated entities. As such, it would be difficult for shareholders to propose
and have approved proposals not supported by management. There can be no
assurances that matters voted upon by our officers and directors in their
capacity as shareholders will be viewed favorably by all of our
shareholders.





The
elimination of monetary liability against our directors, officers and employees
under Nevada law and the existence of indemnification rights to our directors,
officers and employees may result in substantial expenditures by our company and
may discourage lawsuits against our directors, officers and
employees.





Our
Articles of Incorporation contain a provision permitting us to eliminate the
personal liability of our directors to our company and shareholders for damages
for breach of fiduciary duty as a director or officer to the extent provided by
Nevada law. We may also have contractual indemnification obligations under our
employment agreements with our officers. The foregoing indemnification
obligations could result in the Company incurring substantial expenditures to
cover the cost of settlement or damage awards against directors and officers,
which we may be unable to recoup.  These provisions and resultant
costs may also discourage our company from bringing a lawsuit against directors
and officers for breaches of their fiduciary duties, and may similarly
discourage the filing of derivative litigation by our shareholders against our
directors and officers even though such actions, if successful, might otherwise
benefit our company and shareholders.





ITEM
1B.             UNRESOLVED
STAFF COMMENTS.





Not
Applicable.


- 34
-


ITEM
2.                PROPERTIES.





Wuhan
offices and facilities





Our
principal executive offices and our facilities are located in Wuhan City,
China.  The table below provides a general description of our
facilities:




Location
              
              Principal Activities
              
              Area (sq. meters)
              
              Lease Expiration DateNo.86,
      Nanhu Avenue, East Lake Development Zone, Wuhan, Hubei Province, PRC
      430223
              
              Principal
      Executive Office and Factory
              
              36,000
      square meters
              
              N/A
      (provided by Wuhan Donghu New Technology Development Co., Ltd. at no
      charge)18
      Huaguang Blvd. Gaoke Tower, 12th
      Floor, Guandong Technology Area, Donghu Development District, Wuhan City,
      Hubei Province PRC 430040
              
              Office
              
              100
      square meters
              
              N/A
      (provided by Wuhan Donghu New Technology Development Co., Ltd. at no
      charge)





Our
manufacturing facility and principal executive office is 36,000 square meters
situated in the Donghu Development District, Wuhan, China. Only the state may
own land in China, therefore we lease the land under our facility. There is no
expiration date for the lease, which is provided free of charge by the
Administrative Committee of Donghu Development District.





ITEM
3.                LEGAL
PROCEEDINGS.





On
December 4, 2009, Nordic Windpower USA, Inc. ("Nordic Windpower") filed a
lawsuit against GC China Turbine Corp., f.k.a. Nordic Turbines, Inc., in the
U.S. District Court for the Northern District of California, alleging trademark
infringement, trademark dilution, unfair competition and trade dress
infringement. The complaint states that Nordic Windpower seeks to enjoin us from
using the mark "Nordic Turbines" and to take any corrective action related to
our use, recover damages sustained from our use of the mark "Nordic Turbines"
and to obtain a judgment against us because we allegedly competed unfairly under
the California Business and Professions Code.  Nordic Windpower filed
an amended complaint on December 23, 2009. We have substantially complied with
all of Nordic Windpower's requests related it its claims, including changing our
name to "GC China Turbine Corp." on September 14, 2009.  We filed an
answer on January 22, 2010.  We have been actively discussing
settlement and have made substantial progress towards reaching an
agreement.  We are currently negotiating the actual terms of a draft
settlement agreement.  In the event a settlement cannot be reached, we
intend to vigorously defend the case.





ITEM
4.                SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.





None.





PART
II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES.





Market
Information





Our
common stock is not listed on any stock exchange.  Our common stock is
traded over-the-counter on the Over-the-Counter Bulletin Board (“OTCBB”) under the
symbol “GCHT”.  Our common stock has been trading on the OTCBB since
May 15, 2009 and the following table sets forth the high and low bid information
for our common stock for the quarters ended June 30, 2009, September 30, 2009,
and December 31, 2009, as reported by the OTCBB.  The bid prices
reflect inter-dealer quotations, do not include retail markups, markdowns or
commissions and do not necessarily reflect actual transactions.


- 35
-





Low
                          
                          
                          HighFiscal Year Ended December 31,
      2009May
      15, 2009 – June 30, 2009
                          
                          $
                          0.00
                          
                          
                          $
                          1.11Third
      Quarter ended September 30, 2009
                          
                          $
                          0.93
                          
                          
                          $
                          1.50Fourth
      Quarter ended December 31, 2009
                          
                          $
                          1.09
                          
                          
                          $
                          4.07





As of
April 9, 2010, the closing sales price for shares of our common stock was $1.70
per share on the OTCBB.





We
registered 7,600,000 shares of our common stock under the Securities Act of
1933, as amended for sale by certain security holders who also hold certain
registration rights, including 1,200,000 shares of our common stock that are
issuable upon the exercise of outstanding warrants. The outstanding warrants
included 560,000 issued to advisors and placement agents.





Stockholders





As of
April 12, 2010, there were approximately 61 shareholders of record of our common
stock based upon the shareholders’ listing provided by our transfer
agent.  Our transfer agent is Holladay Stock Transfer
Inc.  The transfer agent’s address is 2939 N 67th Place Suite C,
Scottsdale, AZ 85251 and its phone number is (480) 481-3970.





Dividends





We have
never paid cash dividends on our common stock.  We intend to keep
future earnings, if any, to finance the expansion of our business, and we do not
anticipate that any cash dividends will be paid in the foreseeable
future.  Our future payment of dividends will depend on our earnings,
capital requirements, expansion plans, financial condition and other relevant
factors that our board of directors may deem relevant.  Our retained
earnings deficit currently limits our ability to pay dividends.





Recent
Sales of Unregistered Securities





On
October 30, 2009, we issued 32,383,808 shares of our common stock to the
Golden  Wind in exchange for 100% of the capital stock of Luckcharm.
The issuance of the common stock to the Golden Wind pursuant to the Exchange
Agreement was exempt from registration under the Securities Act pursuant to
Section 4(2) and Regulation D thereof.  We made this determination
based on the representations of the sole shareholder of Golden Wind which
included, in pertinent part, that such shareholder was an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act, and that such shareholder was acquiring our common stock, for investment
purposes for its own account and not as nominee or agent, and not with a view to
the resale or distribution thereof, and that such shareholder understood that
the shares of our common stock may not be sold or otherwise disposed of without
registration under the Securities Act or an applicable exemption
therefrom.





Between
October 5, 2009 and October 30, 2009, we entered into Securities Purchase
Agreements with the Investors, pursuant to which the Investors purchased
6,400,000 shares of our common stock, at a purchase price of US$ 1.25 per
share for an aggregate offering price of US$ 8,000,000. Additionally, we
issued warrants to each Investor in an amount equal to 10% of the
number of shares that an Investor purchased and an aggregate of 560,000
warrants to advisors and placement agents, with each warrant having an exercise
price of US$ 1.00 per share and being exercisable at any time
within 3 years from the date of issuance.  On October 30, 2009,
we entered into a Note Purchase Agreement with Clarus whereby Clarus agreed to
loan US$ 1,000,000 to us upon the effective date of delivery of 20 wind turbine
systems by GC Nordic to its customers.  We have agreed with Clarus that the
period to fund the loan under the Note Purchase Agreement is extended to April
30, 2010. The loan will be in the form of a convertible promissory note which
shall bear interest at a rate of 1% per month (the "Note"), and have a maturity
date of 2 years from the date of issuance of the Note. On the six month
anniversary upon the effective date of delivery of 20 wind turbine systems by us
to our customers, the loan will automatically convert into shares of our common
stock at US$ 2.00 per share.  Additionally, the principal and
accrued interest underlying the Note (the "Debt") may be converted by Clarus at
US$ 2.00 per share into shares of our common stock at any time prior to the
maturity date. If the Debt is not repaid by us 6 months from the date of
issuance of the Note, we may at our option, convert the Debt at US$ 2.00 per
share into shares of our common stock anytime after such 6-month
period.


- 36
-


The
issuance of these securities was exempt from registration under
Section 4(2) of the Securities Act. We made this determination based on the
representations of Investors, which included, in pertinent part, that such
shareholders were either (a) "accredited investors" within the meaning of Rule
501 of Regulation D promulgated under the Securities Act, or (b) not a "U.S.
person" as that term is defined in Rule 902(k) of Regulation S under the Act,
and that such Investor was acquiring our common stock, for investment purposes
for their own respective accounts and not as nominees or agents, and not with a
view to the resale or distribution thereof, and that each Investor understood
that the shares of our common stock may not be sold or otherwise disposed of
without registration under the Securities Act or an applicable exemption
therefrom.





On July
31, 2009, we issued convertible promissory notes to certain foreign accredited
investors for proceeds of US$ 10,000,000.  The notes bear interest at
6% per annum or the lowest rate permissible by law calculated annually. Upon
closing of certain agreements, the principal and accrued interest will
automatically be converted into shares of common stock of the Company, at a rate
of US$ 0.80 per share.  We offered and sold the convertible notes in
reliance on Section 506 of Regulation D and/or Regulation S of the Securities
Act, and comparable exemptions for sales to "accredited" investors under state
securities laws.





On July
9, 2009, we issued a convertible promissory note to a foreign accredited
investor for proceeds of US$ 5,000.  The amount is unsecured and is
due on demand.  The principal amount bears interest at 6% per annum
calculated and payable annually.   At any time that the principal
and interest shall remain outstanding, the lender has the right to convert such
principal and interest to shares of our common stock at such price and on such
terms as being offered to investors at the time of conversion. The investor
forgave all of the principal and interest under the note as of December 31,
2009. We offered and sold the convertible note in reliance on Section 506 of
Regulation D and/or Regulation S of the Securities Act, and comparable
exemptions for sales to "accredited" investors under state securities
laws.





On June
9, 2009, we issued a convertible promissory note to a foreign accredited
investor for proceeds of US$ 11,750.  The amount is unsecured and is
due on demand.  The principal amount bears interest at 6% per annum
calculated and payable on demand.  At any time that the principal and
interest shall remain outstanding, the lender has the right to convert such
principal and interest to shares of our common stock at such price and on such
terms as being offered to investors at the time of conversion.  The
investor forgave all of the principal and interest under the note as of December
31, 2009.  We offered and sold the convertible note in reliance on
Section 506 of Regulation D and/or Regulation S of the Securities Act, and
comparable exemptions for sales to "accredited" investors under state securities
laws.





On June
8, 2009, we issued convertible promissory notes to certain foreign accredited
investors for aggregate proceeds of US$ 1,015,000, of which US$ 1,000,000 was
subsequently assigned by such investors to Clarus.  On October 30,
2009, we agreed to amend the terms of the note with Clarus, such that upon the
six month anniversary of the date of delivery of 20 wind turbine systems by GC
Nordic to its customers, the loan would automatically convert into shares of our
common stock at US$ 2.00 per share.  We offered and sold the
convertible notes in reliance on Section 506 of Regulation D and/or Regulation S
of the Securities Act, and comparable exemptions for sales to "accredited"
investors under state securities laws.





Securities
Authorized for Issuance under Equity Compensation Plans





None.





Issuer
Purchase of Equity Securities





None.


- 37
-


ITEM
6.                SELECTED
FINANCIAL DATA.




You
should read the following selected consolidated financial data in conjunction
with “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and our
consolidated financial statements and the related notes appearing elsewhere in
this Annual Report on Form 10-K.




The
consolidated statements of income data for the years ended December 31, 2009,
and 2008 and the consolidated balance sheet data at December 31, 2009, and 2008
are derived from our audited consolidated financial statements appearing in Item
8 of this Annual Report on Form 10-K. The historical results are not necessarily
indicative of the results to be expected in any future period.





(in US$
except loss per share data)





Year ended December 31,2009
                                                                      
                                                                      
                                                                      2008
                                                                      
                                                                      
                                                                      2007Income statement data:Revenues
                                                                      
                                                                      
                                                                      12,760,248
                                                                      
                                                                      
                                                                      $
                                                                      3,065,007
                                                                      
                                                                      
                                                                      
                                                                      -Cost
      of sales
                                                                      
                                                                      
                                                                      9,792,077
                                                                      
                                                                      
                                                                      
                                                                      2,970,613
                                                                      
                                                                      
                                                                      
                                                                      -Gross
      profit
                                                                      
                                                                      
                                                                      2,968,171
                                                                      
                                                                      
                                                                      
                                                                      94,394
                                                                      
                                                                      
                                                                      
                                                                      -Total
      operating expenses
                                                                      
                                                                      
                                                                      1,129,795
                                                                      
                                                                      
                                                                      
                                                                      546,007
                                                                      
                                                                      
                                                                      
                                                                      344,220Interest
      expense
                                                                      
                                                                      
                                                                      159,229
                                                                      
                                                                      
                                                                      
                                                                      106,231Interest
      income
                                                                      
                                                                      
                                                                      (47,529
                                                                      )
                                                                      
                                                                      
                                                                      (1,405
                                                                      )
                                                                      
                                                                      
                                                                      (2,156
                                                                      )Other
      expense (income), net
                                                                      
                                                                      
                                                                      54,356
                                                                      
                                                                      
                                                                      
                                                                      (62,109
                                                                      )
                                                                      
                                                                      
                                                                      (32,852
                                                                      )Loss
      from debt extinguishment
                                                                      
                                                                      
                                                                      57,802Gain
      from change in fair value of warrant liability
                                                                      
                                                                      
                                                                      (65,493
                                                                      )Income
      (loss) before income tax
                                                                      
                                                                      
                                                                      1,680,011
                                                                      
                                                                      
                                                                      
                                                                      (494,330
                                                                      )
                                                                      
                                                                      
                                                                      (309,212
                                                                      )Provision
      (benefit) for income tax
                                                                      
                                                                      
                                                                      1,340,364
                                                                      
                                                                      
                                                                      
                                                                      (115,742
                                                                      )
                                                                      
                                                                      
                                                                      (72,601
                                                                      )Net
      Income (loss)
                                                                      
                                                                      
                                                                      339,647
                                                                      
                                                                      
                                                                      
                                                                      (378,588
                                                                      )
                                                                      
                                                                      
                                                                      (236,611
                                                                      )Net
      Income (loss) attributable to non-controlling interest
                                                                      
                                                                      
                                                                      -Net
      Income (loss) attributable to GC China Turbine Corp.
      shareholders
                                                                      
                                                                      
                                                                      339,647
                                                                      
                                                                      
                                                                      $
                                                                      (378,588
                                                                      )
                                                                      
                                                                      
                                                                      (236,611
                                                                      )Earnings
      (loss) per share- basic
                                                                      
                                                                      
                                                                      0.01
                                                                      
                                                                      
                                                                      
                                                                      (0.01
                                                                      )
                                                                      
                                                                      
                                                                      (0.01
                                                                      )Earnings
      (loss) per share-diluted
                                                                      
                                                                      
                                                                      0.01
                                                                      
                                                                      
                                                                      
                                                                      (0.01
                                                                      )
                                                                      
                                                                      
                                                                      (0.01
                                                                      )Shares
      used in calculating basic per share
                                                                      
                                                                      
                                                                      36,899,821
                                                                      
                                                                      
                                                                      
                                                                      32,383,808
                                                                      
                                                                      
                                                                      
                                                                      32,383,808Shares
      used in calculating diluted per share
                                                                      
                                                                      
                                                                      38,115,890
                                                                      
                                                                      
                                                                      
                                                                      32,383,808
                                                                      
                                                                      
                                                                      
                                                                      32,383,808


- 38
-


Balance
Sheet Data





(in US$
except loss per share data)





As of December 31,2009
                              
                              
                              2008
                              
                              
                              20072007Consolidated
      balance sheet data:Cash
      and cash equivalents
                              
                              $
                              3,803,446
                              
                              
                              $
                              10,661
                              
                              
                              $
                              681,165Working
      capital (deficit)
                              
                              
                              19,773,438
                              
                              
                              
                              (400,355
                              )
                              
                              
                              (1,146,830
                              )Total
      assets
                              
                              
                              33,273,738
                              
                              
                              
                              10,958,034
                              
                              
                              
                              7,122,852Convertible
      promissory note
                              
                              
                              1,182,750
                              
                              
                              
                              -
                              
                              
                              
                              -Warrant
      liability
                              
                              
                              1,267,388
                              
                              
                              
                              -
                              
                              
                              
                              -Other
      long-term liabilities
                              
                              
                              473,198
                              
                              
                              
                              -
                              
                              
                              
                              -Total
      long-term liabilities
                              
                              
                              2,923,336
                              
                              
                              
                              -
                              
                              
                              
                              -Total
      liabilities
                              
                              
                              13,541,588
                              
                              
                              
                              8,797,440
                              
                              
                              
                              6,103,869Total
      equity
                              
                              
                              19,732,150
                              
                              
                              
                              2,160,594
                              
                              
                              
                              1,018,983





Cash
Flow Data





(in
US$ except loss per share data)





Year ended December 31,2009
                                    
                                    
                                    2008
                                    
                                    
                                    2007Net
      cash used in operating activities
                                    
                                    $
                                    (9,182,962
                                    )
                                    
                                    $
                                    (2,369,299
                                    )
                                    
                                    $
                                    90,669Net
      cash used in investing activities
                                    
                                    
                                    (4,350,171
                                    )
                                    
                                    
                                    (189,643
                                    )
                                    
                                    
                                    (1,368,190
                                    )Net
      cash provided by financing activities
                                    
                                    
                                    17,324,407
                                    
                                    
                                    
                                    1,865,443
                                    
                                    
                                    
                                    1,730,753Effect
      of foreign currency translation on cash and cash
    equivalents
                                    
                                    
                                    1,511
                                    
                                    
                                    
                                    22,995
                                    
                                    
                                    
                                    29,341Net
      change in cash and cash equivalents
                                    
                                    $
                                    3,792,785
                                    
                                    
                                    $
                                    (670,504
                                    )
                                    
                                    $
                                    482,573





ITEM
      7.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.





The
following discussion and analysis of the results of operations and financial
condition for the fiscal years ended December 31, 2009 and 2008, should be read
in conjunction with the financial statements and related notes and the other
financial information that are included elsewhere in this annual report on Form
10-K. This discussion includes forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and
Business sections in this annual report on Form 10-K. We use words such as
“anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions
to identify forward-looking statements.


- 39
-


OVERVIEW





We are a
leading manufacturer of 2-blade wind turbines located in Wuhan City of Hubei
Province, China.   We are producing a 1.0 megawatt 2-blade wind
turbine with a focus on our chosen Chinese markets. We plan to penetrate the
broader reaches of the Chinese market with the launch of our larger 2.5 and 3.0
megawatt 2-blade wind turbines.  The 3.0 megawatt wind turbine is
targeted for offshore applications.  We have already successfully won
three wind farm contracts and begun delivering turbines to fulfill some of these
contracts.





Reverse
Acquisition





We were
incorporated under the laws of the State of Nevada on August 25, 2006 under the
name of Visa Dorada Corp. for the purpose of acquiring and developing
mineral properties. We conducted limited operations from the date of our
incorporation until October 2009. On October 30, 2009, we consummated a
voluntary share exchange pursuant to a Share Exchange Agreement with Luckcharm,
and its sole shareholder. As a result of the share exchange, we acquired all of
the issued and outstanding capital stock of Luckcharm in exchange for a total of
32,383,808 shares of our common stock.  Luckcharm is deemed to be the
accounting acquiring entity in the share exchange and, accordingly, the
financial information included in this Annual Report on Form 10-K reflects the
operations of Luckcharm, as if Luckcharm had acquired us. Upon completion of the
reverse acquisition, Luckcharm became our wholly-owned direct
subsidiary.





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





Our
management’s discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States.  The preparation of these financial statements requires
us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements as well as the reported net sales and expenses
during the reporting periods.  On an ongoing basis, we evaluate our
estimates and assumptions. We base our estimates on historical experience and on
various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources.  Actual results may differ from these estimates under
different assumptions or conditions.





While our
significant accounting policies are more fully described in Note 2 to our
consolidated financial statements attached hereto, we believe that the following
accounting policies are the most critical to aid you in fully understanding and
evaluating this management discussion and analysis:





Revenue
Recognition





We
recognize revenues in accordance with ASC 605-10 (pre-codification reference as
Staff Accountant Board ("SAB") No.104, "Revenue Recognition"), when persuasive
evidence of an arrangement exists, delivery has occurred or services have been
rendered, the price is fixed or determinable and collectability is reasonably
assured. For an arrangement with multiple deliverables, we recognize product
revenues in accordance with ASC 605-25 (pre-codification reference as Emerging
Issues Task Force ("EITF") No.00-21, "Revenue Arrangements with Multiple
Deliverables").





We are
not contractually obligated to accept returns.  The sales of goods and
services involve inconsequential or perfunctory performance
obligations.  These obligations can include non-essential installation
or training, provision of product manuals and materials, and limited,
pre-scheduled technical maintenance support. When the only remaining undelivered
performance obligation under an arrangement is inconsequential or perfunctory,
we recognize revenue on the delivery of turbines, the predominant deliverable in
the total contract and provides for the cost of the unperformed obligations.
Cash advances received from customers before the revenue is earned are
classified as deferred revenue.


- 40
-


Warranty





We
provide for the estimated cost of product warranties at the time revenue is
recognized. However, we bear the risk of warranty claims for approximately two
years after we have sold our products and recognized revenues. Because we are a
relatively new company, we have a limited warranty claim period. We also engage
in product quality assurance programs and processes, including monitoring and
evaluating the quality of suppliers, in an effort to ensure the quality of our
products and reduce our warranty exposure. As we have not experienced
significant warranty claims to date, we accrue the estimated costs of such
warranties based on our assessment of competitors’ accrual history while
incorporating some estimates of failure rates through our quality review staff.
Actual warranty costs are accumulated and charged against accrued warranty
liability. Our warranty obligation will be affected not only by our product
failure rates, but also by costs incurred to repair or replace failed products
as well as any service delivery costs incurred in correcting a product failure.
If our actual product failure rates, material usage or service delivery costs
differ from our estimates, we will need to prospectively revise our estimated
warranty liability accrual rate.





Allowance
for doubtful accounts





We conduct credit reviews for
customers to whom we extend credit terms. We estimate the amount of accounts
receivable that may not be collected based on the aging of our accounts
receivable and specific evidence relating to the financial condition of our
customers that may affect their ability to pay their balances.





Impairment
of long-lived assets





We
evaluate our long-lived assets and finite-lived intangible assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset group may not be recoverable. When these events occur, we measure
impairment by comparing the carrying amount of the asset group to future
undiscounted net cash flows expected to result from the use of the assets and
their eventual disposition. If the sum of the expected undiscounted cash flows
is less than the carrying amount of the assets, we would recognize an impairment
loss equal to the excess of the carrying amount over the fair value of the
assets. For the periods presented, we recorded no impairment of our long-lived
assets.





Inventories





Our
inventories are stated at the lower of cost or net realizable value determined
by the weighted average method. The valuation of inventory involves our
management’s determination of the value of excess and slow moving inventory,
which is based upon assumptions of future demands and market conditions. If
actual market conditions are less favorable than those projected by our
management, inventory write-downs may be required. We routinely evaluate
quantities and value of our inventories in light of current market conditions
and market trends, and record write-downs against the cost of inventories for a
decline in net realizable value. Inventory write-down charges establish a new
cost basis for inventory. In estimating obsolescence, we utilize our backlog
information and project future demand. Market conditions are subject to change
and actual consumption of inventories could differ from forecasted demand.
Furthermore, the price of steel, a key raw material component in our turbines is
subject to fluctuations based on global supply and demand. If actual market
conditions are less favorable or other factors arise that are significantly
different than those anticipated by our management, additional inventory
write-downs or increases in obsolescence reserves may be required. Our
management continually monitors the spot price of steel to ensure that inventory
is recorded at the lower of cost or net realizable value.





Income
Taxes





As
required by FASB ASC No.740, “Income Taxes”
(pre-codification reference asFASB Statement No.109,
“Accounting for Income
Taxes”), we periodically evaluate the likelihood of the realization of
deferred tax assets, and reduces the carrying amount of these deferred tax
assets by a valuation allowance to the extent we believe a portion will not be
realized. We consider many factors when assessing the likelihood of future
realization of our deferred tax assets, including our recent cumulative earnings
experience by taxing jurisdiction, expectations of future taxable income, the
carry-forward periods available to us for tax reporting purposes, and other
relevant factors. Deferred income taxes are recognized for (1) temporary
differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements, or (2) net operating loss carry forwards
and credits by applying enacted statutory tax rates applicable to future years.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
our management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Current income taxes are provided for
in accordance with the laws of the relevant taxing authorities. The components
of the deferred tax assets and liabilities are individually classified as
current and non-current based on the characteristics of the underlying assets
and liabilities, or the expected timing of their use when they do not relate to
a specific asset or liability.


- 41
-


Fair
value of financial instruments





We
estimate fair value of financial assets and liabilities as the price that would
be received from the sale of an asset or paid to transfer a liability (an exit
price) on the measurement date in an orderly transaction between market
participants. The fair value measurement guidance establishes a three-level fair
value hierarchy that prioritizes the inputs into the valuation techniques used
to measure fair value. The fair value hierarchy gives the highest priority,
Level 1, to measurements based on unadjusted quoted prices in active markets for
identical assets or liabilities and lowest priority, Level 3, to measurements
based on unobservable inputs and classifies assets and liabilities with limited
observable inputs or observable inputs for similar assets or liabilities as
Level 2 measurement. We determine the fair value of an asset or liability using
valuation techniques that maximize the use of observable inputs.





Backlog





Our
backlog consisted of 140 and 96 units of our 1.0 MW wind turbines as of December
31, 2009 and 2008, respectively.  The 140 units of backlog was
consistent of an addition of 10 units in connection with our purchase contract
with Shenzhen Guohan, an addition of 50 units in connection with our purchase
contract with Kelipu, 40 units from the Daqing Longjiang contract and 40 units
from the Wuhan Kaidi contract, offset by 6 units that were delivered in 2009 on
the Daqing Longjiang contract and 10 units that were delivered in 2009 on the
Wuhan Kaidi contract.





RESULTS
OF OPERATIONS





Comparison
of Years Ended December 31, 2009 and December 31, 2008





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





Year ended December 31,2009
                                      
                                      
                                      2008(in
      US$, except for percentages)Revenue
                                      
                                      $
                                      12,760,248
                                      
                                      
                                      
                                      100.00
                                      %
                                      
                                      $
                                      3,065,007
                                      
                                      
                                      
                                      100.00
                                      %Cost
      of sales
                                      
                                      
                                      9,792,077
                                      
                                      
                                      
                                      76.74
                                      %
                                      
                                      
                                      2,970,613
                                      
                                      
                                      
                                      96.92
                                      %Gross
      profit
                                      
                                      
                                      2,968,171
                                      
                                      
                                      
                                      23.26
                                      %
                                      
                                      
                                      94,394
                                      
                                      
                                      
                                      3.08
                                      %Operating
      expense
                                      
                                      
                                      1,129,795
                                      
                                      
                                      
                                      8.85
                                      %
                                      
                                      
                                      546,007
                                      
                                      
                                      
                                      17.81
                                      %Profit
      (loss) from operations
                                      
                                      
                                      1,838,376
                                      
                                      
                                      
                                      14.41
                                      %
                                      
                                      
                                      (451,613
                                      )
                                      
                                      
                                      (14.73
                                      )%Other,
      Net
                                      
                                      
                                      158,365
                                      
                                      
                                      
                                      1.24
                                      %
                                      
                                      
                                      42,717
                                      
                                      
                                      
                                      1.39
                                      %Provision
      (benefit) for income tax
                                      
                                      
                                      1,340,364
                                      
                                      
                                      
                                      (10.50
                                      )%
                                      
                                      
                                      (115,742
                                      )
                                      
                                      
                                      3.78
                                      %Profit
      (loss) from operations
                                      
                                      $
                                      339,647
                                      
                                      
                                      
                                      2.67
                                      %
                                      
                                      $
                                      (378,588
                                      )
                                      
                                      
                                      (12.34
                                      )%


- 42
-


Sales





Sales for
the year ended December 31, 2009 were US$12,760,248 compared to US$3,065,007 for
the year ended December 31, 2008. This increase of $9,695,241, or 316%, was due
to an increase in the number of units sold during 2009 as compared with
2008.   Production of our wind turbines began during 2008, and
four wind turbines were sold in 2008.  Our production facilities were
operational for all of 2009, during which we recorded sales of 16 units of 1.0
MW wind turbines.  We started mass production based on orders from our
customers during the second half of 2009, and we expect to have sales during
every quarter of fiscal 2010.





Cost
of Sales and Gross Profit Margin





The
following table sets forth the components of our cost of sales and gross profit
both in absolute amount and as a percentage of total net sales for the periods
indicated.


Year
      ended December 31,2009
                                    
                                    
                                    2008(in
      US$, except for percentages)Revenue
                                    
                                    $
                                    12,760,248
                                    
                                    
                                    
                                    100.00
                                    %
                                    
                                    $
                                    3,065,007
                                    
                                    
                                    
                                    100.00
                                    %Raw
      materials
                                    
                                    
                                    8,358,180
                                    
                                    
                                    
                                    65.50
                                    %
                                    
                                    
                                    2,235,843
                                    
                                    
                                    
                                    72.95
                                    %Labor
                                    
                                    
                                    31,055
                                    
                                    
                                    
                                    0.24
                                    %
                                    
                                    
                                    9,095
                                    
                                    
                                    
                                    0.30
                                    %Other
      and Overhead
                                    
                                    
                                    1,402,842
                                    
                                    
                                    
                                    11
                                    %
                                    
                                    
                                    725,675
                                    
                                    
                                    
                                    23.67
                                    %Total
      Cost of Sales
                                    
                                    
                                    9,792,077
                                    
                                    
                                    
                                    76.74
                                    %
                                    
                                    
                                    2,970,613
                                    
                                    
                                    
                                    96.92
                                    %Gross
      Profit
                                    
                                    $
                                    2,968,171
                                    
                                    
                                    
                                    23.26
                                    %
                                    
                                    
                                    94,394
                                    
                                    
                                    
                                    3.08
                                    %





Total
cost of sales for the year ended December 31, 2009 was US$9,792,077, an increase
from US$ 2,970,613 in 2008. Gross profit for fiscal year ended 2009 was
US$2,968,171 or 23.26% compared to 3.08% for fiscal year 2008.  The
increase in gross profit as a percentage of total net sales is due to the
allocation of our overhead expenses over a larger number of units sold in 2009
as compared to the fiscal year 2008.  As compared to the cost of raw
materials expenses and labor, which are directly tied to our net sales, our
overhead expenses are generally fixed or increase or decrease at a much lower
rate than net sales.  We started mass production starting from the
second half of 2009 and recognized revenue of 16 wind turbines. While in 2008,
only 4 wind turbines were sold during the whole year.





The
largest component of our cost of sales, raw materials, consists of components,
fittings and materials used in the manufacture of our wind
turbines.  Most of these raw materials are procured within
China.  With the anticipated growth of the wind power industry in
China, management expects that the manufacturing capacity of the parts and
components of our wind turbines will also continue to grow and result in
decreased costs for these raw materials within our industry.  In
addition, if we are able to grow successfully and increase production,
management believes we will be able to negotiate better pricing on raw materials
through higher volume purchase and more efficiently utilize its manufacturing
capacity resulting in a lower average cost of production per
unit.


- 43
-


Operating
Expenses, interest expense (income) and other expense (income)





For the year ended December 31,2009
                                  
                                  
                                  2008$
                                  
                                  
                                  % of Total
                                    Net Sales
                                  
                                  
                                  $
                                  
                                  
                                  % of Total
                                    Net Sales(in
      US$, except for percentages)Gross
      profit
                                  
                                  $
                                  2,968,171
                                  
                                  
                                  
                                  23.26
                                  %
                                  
                                  $
                                  94,394
                                  
                                  
                                  
                                  3.08
                                  %Operating
      expenses:Selling
      expenses
                                  
                                  
                                  144,440
                                  
                                  
                                  
                                  1.13
                                  %
                                  
                                  
                                  57,925
                                  
                                  
                                  
                                  1.89
                                  %Research
      and development expenses
                                  
                                  
                                  90,437
                                  
                                  
                                  
                                  0.71
                                  %
                                  
                                  
                                  94,300
                                  
                                  
                                  
                                  3.07
                                  %General
      and administrative expenses
                                  
                                  
                                  973,965
                                  
                                  
                                  
                                  7.63
                                  %
                                  
                                  
                                  393,782
                                  
                                  
                                  
                                  12.85
                                  %Other
      operation income
                                  
                                  
                                  (79,047
                                  )
                                  
                                  
                                  0.62
                                  %
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  %Total
                                  
                                  
                                  1,129,795
                                  
                                  
                                  
                                  8.85
                                  %
                                  
                                  
                                  546,007
                                  
                                  
                                  
                                  17.81
                                  %Income
      (loss) from operations
                                  
                                  
                                  1,838,376
                                  
                                  
                                  
                                  14.41
                                  %
                                  
                                  
                                  (451,613
                                  )
                                  
                                  
                                  (14.73
                                  )%Interest
      Expense
                                  
                                  
                                  159,229
                                  
                                  
                                  
                                  1.25
                                  %
                                  
                                  
                                  106,231
                                  
                                  
                                  
                                  3.47
                                  %Interest
      Income
                                  
                                  
                                  (47,529
                                  )
                                  
                                  
                                  0.37
                                  %
                                  
                                  
                                  (1,405
                                  )
                                  
                                  
                                  0.05
                                  %Other
      expense (income), net
                                  
                                  
                                  54,356
                                  
                                  
                                  
                                  0.43
                                  %
                                  
                                  
                                  (62,109
                                  )
                                  
                                  
                                  2.03
                                  %Loss
      from debt extinguishment
                                  
                                  
                                  57,802
                                  
                                  
                                  
                                  0.44
                                  %
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  %Gain
      from change in fair value of warrant liability
                                  
                                  
                                  (65,493
                                  )
                                  
                                  
                                  0.51
                                  %
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  %Provision
      (benefit) for income tax Benefit
                                  
                                  
                                  1,340,364
                                  
                                  
                                  
                                  10.50
                                  %
                                  
                                  
                                  (115,742
                                  )
                                  
                                  
                                  3.78
                                  %Net
      Income (loss)
                                  
                                  $
                                  339,647
                                  
                                  
                                  
                                  2.67
                                  %
                                  
                                  $
                                  (378,588
                                  )
                                  
                                  
                                  (12.34
                                  )%





Operating
Expense





Selling
expenses in 2009 increased by US$ 86,515 from US$ 57,925 in 2008 to US$144,440
in 2009.  In order to develop our markets and capture market share, we
increased our sales force and certain selling expenses for the year ended 2009,
including salaries and bonus, traveling expenses, marketing and other
expenses.





Research
and development expenses were US$ 90,437 for the fiscal year ended December 31,
2009 compared to US$ 94,300 for the fiscal year ended December 31,
2008.  Research and development expenses were primarily attributable
to the patent amortization of the 1.5MW wind turbine for both 2009 and
2008.





General
and administrative expenses increased by US$580,183 from US$393,782 in 2008 to
US$973,965 in 2009.  Due to the financing activities during fiscal
year 2009, our legal and auditing fees increased
accordingly.  Furthermore, with the development of the business, we
hired additional employees associated with administrative activities, which led
to significant increase of management costs, such as salary and bonus, office
expense and traveling expense.





In 2009,
we received unrestricted government subsidies from local government agency
allowing us full discretion in the fund utilization of $79,047, which was
recorded in other operating income in the consolidated statements of
income.  In 2008, we received a government grant, which is related to
our activities in research and development projects, from a local government
agency in the amount of $42,435.  We recorded the government grant
against the research and development expenses when incurred.





Interest
Expenses





Interest
expenses were US$ 159,229 in 2009 compared to US$106,231 in
2008.  Interest expenses were primarily due to the bank loan we
borrowed in fiscal 2008, which was repaid in July 2009 upon
maturity.  There was interest expense associated with the extinguished
promissory note in the amount of $48,720 in fiscal year 2009, which was the main
reason for the increase of interest expenses when compared with fiscal year
2008.





Interest Income





Interest
income were US$ 47,529 for the year ended 2009 compared to US$1,405 for the year
ended 2008.  The increase of bank balance is the main reason for the
increase of interest income.


- 44
-


Other
expense (income), net





Other
expense (income), net for 2009 and 2008 amounted to US$54,356 and US$ (62,109),
respectively, a decrease of US$ 116,465.  The decrease was mainly due
to the foreign exchange loss resulting from overseas raw materials purchases
caused by the devaluation of the RMB against the Euro. We purchase most of the
raw materials from suppliers in China now, and management does not believe
further devaluation of the RMB against the Euro would result in significant
foreign exchange losses in future periods.





Loss
from debt extinguishment





We
recorded a loss on debt extinguishment of US$57,802 for the year ended at
December 31, 2009.  On June 8, 2009, we issued a promissory note of
$600,000 to New Margin ("New Margin Note") and a promissory note of $415,000 to
Coach Capital LLC (“Coach Note”), respectively.  On October 30, 2009,
the New Margin Note and the Coach Note were assigned to Clarus and superseded by
a promissory note to Clarus in the principal amount of
$1,000,000.  All accrued but unpaid interest on the New Margin Note
and the Coach Note was waived.  We accounted for the assignment and
modification of the Coach Note as a debt extinguishment, and recorded a loss on
debt extinguishment of US$57,802 in the consolidated statements of
operations.  We accounted for the assignment and modification of the
New Margin Note as a capital transaction given New Margin's equity shareholder
capacity on the extinguishment date. The amount that otherwise would have been
recognized as loss on debt extinguishment, or $83,478, was recorded against
additional paid-in capital.





Gain
from change in fair value of warrant liability





We
recorded a gain on fair value change of US$65,493 of the warrant
liability.  In conjunction with the private placement offering of
6,400,000 common shares on October 30, 2009, we granted warrants to each
investor in an amount equal to 10% of purchased common shares, or a total of
640,000 shares.  The warrants had an exercise price of $1.00 per share
and were exercisable any time within three years from the date of issuance.
However if the fiscal year 2010 after tax net income (ATNI) is less than a
guaranteed $12,500,000, we will reduce the exercise price of each warrant to
equal to Adjusted Exercise Price in accordance to a pre-set formula, provided
that if the Adjusted Exercise Price is negative, the Adjusted Exercise Price
will be deemed to equal to $0.001 per share. We recorded the fair value of the
warrants of $1,332,881 as warrant liability in the consolidated balance sheets
as the warrants do not qualify for equity classification under US GAAP. The
warrant liability was re-measured at fair value of $1,267,388 at December 31,
2009.  The fair value change of $65,493 was recorded as gain on change
in fair value of warrant liability in the consolidated statements of
operations.





Provision
(benefit) for Income Tax





Income
tax provision for 2009 was US$1,340,364 compared to income tax benefit of
US$115,742 for 2008.


The
actual effective tax rates for the year ended December 31, 2009 and 2008 are 80%
and 23%, respectively.  The increase of the effective tax rate is
mainly attributable to the income tax liability of $825,000 arising from the
$3,300,000 cash consideration paid by Luckcharm to the Founders during the
recapitalization which was deemed as capital contribution subject to RPC income
tax.


- 45
-


Net
Income (loss)





Net
profit in 2009 was US$339,647, an increase of US$718,235 from net loss
US$378,588 in 2008. This is mainly due to the obvious rise of revenue in 2009,
revenue achieved US$12,760,248 in 2009 with US$9,695,241 increase comparing with
2008, represented a 316% growth rate.  Most of these raw materials are
procured within China now, which reduced the unit cost of the wind turbines by
US$130,648 and this is also a main reason for the increase of the net
profit.  The largest component of our cost of sales, raw materials,
consists of components, fittings and materials used in the manufacture of our
wind turbines.  With the anticipated growth of the wind power industry
in China, management expects that the manufacturing capacity of the parts and
components of our wind turbines will also continue to grow and result in
decreased costs for these raw materials within our industry.  In
addition, if we are able to grow successfully and increase production,
management believes we will be able to negotiate better pricing on raw materials
through higher volume purchase and more efficiently utilize its manufacturing
capacity resulting in a lower average cost of production per unit.





Results
of Operations for the Year Ended December 31, 2008 as Compared to the period
from inception (August 25, 2006) to December 31, 2007





Revenues





Revenues
for the year ended December 31, 2008 were $3,065,007 compared to $0 from the
period from August 25, 2006 (Inception) to December 31, 2007.  We
executed our first contract with our first and sole customer during fiscal 2007
but we did not realize the sales until we delivered our wind turbines in fiscal
2008.  The increase was due to sales of four wind turbines to our
first and sole customer during fiscal 2008.





Gross
Profit





Our gross
profit was $94,394 or 3.08% for the year ended December 31, 2008, as compared to
$0 from the period from August 25, 2006 (Inception) to December 31,
2007.  Since we did not start manufacturing until the second half of
2008, we allotted the manufacturing expenses of fiscal 2008 to four wind
turbines that we sold to customers.  Thus, this resulted in a higher
cost basis and a lower gross profit, which does not sufficiently reflect our
earning capacity.





General
and administrative expenses





During
the fiscal year ended December 31, 2008, we incurred total expenses of $393,782,
as compared to $460,941 for the period from inception (August 25, 2006) to
December 31, 2007. The expense was mainly consisted of salaries and bonus for
employees associated with administrative activities, legal and audit expenses
incurred from our financing activities.





LIQUIDITY
AND CAPITAL RESOURCES





Year
Ended December 31, 2009





As of
December 31, 2009, we had cash and cash equivalents of US$3,803,446, other
current assets of US$ 26,588,244 and current liabilities of
US$10,618,252.  Other current assets included US$2,880,281 of
restricted cash, which consists of bank demand deposits used as security against
bank drafts which are used as short term instruments to reduce financing
cost.  In addition to our restricted cash, there are certain
restrictions on the distribution of share capital from our PRC subsidiary. As a
result of these PRC laws and regulations, our PRC subsidiary is restricted in
its ability to transfer a portion of its net assets to us in the form of
dividends, loans or advances. Such restricted portions amounted to $17,776,327
as of December 31, 2009.





Our cash
needs are primarily for working capital to support our operations and the
purchase of raw materials related to the commencement of our mass
production.  We presently finance our operations through revenue from
the sale of our products and services, and the private placement of equity and
debt securities. We have significant capital needs in the next 12 months in
order to grow our customer base, increase revenue and expand our
operations.  Purchase commitments include $28,353,431 for raw
materials and capital commitments include $993,079 for asset improvements and
plant expansion. We believe that our existing capital resources is sufficient to
meet our current obligations and operating requirements, but will not be
sufficient to meet our more aggressive growth plans and that we will need to
raise additional capital in the next 12 months. We will consider debt or equity
offerings or institutional borrowing as potential means of financing, however,
there are no assurances that we will be successful or that we will obtain terms
that are favorable to us.


- 46
-


Net cash
used in operating activities for 2009 was US$9,182,962 compared with net cash
used in operating activities of US$2,369,299 for 2008.  The increase
in net cash used in operating activities for 2009 was mainly due to a
US$20,173,793 increase in working capital attributable to activities associated
with our commencement of mass production.  With the delivery of
sixteen sets of wind turbine in 2009, our accounts receivable balance increased
US$8,925,117.  As the entity commenced mass production in 2009, the
purchase of the raw material led to a US$1,701,662 increase in our inventory
balance.  The advance to suppliers increased US$2,735,602 due to
prepayment of the raw material purchased in late 2009.  Other current
liabilities increased US$1,755,564 and mainly include VAT payable, warranty
accrual and other royalty accrual. Net cash used in operating activities for
2008 was mainly due to changes in working capital for 2008 primarily related to
a US$2,724,470 decrease in advance to suppliers due to the arrival of the raw
material purchased in late 2008, and a US$342,509 increase in deferred revenue
because of the prepayment received from a customer.  Such amounts were
offset by increases in accounts receivable and advance to suppliers of
US$3,090,202 and US$3,138,119, respectively.





Net cash
used in investing activities was US$4,350,171 for 2009, compared with US$189,643
used in investing activities for 2008.  This increase in cash used in
investing activities was primarily related to an increase in loans made to
related parties and an increase in restricted cash.  Loans to related
parties increased to US$1,696,774 in 2009 from US$0 in 2008, the most
significant of which was US$1,430,087 owed from Wuhan Guoce Science &
Technology Corp. which is an electric power equipment manufacturer controlled by
Hou Tiexin (Controlling shareholder of the Group).  Restricted cash
increased to US$2,878,941 in 2009 from US$0 in 2008.  As noted above,
restricted cash consists of bank demand deposits used as security against bank
drafts which are used as short term instruments to reduce financing
cost.  Capital expenditures increased US$280,560 in 2009, compared to
an increase of US$118,869 in 2008.  This increase resulted primarily
from increases in machinery, tools, and other equipment used as we commenced
mass production activities in 2009.





Net cash
provided by financing activities was US$17,324,407 in 2009, compared with
US$$1,865,443 in 2008.  This increase was due to an overall increase
in our capital raising activities used to support operations related to the
commencement of our mass production.  The primary financing activities
included our receipt net cash proceeds of $7,275,014 from an October 2009
private placement offering under which 6,400,000 common shares were issued to
third party investors at $1.25 per share.  We also executed
convertible promissory notes in favour of New Margin, Ceyuan LP and Ceyuan LLC
for net proceeds of US$9,906,115.  The proceeds from our capital
raising activities were primarily offset by repayments of short-term borrowings,
including US$2,195,808 repaid on bank borrowings and US$4,727,779 repaid to
related parties.





CONTRACTUAL
OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS





Contractual
Obligations





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





The
following tables summarize our contractual obligations as of December 31, 2009,
and the effect these obligations are expected to have on its liquidity and cash
flows in future periods.


- 47
-





Payments Due by PeriodTotal
                                                                                  
                                                                                  
                                                                                  Less than 1
                                                                                    year
                                                                                  
                                                                                  
                                                                                  1-3 Years
                                                                                  
                                                                                  
                                                                                  3-5 Years
                                                                                  
                                                                                  
                                                                                  5 Years +Contractual
      obligations:Capital
      obligations
                                                                                  
                                                                                  $
                                                                                  993,079
                                                                                  
                                                                                  
                                                                                  $
                                                                                  993,079
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -Purchase
      obligations
                                                                                  
                                                                                  $
                                                                                  28,353,431
                                                                                  
                                                                                  
                                                                                  $
                                                                                  26,655,730
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,697,701
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -Total
      contractual obligations:
                                                                                  
                                                                                  $
                                                                                  29,346,510
                                                                                  
                                                                                  
                                                                                  $
                                                                                  27,648,809
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,697,701
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -





Capital
obligations include the items that have not been carried out under current
contracts with our suppliers. Purchase obligations consist of expenses on
purchasing components, such as gear box, power generator, and blades,
etc.





Off-Balance
Sheet Arrangements





We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to its shares and classified as
shareholder’s equity or that are not reflected in its 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 it or engages in leasing, hedging or research and development
services with it.





Recent
Accounting Pronouncements





In
January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair
Value Measurements. The ASU amends ASC 820 (formerly Statement No. 157, Fair
Value Measurements) to add new requirements for disclosures about transfers into
and out of Levels 1 and 2 and separate disclosures about purchases, sales,
issuances, and settlements relating to Level 3 measurement on a gross basis
rather than as a net basis as currently required.  ASU 2010-06 also
clarifies existing fair value disclosures about the level of disaggregation and
about inputs and valuation techniques used to measure fair value.  ASU
2010-06 is effective for annual and interim periods beginning after December 15,
2009, except for the requirement to provide the level 3 of purchases, sales,
issuances, and settlements on a gross basis, which will be effective for annual
and interim periods beginning after December 15, 2010.  Early
application is permitted and in the period of initial adoption, entities are not
required to provide the amended disclosures forany previous periods
presented for comparative purposes.  We are currently evaluating the
impact of adoption on its consolidated financial statements.





In
January 2010, the FASB issued ASU 2010-05, “Compensation — Stock Compensation
(Topic 718) — Escrowed Share Arrangements and the Presumption of Compensation
(previously EITF Topic D-110, “Escrowed Share Arrangements and the Presumption
of Compensation”). This ASU provides the SEC Staff’s views on overcoming the
presumption that for certain shareholders escrowed share arrangements represent
compensation. The SEC Staff believes that an escrowed share arrangement in which
the shares are automatically forfeited if employment terminates is compensation,
consistent with the principle articulated in ASC 805, “Business
Combinations”.  We are currently evaluating the impact of adoption on
its consolidated financial statements.





In
December 2009, the FASB issued ASU 2009-17, Consolidations (Topic 810) –
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities which amends the FASB Accounting Standards Codification for
the issuance of FASB Statement No. 167, Amendments to FASB Interpretation No.
46(R), issued by the FASB in June 2009.  The amendments in this ASU
replace the quantitative-based risks and rewards calculation for determining
which reporting entity, if any, has a controlling financial interest in a
variable interest entity with an approach primarily focused on identifying which
reporting entity has the power to direct the activities of a variable interest
entity that most significantly impact the entity's economic performance and (1)
the obligation to absorb the losses of the entity or (2) the right to receive
the benefits from the entity.  ASU 2009-17 also requires additional
disclosure about a reporting entity's involvement in variable interest entities,
as well as any significant changes in risk exposure due to that
involvement.  ASU 2009-17 is effective for annual and interim periods
beginning after November 15, 2009.  Early application is not
permitted.  We have adopted ASU 2009-17 on January 1, 2010. The Group
considers that the adoption of ASU 2009-17 has no significant impact on its
consolidated financial statements.


- 48
-


In
October 2009, the FASB published FASB ASU 2009-13, Revenue Recognition (Topic
605) - Multiple-Deliverable Revenue Arrangements. ASU 2009-13 addresses the
accounting for multiple-deliverable arrangements to enable vendors to account
for products or services (deliverables) separately rather than as a combined
unit. Specifically, this guidance amends the criteria in ASC Subtopic 605-25,
Revenue Recognition-Multiple-Element Arrangements, for separating consideration
in multiple-deliverable arrangements. This guidance establishes a selling price
hierarchy for determining the selling price of a deliverable, which is based on:
(a) vendor-specific objective evidence if available; (b) third-party evidence if
vendor-specific objective is not available; or (c) estimated selling price if
neither vendor-specific objective evidence nor third-party evidence is
available. This guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the relative selling price method. In
addition, this guidance significantly expands required disclosures related to a
vendor's multiple-deliverable revenue arrangements.   The
provisions of ASU 2009-13 are effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010. Early adoption is permitted.  We are currently evaluating
the impact of adoption on its consolidated financial statements.





ITEM
7A.             QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





We do not
use derivative financial instruments in our investment portfolio and have no
foreign exchange contracts. Our financial instruments consist of cash, accounts
receivable, amount due from related parties, accounts payable, advance to
suppliers, short-term borrowings, warrants, and convertible notes. The objective
of our policies is to mitigate potential income statement, cash flow and fair
value exposures resulting from possible future adverse fluctuations in rates. We
evaluate our exposure to market risk by assessing the anticipated near-term and
long-term fluctuations in interest rates and foreign exchange rates. This
evaluation includes the review of leading market indicators, discussions with
financial analysts and investment bankers regarding current and future economic
conditions and the review of market projections as to expected future
rates.





Interest Rates. We did not
experience any material changes in interest rate exposures during 2007, 2008 and
2009.  Hence, the effect of the fluctuations of the interest rates is
considered minimal to our business operations. Based upon economic conditions
and leading market indicators at December 31, 2009, we do not foresee a
significant adverse change in interest rates in the near future and do not use
interest rate derivatives to manage exposure to interest rate
changes.





Foreign Exchange Rates. The
value of the RMB against the U.S. dollar and other currencies is affected by,
among other things, changes in China’s political and economic conditions. Since
July 2005, the RMB has no longer been pegged to the U.S. dollar. The RMB may
appreciate or depreciate significantly in value against the U.S. dollar in the
medium to long term. Moreover, it is possible that in the future, PRC
authorities may lift restrictions on fluctuations in the RMB exchange rate and
lessen intervention in the foreign exchange market.





Because
substantially all of our earnings, cash and assets are denominated in RMB,
appreciation or depreciation in the value of the RMB relative to the U.S. dollar
would affect our financial results reported in U.S. dollar terms without giving
effect to any underlying change in our business or results of operations. As a
result, we face exposure to adverse movements in currency exchange rates as the
financial results of our Chinese operations are translated from local currency
into U.S. dollar upon consolidation. If the U.S. dollar weakens against the RMB,
the translation of our foreign-currency-denominated balances will result in
increased net assets, net revenues, operating expenses, and net income or loss.
Similarly, our net assets, net revenues, operating expenses, and net income or
loss will decrease if the U.S. dollar strengthens against the RMB. Additionally,
foreign exchange rate fluctuations on transactions denominated in RMB other than
the functional currency result in gains and losses that are reflected in our
consolidated statement of operation. Our operations are subject to risks typical
of international business, including, but not limited to, differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate
volatility.


- 49
-





Considering
the RMB balance of our cash as of December 31, 2009, which amounted to US$
2,628,538, a 1.0% change in the exchange rates between the RMB and the U.S.
dollar would result in an increase or decrease of approximately US$ 26,285
of the balance.





ITEM
8.                FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.





The
Annual Financial Statements for the year ended December 31, 2009 will follow the
text of this Form 10-K.





ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.





On
December 1, 2009, Madsen & Associates, CPA’s Inc. (“Madsen”) was dismissed
as the independent registered public accounting firm.  Madsen’s report
on the financial statements of Vista Dorada Corp. for the fiscal years ended
December 31, 2008 and 2007 contained an unqualified opinion which contained an
explanatory paragraph related to conditions which raise substantial doubt about
our ability to continue as a going concern because of our need to raise
additional working capital to service our debt and for our planned
activity.  Our Board of Directors approved the decision to change its
independent registered public accounting firm.  During the last two
fiscal years ended December 31, 2008 and 2007, and further through the date of
dismissal of Madsen, there have been no disagreements with Madsen on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement if not resolved to the
satisfaction of Madsen, would have caused them to make reference to the subject
matter of the disagreement(s) in connection with their report on the financial
statements of Vista Dorada Corp. for such years; and there were no reportable
events, as listed in Item 304(a)(1)(iv) of Regulation S-K.  During the
last two fiscal years ended December 31, 2008 and 2007, and further through the
date of dismissal of Madsen, Madsen did not advise us on any matter set forth in
Item 304(a)(1)(v)(A) through (D) of Regulation S-K.  We requested that
Madsen furnish it with a letter addressed to the SEC stating whether or not it
agrees with the above statements. A copy of such letter was filed as Exhibit
16.1 to the current report on Form 8-K on December 2, 2009.





On
December 1, 2009, we engaged Deloitte Touche Tohmatsu CPA Ltd. (“Deloitte”) as
our new independent registered public accounting firm to audit our financial
statements for the fiscal year ending December 31, 2009. During the two most
recent fiscal years and the interim periods preceding the engagement, we did not
consult with Deloitte regarding (i) the application of accounting principles to
a specific transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the our financial statements, and no written
report or oral advice was provided to us by Deloitte concluding there was an
important factor to be considered by us in reaching a decision as to an
accounting, auditing or financial reporting issue; or (ii) any matter that was
either the subject of a disagreement, as that term is defined in Item 304
(a)(1)(iv) of Regulation S-K or a reportable event, as that term is described in
Item 304 (a)(1)(v) of Regulation S-K.





ITEM
9A.             CONTROLS AND
PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer along with our Chief
Financial Officer, of the effectiveness of the design of our disclosure controls
and procedures (as defined by Exchange Act Rule 13a-15(e) and 15a-15(e)) as
of December 31, 2009 pursuant to Exchange Act Rule 13a-15. Based upon that
evaluation, our Principal Executive Officer along with our Principal Financial
Officer concluded that our disclosure controls and procedures are not effective
as of the end of the period covered by this annual report in ensuring that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and
forms. This conclusion is based on findings that constituted material
weaknesses. A material weakness is a deficiency, or a combination of control
deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the Company’s interim
financial statements will not be prevented or detected on a timely
basis.


- 50
-





Management’s Report on Internal
Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based on criteria established in the
framework inInternal
Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC
guidance on conducting such assessments. Management concluded, as of December
31, 2009, that our internal control over financial reporting was not effective.
Management realized there were deficiencies in the design or operation of the
Company’s internal control that adversely affected the Company’s internal
controls which management considers to be material weaknesses.




Management
realized there were deficiencies in the design or operation of our internal
control that adversely affected our  internal controls which
management considers to be material weaknesses including those described
below:




i)
            We
      lack personnel with the experience to properly analyze and record complex
      transactions in accordance with U.S.
GAAP.


ii)
            We
      have insufficient quantity of dedicated resources and experienced
      personnel involved in reviewing and designing internal controls. As a
      result, a material misstatement of the interim and annual financial
      statements could occur and not be prevented or detected on a timely
      basis.


iii)
            We
      have not achieved the optimal level of segregation of duties relative to
      key financial reporting functions.


iv)
            We
      do not have an audit committee or an independent audit committee financial
      expert. While not being legally obligated to have an audit committee or
      independent audit committee financial expert, it is the management’s view
      that to have an audit committee, comprised of independent board members,
      and an independent audit committee financial expert is an important
      entity-level control over our financial
  statements.


v)
            We
      did not perform an entity level risk assessment to evaluate the
      implication of relevant risks on financial reporting, including the impact
      of potential fraud related risks and the risks related to non-routine
      transactions, if any, on our internal control over financial
      reporting.  Lack of an entity-level risk assessment constituted an
      internal control design deficiency which resulted in more than a remote
      likelihood that a material error would not have been prevented or
      detected, and constituted a material
weakness.




For the
material weaknesses identified in (i), (ii) and (iii), we plan to remediate
these material weaknesses in the next 12 months by hiring one or two additional
personnel with experience and knowledge in U.S. GAAP, directly involved in
internal control review and design, and allow for segregation of key financial
reporting.  This may cost us in excess of US $100,000 per
year.  For the material weakness identified in (iv), we are in the
process of identifying additional independent directors to serve on our board
and an Audit Committee with an objective to have this process completed before
the end of our fiscal year ending December 31, 2010. We will need to analyze the
costs of such additional independent directors in accordance with current market
and industry practices.  For the material weakness identified in (v),
we plan to remediate this material weakness by working with our external auditor
and legal counsel over the next 18 months to perform periodic entity level risk
assessment.  This may cost us in excess of US $250,000 per
year.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. 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. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.


- 51
-





This
Annual Report on Form 10-K does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Our management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only our management’s report
in this annual report.





Nevertheless,
our management has determined that all matters to be disclosed in this report
have been fully and accurately reported. We are in the process of improving our
processes and procedures to ensure full, accurate and timely disclosure in the
current fiscal year, with the expectation of establishing effective disclosure
controls and procedures and internal control over financial reporting as soon as
reasonably practicable. For the fiscal year ending December 31, 2010, our
independent registered public accounting firm will be required to issue a report
on management’s assessment of our internal control over financial reporting and
their evaluation of the operating effectiveness of our internal control over
financial reporting. Our assessment requires us to make subjective judgments and
our independent registered public accounting firm may not agree with our
assessment.





Changes
in Internal Control over Financial Reporting





There
were no changes in our internal controls over financial reporting that occurred
during the year ended December 31, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting. We believe that a control system, no matter how well designed and
operated, cannot provide absolute assurance that the objectives of the control
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within any company have
been detected.





ITEM
9B.             OTHER
INFORMATION.





In
January 2010, we entered into an agreement to acquire 70% ownership of Baicheng
Guoce Wind Power Development Co., Ltd ("Baicheng Guoce") for a consideration of
US $205,032 (RMB1,400,000) in cash from a related party, Wuhan Guoce Electricity
Investment Co., Ltd., with whom we are subject to common control as the sole
majority shareholder is the Chairman of the board of directors for both
companies.  Baicheng Guoce is mainly engaged in production and
erection of wind turbines and providing technical support during installation,
operation, maintenance and after-sales service for wind turbines.  We
are required to inject additional capital funds in the amount of $820,129 by
December 31, 2011.





In
January 2010, we incorporated a company named Baicheng Kairui Wind Power Co.,
Ltd ("Baicheng Kairui") located in Baicheng SiJianFang, Jiling Province
PRC.  Baicheng Kairui was established in January 2010, with registered
capital of $1,464,515. The first capital injection from us in January 2010 was
$732,257(RMB5,000,000) in cash. Baicheng Kairui is mainly engaged in production
and erection of wind turbines and providing technical support during
installation, operation, maintenance and after-sales service for wind turbines.
We are required to inject additional capital funds in the amount of $732,257 by
December 31, 2011.





PART
III





ITEM
10.             DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.





Management





The
following table sets forth the names and ages of our current directors,
executive officers, significant employees, the principal offices and positions
with us held by each person and the date such person became our director,
executive officer or significant employee. Our executive officers are appointed
by our Board of Directors. Our directors serve until the earlier occurrence of
the appointment of his or her successor at the next meeting of stockholders,
death, resignation or removal by the Board of Directors.





Name
              
              Age
              
              Position
              
              SinceHou
      Tie Xin
              
              52
              
              Chairman
      of the Board
              
              2009Qi
      Na
              
              53
              
              Chief
      Executive Officer, Director
              
              2009Zhao
      Ying
              
              31
              
              Chief
      Financial Officer, Secretary
              
              2009Tomas
      Lyrner
              
              52
              
              Chief
      Technology Officer
              
              2009Xu
      Jia Rong
              
              46
              
              Director
              
              2009Marcus
      Laun
              
              40
              
              Director
              
              2009Christopher
      Walker Wadsworth
              
              40
              
              Director
              
              2009





- 52
-




Mr. Hou Tie Xin is the
Chairman of our Board of Directors.  He is the founder, Chairman of
the Board and General Manager of Guoce New Technology, which was established in
1995 and was renamed to Guoce Science and Technology in 2002.  Since
inception of Guoce Science and Technology, Mr. Hou has overseen the acquisition
of over ten subsidiaries and has been awarded the title of “Outstanding
Entrepreneur” by the municipal government.  Mr. Hou is a nationally
renowned power expert and is a professor of engineering.  Mr. Hou has
obtained more than 20 patents for his inventions in connection with his research
and development of energy technology.  Mr. Hou is a member of the
China Standardization Committee and is an author of China’s Power Quality
Standards.  Mr. Hou is also a member of the International
Electrotechnical Commission (“ IEC ”) and attended the 2007 IEC Assembly in
Tokyo as the leader of the Chinese delegation.   Mr. Hou obtained
his Bachelor of Engineering degree in Power System and Automation from Wuhan
University in 1982 and a Masters degree in Power Automation from Huazhong
University of Science & Technology in 1990.





Ms. Qi Na is our Chief
Executive Officer and a member of our Board of Directors.  She has
been General Manager of GC Nordic since 2006.  From 2004, Ms. Qi was
General Manager of Wuhan Guoce Power Investment Corp. as well as Vice General
Manager of Guoce Science and Technology.  In 1999, Ms. Qi founded and
was General Manager of Hubei TaiKang Engineering Tech Corp.  From 1993
to 1999, she worked at Hubei International Financial Technology Consultation
Corp., Hubei ChangJiang HePingShiYe Corp., and Wuhan Machine Bidding
Corp.  From 1972 to 1992, Ms. Qi worked at YiChang 403 factory and 461
factory in various departments, including, youth union, cadre, repair, drive
workshop, quality control and energy.  Ms. Qi obtained a Bachelor of
Engineering degree specializing in Marine Power Plant from Shanghai Jiaotong
University in 1978.





Ms. Zhao Yingour Chief Financial
Officer and Secretary.  She has been Chief Financial Officer of GC
Nordic since 2006.  Ms. Zhao is responsible for financing and
investment and she is also responsible for all communications with the
government.  Ms. Zhao has been with Guoce New Technology since 1999 in
various positions, such as Assistant of Marketing, Vice Manager of the sales
division, Vice Manager of the engineering division, General Manager of the
office and Secretary of the board.  In 1999, Ms. Zhao obtained a
Bachelors degree in management and law from Wuhan Hydro Power
University.  In 2006, Ms. Zhao obtained a Masters degree in Finance
from Wuhan University.





Mr. Tomas Lyrner is our Chief
Technology Officer.  He has been serving as the Chief Technology
Officer of Wuhan Guoce Nordic New Energy Co., Ltd. since 2006. Mr. Lyrner began
his professional career at a Danish wind turbine manufacturer named NEG Micon
(later merged into Vestas) in 1985. His main responsibilities were research and
development, design and calculations.  He was closely involved with
the development of a Danish 3-bladed 200 kilowatt wind turbine of which 50-60
machines was produced.   From the beginning of 1990 to 1999, Mr.
Lyrner worked at the consultant company AF-Industriteknik where he was highly
involved in the design and development of the 2 Nordic Windpower prototype wind
turbines with the generator power of 400 and 1000 kilowatts.  Mr.
Lyrner designed and calculated wind turbine offshore foundations for the company
Vindkompaniet of which 5 wind turbines were installed and still operating 4
kilometers outside of Nasudden, Gotland, Sweden.  From 1999-2004, he
was Chief Technology Officer of Nordic Windpower USA, Inc. working with
modification and adoption to serial production of the Nordic 1000, 1MW wind
turbine prototype.  He was also responsible for design approval
against the Det Norske Veritas.  Since 2004, Mr. Lyrner has had his
own consultant firm named Wind Engineering Consultant (“WEC”).  WEC
has acted as assistant and advisor for EON Sweden (a European power company)
regarding a large wind power offshore project.  WEC has also designed
docking system for offshore wind turbines and conducted conceptual studies
leading to the final layout of 6MW offshore wind turbines through dynamic
simulations by means of VIDYN software.  Mr. Lyrner received his
Masters in Mechanical Engineering from the Royal Institute of Technology of
Stockholm Sweden in 1984.


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Mr. Xu Jia Rongis a member
of our Board of Directors.  He currently serves as General Manager of
Guoce Science and Technology and is responsible for daily management of the
company and has served as Chief Engineer at Guoce New Technology since 1996.
From 1992 through 1996, Mr. Xu served as project leader in Wuhan Hongshan
Electrician Technical research institute monitoring the labor project group, the
primary cognizance automobile electron ignition project research and development
group and the supervisory system research and development group.  From
1982 through 1992, Mr. Xu taught at Wuhan Water Conservation Electric Power
Institute. Mr. Xu has extensive management experience, and is a power expert in
research and development of substation automation and computer-based relay
protection. In 1998, his “35kV Substation Integrated Automation System of GCSIA
Type” project was awarded the second prize of Scientific and Technological
Progress Prize by Shaanxi Power Company. In 1999, his "35kV Substation
Integrated Automation System of GCSIA Type" project was awarded the second prize
of Scientific and Technological Progress Prize by Wuhan municipal government. In
1999 his "GCVQC Volt\Var Control Devices” project was awarded the third prize of
Scientific and Technological Progress Prize by Wuhan municipal government. He
took part in all these projects and worked as the main director. Mr. Xu obtained
a Bachelor of Engineering degree from Wuhan University in Hydraulic and Electric
Engineering in 1982 and a specialized Masters degree in Power System Automation
from Wuhan Water Conservation Electric Power University in 1987.




Mr. Marcus Laun is a member
of our Board of Directors.  He currently is a senior banker at Wynston
Hill Capital, LLC where he is responsible for all aspects of capital raising and
advisory engagements for micro- and small-cap ventures.  From 2004
through 2008, Mr. Laun held various positions at Knight Capital Group including
serving as managing director and director.  From 2000-2004, Mr. Laun
was founder and Chief Executive Officer of Hype (USA) Inc. which controlled the
exclusive rights to HYPE Energy Drink in North America.  Prior to
this, Mr. Laun was a Vice President of corporate finance at Brean Murray &
Co., Inc. and a research analyst at Greenwich High Yield LLC and Mendham Capital
Group LLC.  Mr. Laun received a Masters in Business Administration
degree from Columbia Business School and received a Bachelor of Science degree
from Cornell University.





Mr. Christopher Walker
Wadsworth is a member of our Board of Directors.  He is one of
the founding partners of Ceyuan Ventures. He was a co-founder and managing
director at Manitou Ventures from 2001 to 2004. Before that, he worked as the
vice president of corporate development and product manager for Atom Shockwave
from 1999. Mr. Wadsworth accumulated rich experience in finance and investment
industry through working for Fleet Bank, Montgomery Securities
and Macro-media from 1992 to 1998. Mr. Wadsworth received a Bachelor’s
degree from Williams College a Masters in Business Administration degree from
University of Chicago.





Family
Relationships





There are
no family relationships between or among any of our directors, executive
officers and incoming directors or executive officers.





Involvement
in Certain Legal Proceedings





There has
been a legal proceeding filed against GC China Turbine in connection with
trademark infringement, trademark dilution, unfair competition and trade
dress infringement, see “Legal Proceedings.”





Board
Committees; Director Independence





All
members of our board of directors serve in this capacity until their terms
expire or until their successors are duly elected and qualified.  Our
bylaws provide that the authorized number of directors will be not less than
one. As of this date, our board of directors has not appointed an audit
committee, compensation committee, disclosure committee or nominating
committee.  The functions ordinarily handled by these committees are
currently handled by our entire board of directors.  Our board of
directors intends, however, to review our governance structure and institute
board committees as necessary and advisable in the future, to facilitate the
management of our business.





As of
this date, we appointed 2 independent directors and 3 non-independent
directors to our board of directors.  Marcus Laun and Christopher
Walker Wadsworth are our two independent directors.





Code
of Ethics





We have
adopted a code of ethics that applies to our officers, directors and employees,
including our chief executive officer, senior executive officers, principal
accounting officer, and other senior financial officers. A copy of our code of
ethics will be provided to any person without charge, upon written request sent
to us at our offices located at No.86, Nanhu Avenue, East Lake Development Zone,
Wuhan, Hubei Province, China.


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-


Compensation
Committee Interlocks and Insider Participation




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





ITEM
11.             EXECUTIVE
COMPENSATION





Director
Compensation





Currently,
we do not pay any compensation to members of our board of directors for their
service on the board.  However, we intend to review and consider
future proposals regarding board compensation.





Executive
Compensation





The
following summary compensation table indicates the cash and non-cash
compensation paid by GC Nordic during the fiscal years ended December 31, 2009
and 2008, respectively, to the current Chief Executive Officer, Chief Financial
Officer and each of the other two highest paid executives, if any, whose total
compensation exceeded $100,000 during the fiscal years ended December 31, 2009
and 2008, respectively.





SUMMARY
COMPENSATION TABLE





Name and Principal Position
                        
                        Year
                        
                        Salary
                          ($)
                        
                        Bonus
                          ($)
                        
                        Stock
                          Awards
                          ($)
                        
                        Option
                          Awards
                          ($)
                        
                        Non-Equity
                          Incentive
                          Plan
                          Compensa-
                          tion
                          ($)
                        
                        Nonqualified
                          Deferred
                          Compensa-
                          Tion
                          Earnings
                          ($)
                        
                        All Other
                          Compensa-
                          tion ($)
                        
                        Total
                          ($)Qi
      Na
                        
                        2009
                        
                        11,705
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        
                        
                        11,705incoming
      CEO (1)
                        
                        2008
                        
                        9,587
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        
                        
                        9,587Zhao
      Ying
                        
                        2009
                        
                        9,949
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        
                        
                        9,949incoming
      CFO (2)
                        
                        2008
                        
                        8,027
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        
                        
                        8,027





(1)
            Ms.
      Qi Na is our Chief Executive Officer and took office concurrently with Mr.
      Lennon's resignation.  Salary and other annual compensation paid
      to Ms. Qi are from GC Nordic and are expressed in U.S. dollars based on
      the interbank exchange rates of RMB 6.8282 and RMB 6.8346 for each US$
      1.00, on December 31, 2009 and 2008,
  respectively.


(2)
            Ms.
      Zhao Ying is our Chief Financial Officer and took office concurrently with
      Mr. Lennon's resignation.  Salary and other annual compensation
      paid to Ms. Zhao are from GC Nordic and are expressed in U.S. dollars
      based on the interbank exchange rates of RMB 6.8282 and RMB 6.8346 for
      each US$ 1.00, on December 31, 2009 and 2008,
  respectively.





None of
our executive officers received, nor do we have any arrangements to pay out, any
bonus, stock awards, option awards, non-equity incentive plan compensation, or
non-qualified deferred compensation.





Potential
Payments Upon Termination or Change-in-Control





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


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-


Employment
Agreements





Our
wholly-owned subsidiary, GC Nordic, entered into employment agreements with Mr.
Hou Tie Xin, Ms. Qi Na, Ms. Zhao Ying and Mr. Xu Jia Rong on September 30,
2009 (each an “Employment Agreement,” and together the “Employment
Agreements”).  The following are summaries of the Employment
Agreements with the above-mentioned officers and directors.





GC Nordic
entered into an Employment Agreement with Mr. Hou Tie Xin on September 30,
2009.  Effective September 30, 2009, Mr. Hou was appointed Chairman of
GC Nordic, and his basic annual salary is RMB 300,000 or approximately US$
43,924 per year (the “Base Salary”). GC Nordic’s salary shall be payable by GC
Nordic in regular installments in accordance with GC Nordic’s general payroll
practices. GC Nordic shall also purchase social insurances and provide welfare
and benefits to Mr. Hou according to the applicable labor laws and
regulations.  In addition, the Board may award Mr. Hou a bonus of up
to 25% of his Base Salary during his employment period according to degree of GC
Nordic’s accomplishment of certain financial targets established annually by GC
Nordic.





GC Nordic
entered into an Employment Agreement with Ms. Qi Na on September 30, 2009.
Effective September 30, 2009, Ms. Qi Na was appointed the General Manager of GC
Nordic and her total annual salary is RMB 200,000 or approximately US$ 29,283
per year. Ms. Qi’s salary shall be payable by GC Nordic in regular installments
in accordance with GC Nordic’s general payroll practices. GC Nordic shall also
purchase social insurances and provide welfare and benefits to Ms. Qi according
to the applicable labor laws and regulations. In addition, the Board may award
Ms. Qi a bonus of up to 25% of her Base Salary during her employment period
according to the degree of GC Nordic’s accomplishment of certain financial
targets established annually by GC Nordic.





GC Nordic
entered into an Employment Agreement with Ms. Zhao Ying on September 30, 2009.
Effective September 30, 2009, Mr. Zhao Ying was appointed the Chief Financial
Officer of GC Nordic and her total annual salary is RMB 150,000 or approximately
US$ 21,962 per year. Ms. Zhao’s salary shall be payable by GC Nordic in regular
installments in accordance with GC Nordic’s general payroll practices. GC Nordic
shall also purchase social insurances and provide welfare and benefits to Ms.
Zhao according to the applicable labor laws and regulations. In addition, the
Board may award Ms. Zhao a bonus of up to 25% of her Base Salary during her
employment period according to the degree of GC Nordic’s accomplishment of
certain financial targets established annually by GC Nordic.





GC Nordic
entered into an Employment Agreement with Mr. Xu Jia Rong on September 30, 2009.
Effective September 30, 2009, Mr. Xu Jia Rong was appointed the Deputy General
Manager of GC Nordic and his total annual salary is RMB 15,000 or approximately
US$ 2,196 per year. GC Nordic’s salaries shall be payable by GC Nordic in
regular installments in accordance with the GC Nordic’s general payroll
practices. GC Nordic shall also purchase social insurances and provide welfare
and benefits to Mr. Xu according to the applicable labor laws and regulations.
In addition, the Board may award Mr. Xu a bonus of up to 25% of his Base Salary
during his employment period according to degree of GC Nordic’s accomplishment
of certain financial targets established annually by GC Nordic.





All of
the above-described Employment Agreements will be effective from September 30,
2009 to the fifth anniversary date (the “Initial Employment Period”), and all of
them shall automatically be renewed on their respective original terms and
conditions as modified from time to time by the officers and directors and GC
Nordic for additional one-year periods as soon as the expiration of the Initial
Employment Period. GC Nordic may terminate the employment of the officers and
directors  before his or her employment periods expires
if  such officers and directors materially violates GC Nordic’s rules
or policies, negligently causes substantial damage or adverse effect to GC
Nordic’s interests, or is charged or convicted with criminal liabilities. The
officers and directors agree that during their employment periods and anytime
thereafter that they shall not to disclose any confidential information,
including those received from third parties, to unauthorized person or use for
his or her own account without prior written consent(s) from the appropriate
authorities, unless the confidential information becomes generally known to and
available for use by the public or is required to be disclosed by law or court
order.  In addition, the officers and directors agree to make prompt
and full disclosure to GC Nordic or its affiliates of his or her obtaining
ownership of intellectual properties during his or her employment period and one
year thereafter in connection with the business of GC Nordic or its
affiliates.


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-


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 regarding the beneficial ownership of our
common stock as of March 15, 2010, for each of the following
persons:





·
            each of our directors and each of
      the named executive officers in the “Management—Executive Compensation”
      section of this report;





·
            all directors and named executive
      officers as a group; and





·
            each person who is known by us to
      own beneficially five percent or more of our common stock after the change
      of control transaction.





Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission.  Unless otherwise indicated in the table, the
persons and entities named in the table have sole voting and sole investment
power with respect to the shares set forth opposite the shareholder’s
name.  Unless otherwise indicated, the address of each beneficial
owner listed below is No.86, Nanhu Avenue, East Lake Development Zone, Wuhan,
Hubei Province, China.





Common Stock Beneficially OwnedNumber of
                                              Shares
                                              beneficially
                                              owned (1)
                                            
                                            
                                            Percentage of
                                              class beneficially
                                              owned (2)Executive officers and directors:Hou
      Tie Xin
                                            
                                            
                                            17,765,757
                                            (3)(10)
                                            
                                            29.53
                                            %Qi
      Na
                                            
                                            
                                            2,590,705
                                            (4)(10)
                                            
                                            4.31
                                            %Xu
      Jia Rong
                                            
                                            
                                            2,130,855
                                            (5)(10)
                                            
                                            3.54
                                            %Zhao
      Ying
                                            
                                            
                                            1,554,423
                                            (6)(10)
                                            
                                            2.58
                                            %Marcus
      Laun
                                            
                                            
                                            61,250
                                            (7)
                                            
                                            *
                                            %Tomas
      Lyrner
                                            
                                            
                                            0
                                            
                                            
                                            -
                                            %Chris
      Walker Wadsworth
                                            
                                            
                                            0
                                            (8)
                                            
                                            -
                                            %All
      directors and executive officers as a group (7 persons)
                                            
                                            
                                            24,102,990
                                            
                                            
                                            40.06
                                            %5% Shareholders:Bu
      Zheng Liang
                                            
                                            
                                            3,231,904
                                            (9)(10)
                                            
                                            5.37
                                            %Golden
      Wind Holdings Limited
                                            
                                            
                                            32,383,808
                                            (10)
                                            
                                            53.82
                                            %Ceyuan
      Ventures II, LP
                                            
                                            
                                            6,016,250
                                            (11)
                                            
                                            10.00
                                            %New Margin
      Growth Fund L.P.
                                            
                                            
                                            6,250,000
                                            (12)
                                            
                                            10.39
                                            %




* Less
than 1%




(1)
            Unless
      otherwise indicated in the footnotes to the table, each shareholder shown
      on the table has sole voting and investment power with respect to the
      shares beneficially owned by him or it.  Unless otherwise indicated,
      the address for each of the named beneficial owners is: No.86, Nanhu
      Avenue, East Lake Development Zone, Wuhan, Hubei Province,
      China.


- 57
-





(2)
            Beneficial ownership has been
      determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant
      to the rules of the SEC, shares of Common Stock which an individual or
      group has a right to acquire within 60 days pursuant to the exercise of
      options or warrants are deemed to be outstanding for the purpose of
      computing the percentage ownership of such individual or group, but are
      not deemed to be beneficially owned and outstanding for the purpose of
      computing the percentage ownership of any other person shown in the
      table.





(3)
            Consists of 17,765,757 shares
      owned of record by Golden Wind. Golden Wind and Mr. Hou have entered into
      a Call Option Agreement pursuant to which Mr. Hou has the right to acquire
      all of such shares. Golden Wind and Mr. Hou have also entered a Voting
      Trust Agreement, under which Mr. Hou has been appointed as voting trustee
      under a voting trust created with respect to all of such shares.
      Therefore, Mr. Hou may be deemed to be the sole beneficial owner of such
      shares.





(4)
            Consists of 2,590,705 shares
      owned of record by Golden Wind. Golden Wind and Ms. Qi have entered into a
      Call Option Agreement pursuant to which Ms. Qi has the right to acquire
      all of such shares. Golden Wind and Ms. Qi have also entered a Voting
      Trust Agreement, under which Ms. Qi has been appointed as voting trustee
      under a voting trust created with respect to all of such shares.
      Therefore, Ms. Qi may be deemed to be the sole beneficial owner of such
      shares.





(5)
            Consists of 2,130,855 shares
      owned of record by Golden Wind. Golden Wind and Mr. Xu have entered into a
      Call Option Agreement pursuant to which Mr. Xu has the right to acquire
      all of such shares. Golden Wind and Mr. Xu have also entered a Voting
      Trust Agreement, under which Mr. Xu has been appointed as voting trustee
      under a voting trust created with respect to all of such shares.
      Therefore, Mr. Xu may be deemed to be the sole beneficial owner of such
      shares.





(6)
            Consists of 1,554,423 shares
      owned of record by Golden Wind. Golden Wind and Ms. Zhao have entered into
      a Call Option Agreement pursuant to which Ms. Zhao has the right to
      acquire all of such shares. Golden Wind and Ms. Zhao have also entered a
      Voting Trust Agreement, under which Ms. Zhao has been appointed as voting
      trustee under a voting trust created with respect to all of such shares.
      Therefore, Ms. Zhao may be deemed to be the sole beneficial owner of such
      shares.





(7)
            Consists of warrants to purchase
      35,000 shares issued in the name of Manhatten Valley Capital, LLC and
      26,250 shares issued in the name of Beige Capital LLC, to the extent
      exercisable within 60 days. Mr. Laun is a member in both limited liability
      companies and therefore may be deemed to be the beneficial owner to such
      warrants. The address of Mr. Laun is c/o Wynston Hill Capital, 488
      Madison Avenue 24th Floor, New York, NY
  10022.





(8)
            The address of Mr. Wadsworth is
      c/o Ceyuan Ventures, No. 35 Qin Lao Hutong, Dongcheng District, Beijing
      100009 PRC.





(9)
            Consists of 3,231,904 shares
      owned of record by Golden Wind. Golden Wind and Mr. Bu have entered into a
      Call Option Agreement pursuant to which Mr. Bu has the right to acquire
      all of such shares. Golden Wind and Mr. Bu have also entered into a Voting
      Trust Agreement, under which Mr. Bu has been appointed as voting trustee
      under a voting trust created with respect to all of such shares.
      Therefore, Mr. Bu may be deemed to be the sole beneficial owner of such
      shares.





(10)
            The address of Golden Wind is
      P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British
      Virgin Islands. The sole owner of Golden Wind is Xu Hong
      Bing.  Through Call Option Agreements and Voting Trust
      Agreements, the beneficial owners of Golden Wind are deemed to be Hou Tie
      Xin (30.13%), Bu Zheng Liang (5.48%), Qi Na (4.39%), Xu Jia Rong (3.61%),
      Wu Wei (3.56%), Zhao Ying (2.64%), Zuo Gang (1.91%), Zhang Wei Jun (1.81%)
      and He Zuo Zhi (1.38%). As such, they are deemed to have or share
      investment control over Golden Wind’s portfolio. The numbers of shares of
      GC China Turbine Corp’s common stock reported herein as beneficially owned
      by Mr. Hou, Mr. Bu, Ms. Qi, Mr. Xu, Mr. Wu, Ms. Zhao, Mr. Zuo, Mr. Zhang
      and Mr. He are held by Golden Wind, which they in turn own indirectly
      through their respective ownership of Golden
  Wind.


- 58
-





(11)
            The address of Ceyuan Ventures
      II, LP is No. 25 Qinlao Hutong, Dongcheng District, Beijing 100009 PRC.
      Christopher Walker Wadsworth, Bo Feng and WeiGuo Zhao have dispositive and
      voting control for Ceyuan Ventures II,
  LP.





(12)
            The address of New Margin
      Growth Fund L.P. is Villa #3, Radisson Xingguo Hotel, 78 Xingguo Road,
      Shanghai 200052 PRC. Mr. Yan YiXun has dispositive and voting control for
      New Margin Growth Fund L.P.





Securities
Authorized For Issuance Under Equity Compensation Plans





None.





ITEM 13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE.





Related
Party Transactions





Wuhan
Guoce Science and Technology and we are subject to common control as the sole
majority shareholder is the Chairman of the board of directors for both
companies. Luckcharm and GC Nordic had US$ 1,837,636 and US$ 92,511 due from
Wuhan Guoce Science and Technology as of December 31, 2009 and December 31,
2008, respectively. The amount due from Wuhan Guoce Science and Technology does
not bear interest as it is short term in nature.  We are subject to
similar common control arrangements with Wuhan Guoce Electricity Investment Co.,
LTD. and Join Right Management Limited, from whom amounts due at December 31,
2009 were US$ 266,687 and US$ 10,000, respectively.  In addition, we
have one of our directors controls Wuhan Sanlian Water & Electricity
Control, from whom we are owed US$ 210,889 at December 31, 2009.





On May
22, 2009, GC Nordic entered into a promissory note in favor of us, in the
principal amount of US$ 1,000,000. On the same day, we wired the US$ 1,000,000
to Golden Wind, a company controlled 100% by the Chairman of GC Nordic at that
time due to the fact that Golden Wind and Luckcharm were not yet
incorporated.  Subsequently, on July 28, 2009, Luckcharm received the
proceeds from the related party. Upon closing of the reverse acquisition, this
loan became an intercompany loan.





On June
8, 2009, we issued convertible promissory notes to certain foreign accredited
investors for aggregate proceeds of US$ 1,015,000, of which US$ 1,000,000 was
subsequently assigned by such investors to Clarus.  On October 30,
2009, we agreed to amend the terms of such notes with Clarus, such that upon the
six month anniversary of the date of delivery of 20 wind turbine systems by GC
Nordic to its customers, the loan would automatically convert into shares of our
common stock at US$ 2.00 per share.  Also on October 30, 2009, we
entered into a Note Purchase Agreement with Clarus whereby Clarus agreed to loan
US$ 1,000,000 to us upon the effective date of delivery of 20 wind turbine
systems by GC Nordic to its customers.  The loan will be in the form of a
convertible promissory note which shall bear interest at a rate of 1% per month,
and have a maturity date of 2 years from the date of issuance of such
note.  On the six month anniversary upon the effective date of delivery of
20 wind turbine systems by us to our customers, the loan will automatically
convert into shares of our common stock at US$ 2.00 per share.  We have
agreed with Clarus that the period to fund the loan under the Note Purchase
Agreement is extended to April 30, 2010.  Mr. Marcus Laun who is a
member of our board of directors is also the Managing Director of
Clarus.





On July
31, 2009, Luckcharm entered into a promissory note in favor of us in the
principal amount of US$ 10,000,000 in connection with our loan made to
Luckcharm. Under the terms of the promissory note, we shall forgive the debt and
cancel the promissory note so long as (i) the reverse acquisition is completed
pursuant to its terms or (ii) if the reverse acquisition is not completed
pursuant to its terms, the debt is converted pursuant to the Financing
Agreement. If the reverse acquisition is not completed and the debt is not
converted pursuant to the Financing Agreement, the debt shall be due and payable
within 180 days from the date of the promissory note. Upon closing of the
reverse acquisition, this loan became an intercompany loan.





On
September 4, 2009, we appointed Mr. Hou Tie Xin, Ms. Qi Na and Mr. Xu Jia Rong
to our Board of Directors.  On October 30, 2009, we consummated the
reverse acquisition with Luckcharm and its operating subsidiary, GC Nordic. Mr.
Hou Tie Xin, Ms. Qi Na and Mr. Xu Jia Rong were each original founders of GC
Nordic and each received beneficial ownership of shares of our common stock in
connection with the reverse acquisition as described in “Security Ownership of
Certain Beneficial Owners and Management.”  In addition, Mr. Hou Tie
and Ms. Qi Na are the Chairman of the Board and Chief Executive Officer,
respectively, of GC Nordic.  In connection with the closing of the
reverse acquisition, Ms. Qi Na was appointed Chief Executive Officer of our
Company.


- 59
-





In
December 30, 2009, GC Nordic jointly established Guoce Nordic AB with Tomas
Lyrner in Sweden, of which 85% of the shares of Guoce Nordic AB is held by GC
Nordic and 15% by Mr. Lyrner. Guoce Nordic AB is the research and development
center of GC Nordic will contribute to GC Nordic all of the intellectual rights
developed. Mr. Lyrner is our Chief Technology Officer.


ITEM 14.
              PRINCIPAL
      ACCOUNTING FEES AND SERVICES.


The
following table shows the fees paid or accrued by us for the audit and other
services provided by Deloitte Touche Tohmatsu CPA Ltd. (“Deloitte”) for the
fiscal periods shown.
 
 December
      31, 2009
                                              
                                              
                                              December
      31, 2008Audit
      Fees
                                              
                                              $
                                              235,000
                                              
                                              
                                              $
                                              -Audit
      Related Fees
                                              
                                              
                                              400,000
                                              
                                              
                                              
                                              -Tax
      Fees
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -All
      Other Fees
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Total
                                              
                                              $
                                              635,000
                                              
                                              
                                              $
                                              -
 
 
 The
following table shows the fees paid or accrued by us for the audit and other
services provided by Madsen & Associates, CPA’s Inc. (“Madsen”) for the
fiscal periods shown.
 
 December
      31, 2009
                                            
                                            
                                            December
      31, 2008Audit
      Fees
                                            
                                            $
                                            1,500
                                            
                                            
                                            $
                                            5,000Audit
      Related Fees
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Tax
      Fees
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -All
      Other Fees
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Total
                                            
                                            $
                                            1,500
                                            
                                            
                                            $
                                            5,000
 
 (1)           Audit
Fees
 
 The
aggregate fees billed by the independent registered accountants for the year
ended December 31, 2009 for professional services for the review of the
quarterly financial statements for the quarters ended March 31, June 30 and
September 30, 2009, annual financial statements for the fiscal year ended
December 31, 2009 and services that are normally provided by the accountants in
connection with statutory and regulatory filings or engagements for those period
years were as follows:  $500.00 for each of the quarters ended March
31, June 30 and September 30, 2009 to Madsen and $235,000 for the annual
financial statements for the fiscal year ended December 31, 2009 to
Deloitte.
 
 The
aggregate fees billed by the independent registered accountants for the year
ended December 31, 2008 for professional services for the review of the
quarterly financial statements for the quarters ended March 31, June 30 and
September 30, 2008, annual financial statements for the fiscal year ended of
December 31, 2008 and services that are normally provided by the accountants in
connection with statutory and regulatory filings or engagements for those period
years were as follows:  $500.00 for each of the quarters ended March
31, June 30 and September 30, 2008 and $2,500.00 for the annual financial
statement for the fiscal year ended December 31, 2008 to
Madsen.





- 60
-





(2)           Audit-Related
Fees
 
 The
aggregate fees billed, mentioned above for assurance and related services by the
principal accountants that are reasonably related to the performance of the
audit or review of our financial statements and are not reported under Item
9(e)(1) of Schedule 14A. Services comprising the fees disclosed under the
category of "Audit-related fees" in 2009 primarily consisted of audit and review
of financial statements in conjunction with our reverse acquisition transaction
which was consummated on October 30, 2010 and review of financial statements and
registration statement in connection with our registration of certain shares and
warrants. There was no such fee incurred in 2008.
 
 (3)           Tax Fees
 
 The
aggregate fees billed in December 31, 2009 and 2008 for professional services
rendered by the principal accountants for tax compliance, tax advice, and tax
planning was zero.
 
 (4)           All Other
Fees
 
 The
aggregate fees billed in December 31, 2009 and 2008 for products and serviced
provided by the principal accountant, other than the services reported in (1)
through (3) above was zero.
 
 (5)           Audit Committee’s
Pre-approval Policies
 
 In the
absence of a formal audit committee, the full Board of Directors pre-approves
all audit and non-audit services to be performed by the independent registered
public accounting firm in accordance with the rules and regulations promulgated
under the Securities Exchange Act of 1934, as amended. The Board of Directors
pre-approved 100% of the audit, audit-related and tax services performed by the
independent registered public accounting firm for the fiscal year ended
December 31, 2009.
 
 (6)           Audit Hours
Incurred
 
 The
percentage of hours expended on the principal accountant's engagement to audit
the Company's financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal accountant's
full-time, permanent employees was 0%.  - 61
-


PART
IV





ITEM
15.              EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.





Exhibits





The
following exhibits are included as part of this report by
reference:




Exhibit
                    Number
                  
                  Description2.1
                  
                  Share
      Exchange Agreement dated September 30, 2009 (incorporated by reference
      from the Registrant’s Current Report on Form 8-K filed on October 6,
      2009)3.1
                  
                  Corporate
      Charter dated August 25, 2006 (incorporated by reference from Registrant’s
      Registration Statement on Form SB-2 filed on March 29,
    2007)3.2
                  
                  Articles
      of Incorporation  dated August 25, 2006 (incorporated by
      reference from Registrant’s Registration Statement on Form SB-2 filed on
      March 29, 2007)3.3
                  
                  Certificate
      of Correction dated August 31, 2006 (incorporated by reference from
      Registrant’s Registration Statement on Form SB-2 filed on March 29,
      2007)3.4
                  
                  By-laws
      dated September 6, 2006 (incorporated by reference from Registrant’s
      Registration Statement on Form SB-2 filed on March 29,
    2007)3.5
                  
                  Certificate
      of Change dated May 18, 2009 (incorporated by reference from Registrant’s
      Current Report on Form 8-K filed on May 20, 2009)3.6
                  
                  Amendment
      to the Articles of Incorporation on June 11, 2009 (incorporated by
      reference from the Registrant’s Current Report on Form 8-K filed on June
      15, 2009)3.7
                  
                  Amendment
      to the Articles of Incorporation on September 8, 2009 (incorporated by
      reference from the Registrant’s Current Report on Form 8-K filed on
      September 14, 2009)4.1
                  
                  Form
      of Stock Specimen (incorporated by reference from Registrant’s
      Registration Statement on Form SB-2 filed on March 29,
    2007)9.1
                  
                  Form
      of Voting Trust Agreement dated September 30, 2009 with Xu Hong Bing and
      each of Hou Tie Xin, Bu Zheng Liang, Qi Na, Xu Jia Rong, Wu Wei, Zhao
      Ying, Zuo Gang, Zhang Wei Jun and He Zuo Zhi (incorporated by reference
      from the Registrant’s Schedule 13D filed on November 9,
    2009)9.2
                  
                  Investor
      Rights Agreement dated October 30, 2009 with the Company, NewMargin Growth
      Fund L.P., Ceyuan Ventures II, L.P., Ceyuan Ventures Advisors Fund II and
      Golden Wind Holdings Limited (incorporated by reference from the
      Registrant’s Current Report on Form 8-K filed on November 5,
      2009)9.3
                  
                  Investor
      Rights Agreement dated October 30, 2009 with the Company, NewMargin Growth
      Fund L.P., Ceyuan Ventures II, L.P., Ceyuan Ventures Advisors Fund II and
      Golden Wind Holdings Limited (incorporated by reference from the
      Registrant’s Current Report on Form 8-K filed on November 5,
      2009)10.1
                  
                  Transfer
      Agent and Registrar Agreement dated October 20, 2006 (incorporated by
      reference from Registrant’s Registration Statement on Form SB-2 filed on
      March 29, 2007)10.2
                  
                  Loan
      Agreement between Registrant and Jimmy Soo dated March 26, 2007
      (incorporated by reference from Registrant’s Registration Statement on
      Form SB-2 filed on March 29, 2007)10.3
                  
                  Deed
      between EGM Resources Inc. and Registrant dated March 4, 2007
      (incorporated by reference from Registrant’s Registration Statement on
      Form SB-2 filed on March 29, 2007)10.4
                  
                  Binding
      Letter of Intent dated July 31, 2009 (incorporated by reference from
      Registrant’s Current Report on Form 8-K filed August 3,
    2009)10.5
                  
                  Amended
      and Restated Convertible Promissory Note in favor of New Margin Growth
      Fund L.P. dated July 31, 2009 (incorporated by reference from Registrant’s
      Current Report on Form 8-K filed August 3, 2009)10.6
                  
                  Convertible
      Promissory Note in favor of New Margin Growth Fund L.P. dated July 31,
      2009 (incorporated by reference from Registrant’s Current Report on Form
      8-K filed August 3, 2009)10.7
                  
                  Convertible
      Promissory Note in favor of Ceyuan Ventures II, L.P. dated July 31, 2009
      (incorporated by reference from Registrant’s Current Report on Form 8-K
      filed August 3,
2009)




- 62
-





10.8
            
            Convertible
      Promissory Note in favor of Ceyuan Ventures Advisors Fund II, LLC dated
      July 31, 2009 (incorporated by reference from Registrant’s Current Report
      on Form 8-K filed August 3, 2009)10.9
            
            Promissory
      Note in favor of GC China Turbine Corp. by Luckcharm Holdings Limited
      dated July 31, 2009 (incorporated by reference from Registrant’s Current
      Report on Form 8-K filed August 3, 2009)10.10
            
            Amended
      and Restated Agreement dated July 31, 2009 (incorporated by reference from
      Registrant’s Quarterly Report on Form 10-Q filed August 14,
      2009)10.11
            
            Form
      of Securities Purchase Agreement  (incorporated by reference
      from the Registrant’s Current Report on Form 8-K filed on November 5,
      2009)10.12
            
            Form
      of Investors Right Agreement (incorporated by reference from the
      Registrant’s Current Report on Form 8-K filed on November 5,
      2009)10.13
            
            Form
      of Registration Rights Agreement (incorporated by reference from the
      Registrant’s Current Report on Form 8-K filed on November 5,
      2009)10.14
            
            Form
      of Make Good Escrow Agreement (incorporated by reference from the
      Registrant’s Current Report on Form 8-K filed on November 5,
      2009)10.15
            
            Form
      of Waiver Agreement (incorporated by reference from the Registrant’s
      Current Report on Form 8-K filed on November 5, 2009)10.16
            
            Form
      of Convertible Promissory Note (incorporated by reference from the
      Registrant’s Current Report on Form 8-K filed on November 5,
      2009)10.17
            
            Form
      of Note Purchase Agreement (incorporated by reference from the
      Registrant’s Current Report on Form 8-K filed on November 5,
      2009)10.18
            
            Form
      of Lockup Agreement (incorporated by reference from the Registrant’s
      Current Report on Form 8-K filed on November 5, 2009)10.19
            
            Form
      of Indemnification Agreements(incorporated by reference from the
      Registrant’s Current Report on Form 8-K filed on November 5,
      2009)10.20
            
            Form
      of Warrant (incorporated by reference from the Registrant’s Current Report
      on Form 8-K filed on November 5, 2009)10.21
            
            Summary
      of Contract with Daqing Longjiang dated August 30, 200710.22
            
            Summary
      of Contract with Wuhan Kaidi dated September 200814.1
            
            Code
      of Ethics16.1
            
            Letter
      from Madsen & Associates, CPA’s Inc. (incorporated by reference from
      the Registrant’s Current Report on Form 8-K filed on December 2,
      2009)21.1
            
            Subsidiaries
      of the Registrant (incorporated by reference from the Registrant’s
      Registration Statement on Form S-1 filed on January 21,
    2010)31.1
            
            Rule
      13a-14(a)/15d-14(a) Certification (Principal Executive Officer) (filed
      herewith)31.2
            
            Rule
      13a-14(a)/15d-14(a) Certification (Principal Financial Officer) (filed
      herewith)32
            
            Section
      1350 Certifications (filed
herewith)




- 63
-





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





Report
      of Independent Registered Public Accounting Firm
              F-1Consolidated
      Balance Sheets as of December 31, 2009 and 2008
              F-2Consolidated
      Statements of Operations for the Years Ended December 31, 2009 and
      2008
              F-3Consolidated
      Statements of Equity and Comprehensive Income (Loss) for the Years Ended
      December 31, 2009 and 2008
              F-4Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008
              F-5Notes
      to Consolidated Financial Statements
              F-7Financial
      Statement Schedule I
              F-28




- 64
-


REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders of


GC China
Turbine Corp.


No. 86,
Nanhu Avenue, East Lake Development Zone


Wuhan,
Hubei Province, PRC





We have
audited the accompanying consolidated balance sheets of GC China Turbine Corp.
and subsidiaries (the "Group") as of December 31, 2009 and 2008, and the related
consolidated statements of operations, change in equity and
comprehensive income (loss), and cash flows for each of the two years in the
period ended December 31, 2009 and the related financial statement
schedule.  These financial statements and financial statement schedule
are the responsibility of the Group's management.  Our responsibility
is to express an opinion on these 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 financial statements are free of material misstatement.  The Group
is not required to have, nor were we engaged to perform, an audit of its
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 Group's
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also 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 audits provide a reasonable basis
for our opinion.





In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of GC China Turbine Corp. and subsidiaries as
of December 31, 2009 and 2008 and the results of their operations and their cash
flows for each of the two years in the period ended December 31, 2009, in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects, the information set forth
therein.





DELOITTE
TOUCHE TOHMATSU CPA LTD.


Shanghai,
China


April 15,
2010


F-1


GC
China Turbine Corp.


CONSOLIDATED
BALANCE SHEETS


(Amounts
expressed in US dollars, except share data)





Note
                    
                    
                    December 31,
                      2009
                    
                    
                    December 31,
                      2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    
                    
                    
                    $
                    3,803,446
                    
                    
                    $
                    10,661Restricted
      cash
                    
                    
                    
                    
                    
                    2,880,281
                    
                    
                    
                    -Accounts
      receivable
                    
                    
                    
                    
                    
                    12,128,711
                    
                    
                    
                    3,196,456Inventories
                    
                    4
                    
                    
                    
                    5,087,326
                    
                    
                    
                    3,391,067Advance
      to suppliers
                    
                    
                    
                    
                    
                    3,734,728
                    
                    
                    
                    996,921Amount
      due from related party
                    
                    5
                    
                    
                    
                    2,325,212
                    
                    
                    
                    92,511Prepaid
      expenses and other current assets
                    
                    6
                    
                    
                    
                    155,780
                    
                    
                    
                    546,229Deferred
      tax assets
                    
                    14
                    
                    
                    
                    276,206
                    
                    
                    
                    163,240Total
      current assets
                    
                    
                    
                    
                    
                    30,391,690
                    
                    
                    
                    8,397,085Property
      and equipment, net
                    
                    7
                    
                    
                    
                    1,402,839
                    
                    
                    
                    1,416,851Intangible
      assets, net
                    
                    8
                    
                    
                    
                    744,175
                    
                    
                    
                    940,398Long-term
      accounts receivable
                    
                    
                    
                    
                    
                    532,387
                    
                    
                    
                    129,455Deferred
      tax assets
                    
                    14
                    
                    
                    
                    37,157
                    
                    
                    
                    74,245Other
      assets
                    
                    
                    
                    
                    
                    165,490
                    
                    
                    
                    -Total
      assets
                    
                    
                    
                    
                    $
                    33,273,738
                    
                    
                    $
                    10,958,034LIABILITIES
      & EQUITYCurrent
      liabilities:Short-term
      bank borrowings
                    
                    9
                    
                    
                    
                    -
                    
                    
                    
                    2,194,715Borrowings
      from a related party
                    
                    9
                    
                    
                    
                    -
                    
                    
                    
                    139,015Accounts
      payable
                    
                    
                    
                    
                    
                    4,574,708
                    
                    
                    
                    716,220Accrued
      expenses and other current liabilities
                    
                    10
                    
                    
                    
                    2,770,488
                    
                    
                    
                    1,013,138Deferred
      revenue
                    
                    
                    
                    
                    
                    1,856,413
                    
                    
                    
                    4,734,352Income
      tax payable
                    
                    
                    
                    
                    
                    1,416,643
                    
                    
                    
                    -Total
      current liabilities
                    
                    
                    
                    
                    
                    10,618,252
                    
                    
                    
                    8,797,440Convertible
      promissory note
                    
                    11
                    
                    
                    
                    1,182,750
                    
                    
                    
                    -Warrant
      liability
                    
                    13
                    
                    
                    
                    1,267,388
                    
                    
                    
                    -Other
      long-term liabilities
                    
                    
                    
                    
                    
                    473,198
                    
                    
                    
                    -Total
      liabilities
                    
                    
                    
                    
                    
                    13,541,588
                    
                    
                    
                    8,797,440Commitments
      and contingencies
                    
                    16EQUITYCommon
      share (US$0.001 par value; 100,000,000 shares authorized, 58,970,015 and
      32,383,808 shares issued and outstanding as of December 31, 2009 and 2008,
      respectively)
                    
                    12
                    
                    
                    
                    58,970
                    
                    
                    
                    32,384Additional
      paid-in capital
                    
                    
                    
                    
                    
                    19,884,645
                    
                    
                    
                    2,680,845Accumulated
      deficit
                    
                    
                    
                    
                    
                    (372,377
                    )
                    
                    
                    (712,024
                    )Accumulated
      other comprehensive income
                    
                    
                    
                    
                    
                    158,757
                    
                    
                    
                    159,389Total
      GC China Turbine Corp shareholders' Equity
                    
                    
                    
                    
                    
                    19,729,995
                    
                    
                    
                    2,160,594Non-controlling
      interest
                    
                    
                    
                    
                    
                    2,155
                    
                    
                    
                    -Total
      equity
                    
                    
                    
                    
                    
                    19,732,150
                    
                    
                    
                    2,160,594Total
      liabilities and equity
                    
                    
                    
                    
                    $
                    33,273,738
                    
                    
                    $
                    10,958,034





The
accompanying notes are an integral part of these consolidated financial
statements.


F-2


GC
China Turbine Corp.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Amounts
expressed in US dollars, except share data)





Year ended December 31Note
                  
                  
                  2009
                  
                  
                  2008Revenues
                  
                  
                  
                  
                  $
                  12,760,248
                  
                  
                  $
                  3,065,007Cost
      of sales
                  
                  
                  
                  
                  
                  9,792,077
                  
                  
                  
                  2,970,613Gross
      profit
                  
                  
                  
                  
                  
                  2,968,171
                  
                  
                  
                  94,394Operating
      expenses:Selling
      and marketing expenses
                  
                  
                  
                  
                  
                  144,440
                  
                  
                  
                  57,925Research
      and development expenses
                  
                  
                  
                  
                  
                  90,437
                  
                  
                  
                  94,300General
      and administrative expenses
                  
                  
                  
                  
                  
                  973,965
                  
                  
                  
                  393,782Other
      operation income
                  
                  
                  
                  
                  
                  (79,047
                  )
                  
                  
                  -Total
      operating expenses
                  
                  
                  
                  
                  
                  1,129,795
                  
                  
                  
                  546,007Income
      (loss) from operations
                  
                  
                  
                  
                  
                  1,838,376
                  
                  
                  
                  (451,613
                  )Interest
      expense
                  
                  
                  
                  
                  
                  159,229
                  
                  
                  
                  106,231Interest
      income
                  
                  
                  
                  
                  
                  (47,529
                  )
                  
                  
                  (1,405
                  )Other
      expense (income), net
                  
                  
                  
                  
                  
                  54,356
                  
                  
                  
                  (62,109
                  )Loss
      from debt extinguishment
                  
                  11
                  
                  
                  
                  57,802
                  
                  
                  
                  -Gain
      from change in fair value of warrant liability
                  
                  13
                  
                  
                  
                  (65,493
                  )
                  
                  
                  -Income
      (loss) before provision for income tax
                  
                  
                  
                  
                  
                  1,680,011
                  
                  
                  
                  (494,330
                  )Provision
      (benefit) for income tax
                  
                  14
                  
                  
                  
                  1,340,364
                  
                  
                  
                  (115,742
                  )Net
      income (loss)
                  
                  
                  
                  
                  
                  339,647
                  
                  
                  
                  (378,588
                  )Net
      income (loss) attributable to non-controlling interest
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      income (loss) attributable to GC China Turbine Corp.
      shareholders
                  
                  
                  
                  
                  $
                  339,647
                  
                  
                  $
                  (378,588
                  )Earnings
      (loss) per share- basic
                  
                  15
                  
                  
                  $
                  0.01
                  
                  
                  $
                  (0.01
                  )Earnings
      (loss) per share- diluted
                  
                  15
                  
                  
                  $
                  0.01
                  
                  
                  $
                  (0.01
                  )Weighted
      average common share outstanding- basic
                  
                  15
                  
                  
                  
                  36,899,821
                  
                  
                  
                  32,383,808Weighted
      average common share outstanding- diluted
                  
                  15
                  
                  
                  
                  38,115,890
                  
                  
                  
                  32,383,808





The
accompanying notes are an integral part of these consolidated financial
statements.


F-3





GC
China Turbine Corp.


CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME (LOSS)




(Amounts
expressed in US dollars, except share data)




AccumulatedOtherCommon Shares
                                              
                                              
                                              Additional
                                              
                                              
                                              Accumulated
                                              
                                              
                                              Comprehensive
                                              
                                              
                                              Non-controlling
                                              
                                              
                                              
                                              
                                              
                                              ComprehensiveShares
                                              
                                              
                                              Amount
                                              
                                              
                                              paid-in capital
                                              
                                              
                                              deficit
                                              
                                              
                                              income (loss)
                                              
                                              
                                              interest
                                              
                                              
                                              Total
                                              
                                              
                                              income (loss)Balance
      at January 1, 2008
                                              
                                              
                                              32,383,808
                                              
                                              
                                              $
                                              32,384
                                              
                                              
                                              $
                                              1,221,566
                                              
                                              
                                              $
                                              (333,436
                                              )
                                              
                                              $
                                              98,469
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              1,018,983Shareholders
      contribution
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,459,279
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,459,279Net
      loss
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (378,588
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (378,588
                                              )
                                              
                                              $
                                              (378,588
                                              )Foreign
      currency translation adjustments
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              60,920
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              60,920
                                              
                                              
                                              
                                              60,920Balance
      at December 31, 2008
                                              
                                              
                                              32,383,808
                                              
                                              
                                              
                                              32,384
                                              
                                              
                                              
                                              2,680,845
                                              
                                              
                                              
                                              (712,024
                                              )
                                              
                                              
                                              159,389
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,160,594
                                              
                                              
                                              $
                                              (317,668
                                              )Contribution
      from shareholders
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,463,101
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              2,155
                                              
                                              
                                              
                                              1,465,256Issuance
      of common shares upon conversion of convertible promissory notes, net of
      issuance costs (Note 11)
                                              
                                              
                                              12,500,000
                                              
                                              
                                              
                                              12,500
                                              
                                              
                                              
                                              9,893,615
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              9,906,115Issuance
      of common shares in connection with reverse
    recapitalization
                                              
                                              
                                              7,686,207
                                              
                                              
                                              
                                              7,686
                                              
                                              
                                              
                                              (5,171
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,515Issuance
      of common shares , net of issuance costs
                                              
                                              
                                              6,400,000
                                              
                                              
                                              
                                              6,400
                                              
                                              
                                              
                                              5,018,603
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              5,025,003Issuance
      of warrants (Note 13)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              917,130
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              917,130Extinguishment
      of debt from a shareholder (Note 11)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (83,478
                                              )
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (83,478
                                              )Net
      income
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              339,647
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              339,647
                                              
                                              
                                              $
                                              339,647Foreign
      currency translation adjustments
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (632
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (632
                                              )
                                              
                                              
                                              (632
                                              )Balance
      at December 31, 2009
                                              
                                              
                                              58,970,015
                                              
                                              
                                              $
                                              58,970
                                              
                                              
                                              $
                                              19,884,645
                                              
                                              
                                              $
                                              (372,377
                                              )
                                              
                                              $
                                              158,757
                                              
                                              
                                              $
                                              2,155
                                              
                                              
                                              $
                                              19,732,150
                                              
                                              
                                              $
                                              339,015





The
accompanying notes are an integral part of these consolidated financial
statements .


F-4


GC
China Turbine Corp.


CONSOLIDATED
STATEMENTS OF CASH FLOWS




(Amounts
expressed in US dollars, except share data)





Year
      ended December 31,2009
                
                
                2008OPERATING
      ACTIVITIES:Net
      income (loss)
                
                $
                339,647
                
                
                $
                (378,588
                )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Depreciation
      of property and equipment
                
                
                98,382
                
                
                
                68,136Deferred
      income taxes
                
                
                (75,621
                )
                
                
                (115,742
                )Interest
      expense accrued for promissory note
                
                
                48,720
                
                
                
                -Amortization
      of intangible assets
                
                
                197,297
                
                
                
                197,717Amortization
      of premium for convertible promissory note
                
                
                (22,250
                )
                
                
                -Loss
      from debt extinguishment
                
                
                57,802
                
                
                
                -Gain
      from change in fair value of warrant liability
                
                
                (65,493
                )
                
                
                -Changes
      in operating assets and liabilitiesIncrease
      in accounts receivable
                
                
                (8,925,117
                )
                
                
                (3,090,202
                )Increase
      in inventories
                
                
                (1,701,662
                )
                
                
                (3,138,119
                )Decrease/
      (increase) in advance to suppliers
                
                
                (2,735,602
                )
                
                
                2,724,470Increase
      in other current assets
                
                
                (647,776
                )
                
                
                (80,117
                )Increase
      in long-term accounts receivable
                
                
                (402,624
                )
                
                
                (129,455
                )Increase
      in accounts payable
                
                
                4,360,807
                
                
                
                409,381Increase/
      (decrease) in deferred revenue
                
                
                (2,881,020
                )
                
                
                342,509Increase
      in income tax payable
                
                
                1,415,984
                
                
                
                -Increase
      in other current liabilities
                
                
                1,755,564
                
                
                
                820,711Net
      cash used in operating activities
                
                
                (9,182,962
                )
                
                
                (2,369,299
                )INVESTING
      ACTIVITIES:Purchase
      of property and equipment
                
                
                (280,560
                )
                
                
                (118,869
                )Loan
      to related parties
                
                
                (1,696,774
                )
                
                
                -Purchase
      of intangible assets
                
                
                -
                
                
                
                (70,774
                )Collection
      of advance payment to a third party
                
                
                506,104Increase
      in restricted cash
                
                
                (2,878,941
                )
                
                
                -Net
      cash used in investing activities
                
                
                (4,350,171
                )
                
                
                (189,643
                )FINANCING
      ACTIVITIES:Proceeds
      from short-term bank borrowings
                
                
                -
                
                
                
                2,194,298Repayments
      of short-term bank borrowings
                
                
                (2,195,808
                )
                
                
                -Proceeds
      from short-term borrowings from related party
                
                
                4,588,764
                
                
                
                2,389,193Repayments
      of short-term borrowings to related party
                
                
                (4,727,779
                )
                
                
                (4,177,327
                )Net
      proceeds from issuance of common shares
                
                
                7,275,014
                
                
                
                -Net
      proceeds from issuance of convertible promissory notes
                
                
                9,906,115
                
                
                
                -Proceeds
      from issuance of promissory notes
                
                
                1,015,000
                
                
                
                -Proceeds
      from cash contribution from shareholders
                
                
                1,463,101
                
                
                
                1,459,279Net
      cash provided by financing activities
                
                
                17,324,407
                
                
                
                1,865,443Effect
      of exchange rate changes on cash and cash equivalents
                
                
                1,511
                
                
                
                22,995NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                
                
                3,792,785
                
                
                
                (670,504
                )Cash
      and cash equivalents at the beginning of the year
                
                
                10,661
                
                
                
                681,165Cash
      and cash equivalents at the end of the year
                
                $
                3,803,446
                
                
                $
                10,661


F-5





GC
China Turbine Corp.


CONSOLIDATED
STATEMENTS OF CASH FLOWS




(Amounts
expressed in US dollars, except share data)





Year
      ended December 31,2009
                      
                      
                      2008Supplemental
      cash flow information:Cash
      paid for interest expense
                      
                      $
                      110,509
                      
                      
                      $
                      106,231Non-cash
      investing and financing activities:Purchase
      of intangible asset by accounts payable
                      
                      $
                      -
                      
                      
                      $
                      219,472Purchase
      of property and equipment by accounts payable
                      
                      $
                      235,492
                      
                      
                      $
                      -Issuance
      of common shares upon conversion of convertible promissory
      notes
                      
                      $
                      9,906,115
                      
                      
                      $
                      -Extinguishment
      of debt
                      
                      $
                      1,063,720
                      
                      
                      $
                      -Issuance
      of a new debt
                      
                      $
                      1,205,000
                      
                      
                      $
                      -Issuance
      of common shares in connection with reverse
    recapitalization
                      
                      $
                      2,515
                      
                      
                      $
                      -Issuance
      of warrants
                      
                      $
                      917,130
                      
                      
                      $
                      -





The
accompanying notes are an integral part of these consolidated financial
statements.


F-6





GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





GC China
Turbine Corp. (the "Company") was incorporated in the State of Nevada, United
States of America, on August 25, 2006.  On July 24, 2009 and further
amended and restated on July 31, 2009, the Company entered into a binding letter
of intent (the "LOI") with Luckcharm Holdings Limited, a Hong Kong company
("LHL"), GC Nordic New Energy Co., Ltd. ("GC-Nordic"), Ceyuan Venture II, L.P.
("Ceyuan LP"), Ceyuan Ventures Advisors Fund II, LLC ("Ceyuan LLC") and
NewMargin Growth Fund L.P. ("New Margin").  Ceyuan LP, Ceyuan LLC and
New Margin are the private equity investors.  Under the terms of LOI,
the Company will acquire all of the issued and outstanding shares of LHL in
exchange for Golden Wind Holdings Limited ("GW"), a company incorporated in the
British Virgin Islands as an exempted company with limited liability under the
Companies Law of the British Virgin Islands and the parent company of LHL at
that time, acquiring fifty four percent (54%) of the Company's issue and
outstanding shares of common share (the "Exchange Transaction").  On
October 30, 2009, the Exchange Transaction was consummated.  As a
result of the Exchange Transaction, LHL became the Company's wholly-owned
subsidiary.  For accounting purpose, LHL is the acquiring entity. In
the consolidated financial statements subsequent to the transaction, the assets
and liabilities of the Company were recognized at fair value (which approximated
carrying value) on the transaction date, except for those resulted from
transactions entered into on behalf of or primarily for the benefit of LHL or
the Company after the Exchange Transaction and the assets and liabilities of LHL
were recorded at carrying amounts immediately prior to the transaction. The
amount recognized as issued equity interests was determined by adding the issued
equity interest of LHL outstanding immediately before the transaction to the
fair value of the Company. However, the equity structure was restated to reflect
the number of common shares of the Company issued to effect the transaction
using the exchange ratio prescribed by the Exchange Agreement. The historical
financial statements prior to the effective date of the Exchange Transaction are
those of LHL.  All share and per share data have been presented to
give retroactive effect of the Company’s legal capital throughout the periods
presented in these financial statements.





Luckcharm
Holding Limited was incorporated in Hong Kong on June 15, 2009 as a shell
company.  On June 28, 2009, LHL was acquired by Golden Wind Holding
Limited for cash consideration of HK$1.00 (US$0.13). On August 1, 2009, LHL
entered into an agreement to acquire 100% of the equity of Wuhan Guoce Nordic
New Energy Co., Ltd. ("GC-Nordic") for total cash consideration of $3.3 million
(RMB 22.5 million) from the original nine individual shareholders (the
"Founders").  At the time of this transaction, the Founders obtained
100% voting interests in GW in the same proportion as their ownership interest
in GC-Nordic, through a call option and voting trust agreements with Xu Hong
Bing (the "Seller"), the sole shareholder of GW for a nominal
consideration.  The acquisition of GW has been accounted for as a
reverse acquisition with no change in control.  On August 5, 2009,
GC-Nordic received approval on this acquisition from the Bureau of Commerce of
the Wuhan City, Hubei Province, People's Republic of China ("PRC"). The
restructuring process has been accounted for as a recapitalization as LHL and
GC-Nordic were under common control with no adjustment to the historical basis
of the assets and liabilities of GC-Nordic.





GC-Nordic
was established as a domestic limited liability company on August 21, 2006 upon
the issuing of a license by the Administration for Industry and Commerce of the
Wuhan City, Hubei Province, PRC with an operating period of ten years to August
20, 2016.





On
December 30, 2009, GC-Nordic incorporated a 85% owned subsidiary, Guoce Nordic
AB, ("R&D Center") in accordance with the laws of Sweden, which carried out
wind turbine technology research, develop market, produce and sell wind
turbines, build and invest in wind farms.  Tomas Lyrner, the Chief
Technology Officer of the Company, holds the remaining 15%
interest.





GC China
Turbine Corp., Luckcharm Holding Limited, GC-Nordic and R&D Center are
collectively referred to as the "Group", which is engaged in the design,
manufacture, commissioning and distribution of wind turbine generators and
provides related technical support services in the PRC.


F-7


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES
(CONTINUED)





Upon the
consummation of the Exchange Transaction on October 30, 2009,


1)
            The
      Company issued 32,383,808 common shares to GW in exchange for 100% of the
      issued and outstanding capital stock of Luckcharm (Note
    12).


2)
            US$10
      million convertible promissory notes issued to New Margin, Ceyuan LP and
      Ceyuan LLC in July 2009 were converted into 12,500,000 shares of the
      Company's common share (Note 12).


3)
            The
      Company assigned two previously issued promissory notes to Clarus Capital
      Ltd. in the amount of US$1 million ("Clarus Note I") (Note
      11).


4)
            The
      Group entered into an agreement with Clarus Capital Ltd. for a forward
      issuance of US$1 million promissory note ("Clarus Note II") (Note
      11).


5)
            The
      Group completed a private placement offering by issuing 6,400,000 shares
      of its common share to third party investors for a total consideration of
      US$8 million (Note 12). In conjunction with the private placement, the
      Group also granted 640,000 shares of warrants ("Warrant I") to these
      investors on a pro-rata basis and 560,000 shares of warrants ("Warrant
      II") to the private placement agents (Note
13).


6)
            GW,
      the parent company of the Group, entered into a make good escrow agreement
      with the private placement investors, whereby GW pledged 640,000 common
      shares of the Group for the benefit of these investors when certain events
      occur (Note 12).





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





(a)
            Basis
      of presentation





The
consolidated financial statements have been prepared in accordance with the
accounting principles generally accepted in the United States of America (“US
GAAP”).





(b)
            Basis
      of consolidation





The
consolidated financial statements include the financial statements of the Group
and its majority-owned subsidiaries.  All transactions and balances
among the Group and its subsidiaries have been eliminated upon
consolidation.





(c)
            Use
      of estimates





The
preparation of consolidated financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities that reported in the accompanying consolidated financial statements
and related disclosures, and the reported amounts of revenues and expenses
during the reporting period.  These estimates are based on
management’s best knowledge of current events and actions that the Group may
take in the future. Actual results could materially differ from these
estimates.





Significant
accounting estimates and assumptions reflected in the financial statements
include but are not limited to allowance for doubtful accounts, useful lives of
property and equipment and finite lived intangible assets, valuation of
inventories, impairment for long-lived assets, accruals for warranty costs,
recoverability of prepayments,  assumptions related to the valuation
of financial instruments  and valuation of deferred tax
assets.





(d)
            Cash
      and cash equivalents





Cash and
cash equivalents consist of cash on hand and highly liquid investments which are
unrestricted as to withdrawal or use, and which have original maturities of
three months or less when purchased.


F-8


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





(e)
            Restricted
      cash





Restricted
cash are bank demand deposits used as security against bank drafts. These are
used by the Group as short term instruments to reduce financing
cost.





(f)
            Accounts
      receivable





Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts.  An estimate for doubtful
accounts is made when collection of the full amount is no longer
probable.  Bad debts are written off as incurred. Long-term accounts
receivable with fixed or determinable payments were recorded in the accompanying
consolidated balance sheet at their net present value on the date of recognition
based on a discount rate that approximated the discount rate generally available
for discounting similar instruments with commercial bank in PRC.





(g)
            Inventories





Inventories
are stated at the lower of cost or market.  Cost is calculated on the
first-in-first-out basis and includes all costs to acquire and other costs
incurred in bringing the inventories to their present location and
condition.  The Group provides estimated inventory write-down to the
estimated market value for excessive, slow moving and obsolete inventories as
well as inventories whose carrying value is in excess of net realizable value.
The estimated market value is measured as the estimated selling price of each
class of the inventories in the ordinary course of business less estimated costs
of completion and disposal. As of December 31, 2009 and 2008, there were no such
charges to inventory.





(h)
            Property
      and equipment, net





Property
and equipment are stated at cost less accumulated depreciation and impairment
loss, if any.





Property
and equipment are depreciated over their estimated useful lives on a
straight-line basis.  Residual rates are determined based on the
economic value of the property and equipments at the end of the estimated useful
period, with a range from 3% to 5%.  Upon retirement or sale, the cost
of assets disposed of and the related accumulated depreciation are removed from
the accounts and any resulting gain or loss is recognized in statement of
income.  Repairs and maintenance costs are expensed as
incurred.  The estimated useful lives are as follows:





Useful livesElectronic
      equipment and computers
                      5
      yearsFurniture, office equipment and vehicles
                      5
      yearsMachinery
      and tools
                      5-20
      yearsLeasehold
      improvements
                      Shorter
      of the lease term or the estimated useful
lives





(i)
            Intangible
      assets, net





Intangible
assets are stated at cost less accumulated amortization and impairment losses,
if any.





Intangible
assets with finite lives are amortized over their estimated useful lives on a
straight-line basis.  The estimated useful life is as
follows:


Useful lifePurchased
      technology
                        3-10
      years




F-9


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





(j)
            Impairment
      of long-lived assets





The Group
evaluates its long-lived assets and finite lived intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset group may not be recoverable. When these events
occur, the Group compares the carrying amount of the asset group to future
undiscounted net cash flows expected to result from the use of the assets and
their eventual disposition. If the sum of the expected undiscounted cash flows
is less than the carrying amount of the assets, the Group would recognize an
impairment loss equal to the excess of the carrying amount over the fair value
of the assets. There was no impairment charge recognized for the years ended
December 31, 2009 and 2008 respectively.





(k)
            Income
      taxes





The Group
accounts for income taxes in accordance with ASC 740 (pre-codification reference
as SFAS No. 109, “Accounting
for Income Taxes,”) which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax return.  Under
this method, deferred tax liabilities and assets are determined based on the
temporary difference between the financial statement and tax basis of assets and
liabilities using presently enacted tax rates in effect. The effect on deferred
taxes of a change in tax rates is recognized in the consolidated statements of
operations in the period of change.  A valuation allowance is provided
on deferred tax assets to the extent that it is more likely than not that such
deferred tax assets will not be realized.  The total income tax
provision includes current tax expenses under applicable tax regulations and the
change in the balance of deferred tax assets and liabilities.





(l)
            Foreign
      currency translation





The
      functional currency and reporting currency of the Company is United States
      Dollar ("US Dollar").  Monetary assets and liabilities
      denominated in currencies other than the US Dollar are translated into US
      Dollar at the rates of exchange ruling at the balance sheet
      date.  Transactions in currencies other than the US Dollar
      during the year are converted into the US Dollar at the applicable rates
      of exchange prevailing on the day transactions
      occurred.  Transaction gains and losses are recognized in the
      statements of income.





The
      financial records of the Group's PRC subsidiary are maintained in Renminbi
      ("RMB") which is its functional currency.  Assets and
      liabilities are translated at the exchange rates at the balance sheet
      date, equity accounts are translated at historical exchange rates and
      revenues, expenses, gains and losses are translated using the average rate
      for the year. Translation adjustments are reported as cumulative
      translation adjustments and are shown as a separate component of
      accumulated other comprehensive income in the statement of equity and
      comprehensive income (loss).





The RMB
is not a freely convertible currency. The State Administration for Foreign
Exchange of People's Republic of China ("PRC"), under the authority of the
People’s Bank of China, controls the conversion of RMB into foreign currencies.
The value of the RMB is subject to changes in central government policies and to
international economic and political developments affecting supply and demand in
the China foreign exchange trading system market. The Group's aggregate amount
of cash and cash equivalents dominated in RMB amounted to US$2,628,538 and
US$10,661 as of December 31, 2009 and 2008, respectively.


F-10


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





(m)
            Revenue
      recognition





The Group
recognizes revenues in accordance with ASC 605-10 (pre-codification reference as
Staff Accountant Board ("SAB") No.104, "Revenue Recognition"), when
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the price is fixed or determinable and collectability is
reasonably assured. For an arrangement with multiple deliverables, the Group
recognizes product revenues in accordance with ASC 605-25 (pre-codification
reference as Emerging Issues Task Force ("EITF") No.00-21, "RevenueArrangements with Multiple
Deliverables").





The Group
is not contractually obligated to accept returns.  The sales of goods
and services involve inconsequential or perfunctory performance
obligations.  These obligations can include non-essential installation
or training, provision of product manuals and materials, and limited,
pre-scheduled technical maintenance support. When the only remaining undelivered
performance obligation under an arrangement is inconsequential or perfunctory,
the Group recognizes revenue on the delivery of turbines, the predominant
deliverable in the total contract and provides for the cost of the unperformed
obligations. Cash advances received from customers before the revenue is earned
are classified as deferred revenue.





(n)
            Cost
      of Sales





Cost of
sales includes production cost, which includes material, direct labor and
manufacturing expenses (i.e. depreciation and amortization expenses), and
indirect costs, as well as shipping and handling costs for products sold,
royalty payments, and warranty costs.





(o)
            Warranty
      cost





Limited
warranties are provided to the wind turbine generators for two years following
delivery for defects in equipment hardware.  Various suppliers provide
warranties to the Group on components purchased.  Warranty costs are
accrued as revenues are recognized and are offset by any recoveries received
from suppliers.  Actual warranty costs are accumulated and charged
against the accrued warranty liability.  Product warranties are
accrued at 2% of wind turbine sales based on an assessment of industry norms
which also represents the Group's best estimate to date.  The Group
accrued US$236,629 and US$57,525 warranty costs during the years ended December
31, 2009 and 2008, respectively.  As of December 31, 2009, US$20,244
warranty accrual was used. If the Group begins to experience warranty claims
differing from the current accrual rate, the warranty accrual rate would be
prospectively revised.





Warranty costAs
      of January 1, 2008
                    
                    $
                    -Addition
                    
                    
                    57,525Utilization
                    
                    
                    -As
      of December 31, 2008
                    
                    
                    57,525Addition
                    
                    
                    236,629Utilization
                    
                    
                    20,244As
      of December 31, 2009
                    
                    $
                    273,910




F-11


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





(p)
            Government
      subsidies





Government
subsidies are recognized when received and when all the conditions for their
receipt have been met.  Government grants whose primary condition is
that the Group should purchase, construct or otherwise acquire non-current
assets are recognized as non-current liabilities in the balance sheet and
transferred to profit or loss on a systematic and rational basis over the useful
lives of the related assets.  Government grants for revenue and/or
expenses should be recognized in income when the related revenue and/or expense
are recorded.





In 2009,
the Group received unrestricted government subsidies from local government
agency allowing the Group full discretion in the fund utilization of US$79,047,
which was recorded in other operating income in the consolidated statements of
income.  In 2008, the Group received a government grant, which is
related to the Group's activities in research and development projects, from a
local government agency in the amount of US$42,435.  The Group records
the government grant against the research and development expenses when
incurred.





(q)
            Fair
      value of financial instruments





The Group
estimates fair value of financial assets and liabilities as the price that would
be received from the sale of an asset or paid to transfer a liability (an exit
price) on the measurement date in an orderly transaction between market
participants. The fair value measurement guidance establishes a
three-level fair value hierarchy that prioritizes the inputs into the
valuation techniques used to measure fair value. The fair value hierarchy gives
the highest priority, Level 1, to measurements based on unadjusted quoted prices
in active markets for identical assets or liabilities and lowest priority, Level
3, to measurements based on unobservable inputs and classifies assets and
liabilities with limited observable inputs or observable inputs for similar
assets or liabilities as Level 2 measurement. The Group determines the fair
value of an asset or liability using valuation techniques that maximize the use
of observable inputs.





(r)
            Earnings
      (loss) per share





Basic
earnings (loss) per share is computed by dividing earnings attributable to
holders of common shares by the weighted average number of common shares
outstanding during the year.  Diluted earnings (loss) per common share
reflects the potential dilution that could occur if securities or other
contracts to issue common shares were exercised or converted into common
shares.  Common share equivalents are excluded from the computation in
loss periods as their effects would be anti-dilutive.





(s)
            Comprehensive
      income (loss)





Comprehensive
income (loss) includes all changes in equity except those resulting from
investments by owners and distributions to owners and is comprised of net income
(loss) and foreign currency translation adjustments.





(t)
            Research
      and development





Research
and development costs are expensed as incurred.  Generally all
research and development is performed internally for the benefit of the
Group.  The Group does not perform such activities for
others.  Research and development costs include salaries, amortization
of intangible asset used for research and development purposes, utilities, and
miscellaneous items directly related to research and development activities.
Research and development expenses for the years ended December 31, 2009 and 2008
amounted to $90,437 and $94,300, respectively.


F-12


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





(u)
            Concentration
      of credit risk





Financial
instruments that potentially expose the Group to significant concentrations of
credit risk consist principally of cash and cash equivalents, accounts
receivable and long-term accounts receivable and advance to
suppliers.  The Group places its cash and cash equivalents with
financial institutions with high-credit ratings and quality.





The Group
conducts credit evaluation of customers and generally does not require
collateral or other securities from its customers.  The Group
establishes an allowance for doubtful accounts primarily based upon the age of
the receivables and factors surrounding the credit risk of specific customers.
With respect to advances to suppliers, who are primarily the suppliers of wind
turbine components, the Group performs ongoing credit evaluations of its
suppliers' financial conditions.  The Group generally does not require
collateral or other security against advance to suppliers; however, it maintains
reserves for potential credit losses and such losses have historically been
within management's expectations.





(v)
            Business
      risks





The
Group's near term, and possibly long term, prospects are significantly dependent
upon several customers. Revenues and outstanding accounts receivable for the
years ended December 31, 2009 and 2008 were from only two customers and one
customer, respectively. As a result, currently the Group is substantially
dependent upon the continued participation of these customers in order to
maintain and continue to grow its total revenues. Significantly reducing the
Group's dependence on these customers is likely to take a long time and there
can be no guarantee that the Group will succeed in reducing that
dependence.





The
following table summarizes revenues and accounts receivable for customers that
accounted for 10% or more of accounts receivable or revenues:





Accounts receivableDecember
      31,2009
                    
                    
                    2008Customer
      A
                    
                    
                    44
                    %
                    
                    
                    100
                    %Customer
      B
                    
                    
                    56
                    %
                    
                    
                    -





RevenuesYear
      ended December 31,2009
                    
                    
                    2008Customer
      A
                    
                    
                    37
                    %
                    
                    
                    100
                    %Customer
      B
                    
                    
                    63
                    %
                    
                    
                    -


F-13


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





(w)
            Recently
      issued accounting pronouncements





In
January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair
Value Measurements. The ASU amends ASC 820 (formerly Statement No. 157, Fair
Value Measurements) to add new requirements for disclosures about transfers into
and out of Levels 1 and 2 and separate disclosures about purchases, sales,
issuances, and settlements relating to Level 3 measurement on a gross basis
rather than as a net basis as currently required.  ASU 2010-06 also
clarifies existing fair value disclosures about the level of disaggregation and
about inputs and valuation techniques used to measure fair value.  ASU
2010-06 is effective for annual and interim periods beginning after December 15,
2009, except for the requirement to provide the level 3 activity of purchases,
sales, issuances, and settlements on a gross basis, which will be effective for
annual and interim periods beginning after December 15, 2010.  Early
application is permitted and in the period of initial adoption, entities are not
required to provide the amended disclosures for any previous periods presented
for comparative purposes.  The Group is currently evaluating the
impact of adoption on its consolidated financial statements.





In
January 2010, the FASB issued ASU 2010-05, “Compensation — Stock Compensation
(Topic 718) — Escrowed Share Arrangements and the Presumption of Compensation
(previously EITF Topic D-110, “Escrowed Share Arrangements and the Presumption
of Compensation”). This ASU provides the SEC Staff’s views on overcoming the
presumption that for certain shareholders escrowed share arrangements represent
compensation. The SEC Staff believes that an escrowed share arrangement in which
the shares are automatically forfeited if employment terminates is compensation,
consistent with the principle articulated in ASC 805, “Business Combinations”.
The Group is currently evaluating the impact of adoption on its consolidated
financial statements.





In
December 2009, the FASB issued ASU 2009-17, Consolidations (Topic 810) –
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities which amends the FASB Accounting Standards Codification for
the issuance of FASB Statement No. 167, Amendments to FASB Interpretation No.
46(R), issued by the FASB in June 2009.  The amendments in this ASU
replace the quantitative-based risks and rewards calculation for determining
which reporting entity, if any, has a controlling financial interest in a
variable interest entity with an approach primarily focused on identifying which
reporting entity has the power to direct the activities of a variable interest
entity that most significantly impact the entity's economic performance and (1)
the obligation to absorb the losses of the entity or (2) the right to receive
the benefits from the entity.  ASU 2009-17 also requires additional
disclosure about a reporting entity's involvement in variable interest entities,
as well as any significant changes in risk exposure due to that
involvement.  ASU 2009-17 is effective for annual and interim periods
beginning after November 15, 2009.  Early application is not
permitted.  The Group adopted ASU 2009-17 from January 1, 2010. 
The Group considers that the adoption of ASU 2009-17 has no significant impact
on its consolidated financial statements.





In
October 2009, the FASB published FASB ASU 2009-13, Revenue Recognition (Topic
605) - Multiple-Deliverable Revenue Arrangements. ASU 2009-13 addresses the
accounting for multiple-deliverable arrangements to enable vendors to account
for products or services (deliverables) separately rather than as a combined
unit. Specifically, this guidance amends the criteria in ASC Subtopic 605-25,
Revenue Recognition-Multiple-Element Arrangements, for separating consideration
in multiple-deliverable arrangements. This guidance establishes a selling price
hierarchy for determining the selling price of a deliverable, which is based on:
(a) vendor-specific objective evidence if available; (b) third-party evidence if
vendor-specific objective is not available; or (c) estimated selling price if
neither vendor-specific objective evidence nor third-party evidence is
available. This guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the relative selling price method. In
addition, this guidance significantly expands required disclosures related to a
vendor's multiple-deliverable revenue arrangements.   The
provisions of ASU 2009-13 are effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010. Early adoption is permitted.  The Group is currently
evaluating the impact of adoption on its consolidated financial
statements.


F-14


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





3.
            FAIR
      VALUE MEASUREMENT





As of
December 31, 2009, information about inputs into the fair value
measurements of the Group’s assets and liabilities that are measured at fair
value on a recurring basis in periods subsequent to their initial recognition is
as follows:





Fair Value Measurements at December 31, 2009UsingQuoted PricesTotal Fair
                    
                    
                    in Active
                    
                    
                    SignificantValue and
                    
                    
                    Markets for
                    
                    
                    Other
                    
                    
                    SignificantCarrying
                    
                    
                    Identical
                    
                    
                    Observable
                    
                    
                    UnobservableValue on the
                    
                    
                    Assets
                    
                    
                    Inputs
                    
                    
                    InputsBalance Sheet
                    
                    
                    (Level 1)
                    
                    
                    (Level 2)
                    
                    
                    (Level 3)Liabilities:Warrant
      Liability
                    
                    $
                    1,267,388
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    1,267,388Total
      liabilities
                    
                    $
                    1,267,388
                    
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    1,267,388





The Level
3 liability was recorded in 2009 and its fair value on day 1 was US$1,332,881. A
summary of changes in Level 3 liability for the year ended December 31,
2009 is as follows:





Beginning
      balance
                                    
                                    $
                                    -Issuance
                                    
                                    
                                    1,332,881Total
      (gains)losses (unrealized)Included
      in earnings
                                    
                                    
                                    (65,493
                                    )Including
      in other comprehensive income
                                    
                                    
                                    -Ending
      balance
                                    
                                    $
                                    1,267,388The
      amount of total (gains) or losses for the year included in earnings
      attributable to the change in unrealized gains or losses relating to
      assets still held at the reporting date
                                    
                                    $
                                    (65,493
                                    )





The fair
value of the warrant is estimated using binomial model (Note 13).It is classified as
level 3 in the fair value hierarchy as the fair value estimation involves
significant assumptions that are not observable in the market.





The
estimated fair value of the Company’s financial instruments, including accounts
receivables, advances to suppliers, accounts payable, amount due from related
parties and short-term borrowings, approximates their carrying value at
December 31, 2009, and 2008 due to their short-term nature. The fair value
of long-term accounts receivable was approximately US$532,387 and US$129,455,
respectively, as of December 31, 2009 and 2008, and was estimated by discounted
cash flow method using prevailing market interest rate on the valuation date as
discount rate. The fair value of convertible debt is approximately US$1,255,000
as of December 31, 2009 and is estimated based on the fair value of common
shares the debt is convertible into on the valuation date.


F-15


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





4.
            INVENTORIES





The Group's inventories as of
December 31, 2009 and 2008 are summarized as follows:





December 31,
                      2009
                    
                    
                    December 31,
                      2008Raw
      materials
                    
                    $
                    431,618
                    
                    
                    $
                    2,885,327Work
      in progress
                    
                    
                    130,030
                    
                    
                    
                    505,740Finish
      goods
                    
                    
                    4,525,678
                    
                    
                    
                    -$
                    5,087,326
                    
                    
                    $
                    3,391,067





5.
            AMOUNT
      DUE FROM RELATED PARTIES





Parties
are considered to be related if one party has the ability, directly or
indirectly, to control the other party or exercise significant influence over
the other party in making financial and operational
decisions.  Parties are also considered to be related if they are
subject to common control or common significant influence.  Related
parties may be individuals or corporate entities.





The
following entities are considered to be related parties to the Group because
they are affiliates of the Group under the common control of the Group's major
shareholder.  The related parties only act as service providers and
borrowers to the Group and there is no other relationship wherein the Group has
the ability to exercise significant influence over the operating and financial
policies of these parties.  The Group is not obligated to provide any
type of financial support to these related parties.





Related Party
              
              Nature of the party
              
              Relationship with the GroupWuhan
      Guoce Science & Technology Corp. ("GC-Tech")
              
              Electric
      power equipment manufacturer
              
              Controlled
      by Hou Tiexin (Controlling shareholder of
      the  Group)Wuhan
      Guoce Electricity Investment Co., LTD. ("Guoce Electricity
      Investment")
              
              Investment
      and management company
              
              Controlled
      by Hou Tiexin (Controlling shareholder of the Group)Join
      Right Management Limited ("Join Right")
              
              Investment
      and management company
              
              Controlled
      by Hou Tiexin (Controlling shareholder of the Group)Wuhan
      Sanlian Water & Electricity Control Equipment Co., Ltd. ("Wuhan
      Sanlian")
              
              Electric
      control equipment manufacturer
              
              Controlled
      by Xu Jiarong(Director
      of the Group)New
      Margin Growth Fund L.P. ("New Margin")
              
              Investment
      and management Company
              
              Principle
      shareholder of the Group (Note
11)




Amount Due From Related PartiesDecember 31,
                      2009
                    
                    
                    December 31,
                      2008GC-Tech
                    
                    $
                    1,837,636
                    
                    
                    $
                    92,511Guoce
      Electricity Investment
                    
                    
                    266,687
                    
                    
                    
                    -Wuhan
      Sanlian
                    
                    
                    210,889
                    
                    
                    
                    -Join
      Right
                    
                    
                    10,000
                    
                    
                    
                    -Amount
      due from related parties
                    
                    $
                    2,325,212
                    
                    
                    $
                    92,511




F-16


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





5.
            AMOUNT
      DUE FROM RELATED PARTIES
(CONTINUED)





The Group
had US$1,837,636 and US$92,511 due from GC-Tech as of December 31, 2009 and
2008, respectively. The amount of US$1,837,636 represents the prepayment of
US$407,549 to GC-Tech who imports raw materials from overseas on behalf of the
Group and a related party loan of US$1,430,087, the Group extended to
GC-Tech.  Interest rate of the related party loan is 5.4%, which
benchmarks to the one year borrowing rate for bank loans from People's Bank of
China.





The Group
had US$266,687 and nil due from Guoce Electricity Investment as of December 31,
2009 and 2008, respectively. The amount represents short term related party loan
with zero interest rate, and this amount was settled subsequently in March
2010.





The Group
had US$210,889 and nil due from Wuhan Sanlian as of December 31, 2009 and 2008,
respectively. The amount represents the prepayment to Wuhan Sanlian for purchase
of production material.





6.
            PREPAID
      EXPENSES AND OTHER CURRENT ASSETS





Prepaid
expenses and other current assets consisted of the following:





December 31,
                    2009
                  
                  
                  December 31,
                    2008Other
      receivable
                  
                  $
                  -
                  
                  
                  $
                  505,867Staff
      advance
                  
                  
                  72,561
                  
                  
                  
                  24,175Deferred
      assets
                  
                  
                  59,050
                  
                  
                  
                  14,358Others
                  
                  
                  24,169
                  
                  
                  
                  1,829$
                  155,780
                  
                  
                  $
                  546,229





7.
            PROPERTY
      AND EQUIPMENT, NET





Property and equipment consisted of
the following:


December 31,
                    2009
                  
                  
                  December 31,
                    2008Electronic
      equipment and computers
                  
                  $
                  94,636
                  
                  
                  $
                  81,816Furniture,
      office equipment and vehicles
                  
                  
                  124,399
                  
                  
                  
                  105,524Machinery
      and tools
                  
                  
                  1,297,502
                  
                  
                  
                  1,250,707Leasehold
      improvements
                  
                  
                  55,228
                  
                  
                  
                  49,3481,571,765
                  
                  
                  
                  1,487,395Less:
      Accumulated depreciation
                  
                  
                  168,926
                  
                  
                  
                  70,544Property
      and equipment, net
                  
                  $
                  1,402,839
                  
                  
                  $
                  1,416,851





The Group
recorded depreciation expense of US$98,382 and US$68,136 for the years ended
December 31, 2009 and 2008, respectively.


F-17


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





8.
            INTANGIBLE
      ASSETS, NET





Intangible assets consist of the
following:


December 31,
                          2009
                        
                        
                        December 31,
                          2008Gross
      carrying amount -Purchased
      technology
                        
                        $
                        1,150,812
                        
                        
                        $
                        1,149,738Less:
      Accumulated amortization -Purchased
      technology
                        
                        
                        406,637
                        
                        
                        
                        209,340Intangible,
      net
                        
                        $
                        744,175
                        
                        
                        $
                        940,398





The Group
recorded amortization charges of US$197,297 and US$197,717 for the years ended
December 31, 2009 and 2008, respectively.





The
annual estimated amortization expense for the next five years is as
follows:


2010
                      
                      $
                      197,0102011
                      
                      
                      99,4222012
                      
                      
                      99,4222013
                      
                      
                      99,4222014
                      
                      
                      99,422Thereafter
                      
                      
                      149,477$
                      744,175





9.
            SHORT-TERM
      BORROWINGS AND BORROWINGS FROM A RELATED
PARTY





December 31,
                    2009
                  
                  
                  December 31,
                    2008Short-term
      bank borrowings
                  
                  $
                  -
                  
                  
                  $
                  2,194,715Borrowings
      from a related party
                  
                  $
                  -
                  
                  
                  $
                  139,015Total
                  
                  $
                  -
                  
                  
                  $
                  2,333,730





As of
December 31, 2008, the Group had a short-term unsecured loan, which is
guaranteed by a third party, from the PRC bank in the amount of
US$2,194,715.  The maturity date of the short term loan outstanding
from the PRC bank at December 31, 2008 was July 2009.  The interest
rate of outstanding short-term loan at December 31, 2008 was 8.74%, which is
subject to adjustment in accordance with the basic interest rate released by
People's Bank of China.  The Group repaid the PRC bank loan in July
2009.





The Group
had short-term loans from GC-Tech in the amount of US$139,015 as of December 31,
2008.  The loan was provided to the Group for daily operational
purposes and working capital needs by GC-Tech.  The related party loan
was interest free.  The Group repaid the short-term borrowings from a
related party in the full amount of US$139,105 in 2009.


F-18


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





10.
            ACCRUED
      EXPENSES AND OTHER CURRENT
LIABILITIES





Accrued expenses and other current
liabilities consist of the following:





December 31,
                      2009
                    
                    
                    December 31,
                      2008Payroll
      and bonus payable
                    
                    $
                    67,887
                    
                    
                    $
                    52,063Accrued
      customs duty
                    
                    
                    -
                    
                    
                    
                    91,460Other
      tax payables
                    
                    
                    1,594,890
                    
                    
                    
                    513,570Warranty
      accrual
                    
                    
                    273,910
                    
                    
                    
                    57,525Royalty
      accrual
                    
                    
                    559,543
                    
                    
                    
                    110,964Others
                    
                    
                    274,258
                    
                    
                    
                    187,556$
                    2,770,488
                    
                    
                    $
                    1,013,138





11.
            PROMISSORY
      NOTE AND CONVERTIBLE PROMISSORY
NOTES





On July
31, 2009, the Company executed convertible promissory notes in favour of New
Margin, Ceyuan LP and Ceyuan LLC in the amount of US$5 million, US$4.8 million
and US$0.2 million, respectively (collectively, the "Promissory
Notes").  The Promissory Notes earn simple interest at an annual
percentage rate equal to 6% or the lowest rate permissible by law (i.e.,
0%).  The Promissory Notes do not have a contractual maturity
date.  They will either be converted into common shares of the Company
at US$0.80 per share when the Exchange Transaction is consummated, or be
converted into a 29.87% equity interests in GC-Nordic if the Exchange
Transaction fails. The Promissory Notes were accounted for as equity instruments
because legally they were equity instruments and the holders would not be
entitled to creditor's rights in any situation including bankruptcy and
liquidation. Immediately after the issuance, the proceeds received were
transferred to LHL in the form of short-term borrowings, which were eliminated
upon consummation of the Exchange Transaction. The Promissory Notes were
converted into 12,500,000 common shares of the Company pursuant to the
contractual conversion provision on October 30, 2009 (Note 12).





In
contemplation of the Exchange Transaction between the Company and LHL, on June
8, 2009, the Company issued a promissory note of US$600,000 to New Margin ("New
Margin Note") and a promissory note of US$415,000 to Coach Capital LLC (“Coach
Note”), respectively. Both notes were due on demand and carried an interest of
one percent per month. The New Margin Note had no conversion feature. The Coach
Note was convertible into the common share of the Company by the holder at a
price equal to the lesser of US$1.00 per share or the issue price of the latest
share offering prior to the exercise of the conversion option. The proceeds
received were transferred to LHL via a promissory note, which was eliminated
upon consummation of the Exchange Transaction. On October 30, 2009, the New
Margin Note and the Coach Note were assigned to Clarus Capital Ltd., a United
States based company who served as the financial advisor for the Group and the
agent for the US$8 million private placement (Note 12) and superseded by a
promissory note to Clarus Capital Ltd. (the “Holder”) in the principal amount of
US$1,000,000. All accrued but unpaid interest on the previous two notes were
waived. Clarus Note I shall be due and payable by the Company on or before
October 31, 2011 ("Maturity Date") and bears no interest. It is convertible, in
whole but not in part, into shares of the Company at a price of US$2.00
(“Conversion Price”) per share at anytime on or before the Maturity Date. On the
six-month anniversary of the date that the Company provides a confirmation to
Holder of the delivery of twenty wind turbine systems by the Company’s direct
wholly-owned subsidiary, GC-Nordic to its customers, Clarus Note I shall be
automatically converted into common shares of the Company at the Conversion
Price. The Company accounted for the assignment and modification of the Coach
Note as a debt extinguishment, and recorded a loss on debt extinguishment of
US$57,802 in the consolidated statements of operations. The Company accounted
for the assignment and modification of the New Margin Note as a capital
transaction given New Margin's equity shareholder capacity on the Extinguishment
Date. The amount that otherwise would have been recognized as loss on debt
extinguishment, or US$83,478, was recorded against additional paid-in capital.
The Clarus Note I was deemed as a new debt instrument and recorded at fair value
of US$1,205,000 on October 30, 2009. The fair value in excess of principal
amounted US$205,000 is accounted for as premium to be amortized by effective
interest rate method through the Maturity Date.  US$22,250 was
amortized into interest income for the year ended December 31, 2009. The
conversion option was not an embedded derivative requiring bifurcation under US
GAAP, and the Company did not record a beneficial conversion feature on Clarus
Note I as the effective conversion price was not less than the estimated fair
value of the Company's common share the note is convertible into on the note
issuance date.


F-19


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





11.
            PROMISSORY
      NOTE AND CONVERTIBLE PROMISSORY NOTES
  (CONTINUED)




On
October 30, 2009, the Company also entered into an agreement with Clarus Capital
Ltd. for a forward issuance of US$1 million promissory note to Clarus Capital
Ltd. upon the date that GC-Nordic has delivered 20 wind turbine systems to its
customers. The Clarus Note II bears no interest and will have a maturity of two
years from the date of issuance. The note will be convertible by the Holder into
the Company's common share at anytime on or before maturity at a price of
US$2.00 per share, and is automatically convertible six months after
issuance.  The Company will account for this note once the note is
issued. As of December 31, 2009, Claurs Note II has not yet been
issued.





12.
            COMMON
      SHARES





On
October 30, 2009, the Company issued 32,383,808 shares of its common share
to Golden Wind Holdings Ltd. in exchange for 100% of the issued and outstanding
capital stock of LHL.  As stated in Note 1, the equity structure prior
to October 30, 2009 was restated to reflect the number of common shares of GCTC
issued to effect the transaction using the exchange ratio prescribed by the
Exchange Agreement. The historical financial statements prior to the effective
date of the Exchange Transaction are those of LHL.  All share and per
share data have been presented to give retroactive effect of GCTC’s legal
capital throughout the periods presented in these financial
statements.  The Company had 7,686,207 shares outstanding immediately
before the Exchange Transaction, which were deemed as shares issued by LHL, the
accounting acquirer, to the Company, the accounting acquiree.





On
October 30, 2009, upon the closing of the Exchange Transaction, the US$10
million convertible promissory notes issued to New Margin, Ceyuan LP, and Ceyuan
LLC, were converted into 12,500,000 common shares at a conversion price per
share equal to US$0.80, net off issuance costs of US$93,885 (Note
11).





Concurrent
with the Exchange Transaction, on October 30, 2009, the Company also completed a
private placement offering under which 6,400,000 common shares were issued to
third party investors at US$1.25 per share for a total consideration of US$8
million. The Company received net cash proceeds of US$7,275,014. The issuance
costs included 1) US$724,986 in cash for legal, accounting, and other direct
issuance costs and 2) 560,000 shares of warrants (Warrant II) issued to a
private placement agent for no consideration, which had fair value as US$917,130
upon issuance (Note 13).  To investor subscribed for common shares,
the Company also granted a total of 640,000 shares of warrants (Warrant I) to
purchase common shares on a pro rata basis, which was recognized a warrant
liability (Note 13).  The net cash proceeds were further assigned to
the fair value of the warrant liability for US$1,332,881 on the issuance
date.





In
connection with the private placement offering, the Company, GW and the
investors entered into a make good escrow agreement, whereby GW pledged 640,000
common shares of the Company into escrow for the benefit of investors in the
event the Company fails to satisfy certain After-Tax Net Income (ATNI)
threshold. Specifically, if the ATNI for the fiscal year ending December 31,
2010 reported in the  Company's  Annual Report on Form 10-K
as filed with the Securities Exchange Commission is less than US$12,500,000,
shares in escrow will be transferred to each investor on a pro rata basis for no
additional consideration, at a number equal to pre-set formula agreed between GW
and investors (the "2010 Make Good Shares"), provided, that the number of 2010
Make Good Shares shall in no event exceed 640,000 shares. If the ATNI threshold
is satisfied, no transfer of the 640,000 shares shall be made to the investors
and all 640,000 shares deposited with the escrow agent shall immediately be
returned to GW.  The make good escrow agreement represents a
transaction among shareholders and has no impact on the Group's consolidated
financial statements because the Company is not legally liable for the escrow
shares in any circumstances.


F-20


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





13.
            WARRANTS





In
conjunction with the private placement offering of 6,400,000 common shares on
October 30, 2009, the Company granted Warrant I to each investor in an amount
equal to 10% of purchased common shares, or a total of 640,000
shares.  The warrants had an exercise price of US$1.00 per share and
were exercisable any time within three years from the date of issuance. However
if the fiscal year 2010 ATNI is less than a guaranteed US$12,500,000, the
Company will reduce the exercise price of each warrant to equal to Adjusted
Exercise Price in accordance to a pre-set formula, provided that if the Adjusted
Exercise Price is negative, the Adjusted Exercise Price will be deemed to equal
to US$0.001 per share. The Company recorded the fair value of the warrants of
US$1,332,881 as warrant liability in the consolidated balance sheets as the
warrants do not qualify for equity classification under US GAAP. The warrant
liability was remeasured at fair value of US$1,267,388 at December 31, 2009. The
fair value change of US$65,493 was recorded as gain on change in fair value of
warrant liability in the consolidated statements of operations.





In
connection with the same private placement, the Company granted 560,000 shares
of Warrant II to the agents as compensation for received consulting
services.  The warrants had an exercise price of US$1.00 per share and
were exercisable any time within three years from the date of
issuance.  The fair value of the warrants of US$917,130 was accounted
for as equity instruments on the grant date, and was netted against proceeds
from private placement offering as part of equity issuance costs.





The fair
value of the warrants was computed using binomial option pricing model and the
following assumptions:





Warrant
      I
                    
                    
                    Warrants
      IIOctober 31, 2009
                    
                    
                    December 31, 2009
                    
                    
                    October 31, 2009Contractual
      life
                    
                    3
      years
                    
                    
                    2.8
      years
                    
                    
                    3
      yearsVolatility
                    
                    
                    66.28
                    %
                    
                    
                    65.94
                    %
                    
                    
                    66.28
                    %Expected
      dividend
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Average
      risk-free rate
                    
                    
                    1.42
                    %
                    
                    
                    1.59
                    %
                    
                    
                    1.42
                    %





None of
the above warrants had been exercised as of December 31, 2009.





14.
            INCOME
      TAXES





(a)
            Tax
      law of each tax jurisdictions





United
States





Under the
federal and state income tax law of United States, the Company is subjected to
tax on its income or capital gains.  As at December 31, 2009, the
Company does not have any assessable profits and accordingly, no provision for
federal and state income taxes have been provided thereon.





Hong Kong





LHL did
not have assessable profits that were earned in or derived from Hong Kong during
the year ended December 31, 2009 and 2008.  Accordingly, no Hong Kong
profits tax has been provided for.





China





GC-Nordic
is subject to Enterprise Income Tax, or EIT, on the taxable income as reported
in its statutory financial statements adjusted in accordance with relevant PRC
income tax laws.





PRC CIT
was generally assessed at the rate of 33% of taxable income prior to January 1,
2008.  On March 16, 2007, the National People's Congress of the PRC
approved and promulgated the new Enterprise Income Tax Law ("new EIT Law"),
which took effect beginning January 1, 2008.  Under the new EIT law,
foreign investment enterprise and domestic companies are subject to a uniform
tax rate of 25%.


F-21


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





14.
            INCOME
      TAXES (CONTINUED)





(b)
            Reconciliation
      from income tax at statutory rate to effective tax
  rate





The
following table sets out the reconciliation from the statutory CIT rate to the
Group’s effective tax rate:





Year
      ended
                      December
      31,2009
                    
                    
                    2008Statutory
      EIT rate
                    
                    
                    25
                    %
                    
                    
                    25
                    %Effect
      of different tax rate of group entities in other
    jurisdictions
                    
                    
                    (2
                    )%
                    
                    
                    -Tax
      effect of donation that are not deductible in determining taxable
      profit
                    
                    
                    49.4
                    %
                    
                    
                    -Tax
      effect of other expense that are not deductible in determining taxable
      profit
                    
                    
                    (0.4
                    )%
                    
                    
                    (2
                    )%Change
      in valuation allowance
                    
                    
                    8
                    %
                    
                    
                    -Effective
      EIT rate
                    
                    
                    80
                    %
                    
                    
                    23
                    %





The
actual effective tax rates for the year ended December 31, 2009 and 2008 are 80%
and 23%, respectively.  The increase of the effective tax rate is
mainly attributable to the income tax liability of US$825,000 arising from the
US$3,300,000 cash consideration paid by LHL to the Founders during the
recapitalization (Note 1) which was deemed as donation subject to PRC income
tax.





(c)
            Deferred
      tax





Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.  Significant components of
the Group's net deferred tax assets are as follows:





December 31,
                        2009
                      
                      
                      December 31,
                        2008Deferred
      tax assetsNet
      operating losses carried forward
                      
                      $
                      139,867
                      
                      
                      $
                      90,715Accrued
      expenses
                      
                      
                      257,627
                      
                      
                      
                      72,525Pre-operating
      expenses
                      
                      
                      55,736
                      
                      
                      
                      74,245Less:
      valuation allowance
                      
                      
                      (139,867
                      )
                      
                      
                      -$
                      313,363
                      
                      
                      $
                      237,485Analysis
      as:Current
                      
                      $
                      276,206
                      
                      
                      $
                      163,240Non-current
                      
                      
                      37,157
                      
                      
                      
                      74,245$
                      313,363
                      
                      
                      $
                      237,485


F-22


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





14.
            INCOME
      TAXES (CONTINUED)





As of
December 31, 2009, deductible net operating loss carry-forwards including the
Company and LHL were US$410,827 and US$1,128, which were subject to the federal
tax rate of 34% and the profit tax rate of 16.5% in Hong Kong, respectively.
Then Company and LHL do not have enough profit in the foreseeable future to
realize the tax benefit. The Group believes that it is more likely than not that
the benefit from the net operating loss carry forward will not be realized. The
Group has fully provided a valuation allowance on the deferred tax assets
relating to these operating losses carry forward. If or when recognized, the tax
benefits relating to any reversal of the valuation allowance on deferred tax
assets will be recognized as a deduction of income tax expense.





(c)
            Significant
      components of income tax expense





Income
tax for the PRC subsidiary is calculated on a separate entity
basis.  The Group's PRC subsidiary files stand-alone tax
returns.  The provisions for the Group's income taxes for the years
ended December 31, 2009 and 2008, respectively, are summarized as
follows:


December 31,
                    2009
                  
                  
                  December 31,
                    2008Current
      tax
                  
                  $
                  1,415,985
                  
                  
                  $
                  -Deferred
      tax benefit
                  
                  
                  (75,621
                  )
                  
                  
                  (115,742
                  )$
                  1,340,364
                  
                  
                  $
                  (115,742
                  )


(d)
            Uncertainty
      in income tax





Effective
January 1, 2007, the Group adopted FASB ASC 740, (pre-codification reference as
"FIN 48"), which prescribes a more-likely-than-not threshold for financial
statement recognition and measurement of a tax position taken in the tax
return.  This interpretation also provides guidance on de-recognition
of income tax assets and liabilities, classification of current and deferred
income tax assets and liabilities, accounting for interest and penalties
associated with tax positions, accounting for income taxes in interim periods
and income tax disclosures.





There is
no impact on the financial statement upon the adoption of ASC 740 as of January
1, 2007. At December 31, 2009 and 2008, the amounts of gross unrecognized tax
benefits were zero. The Group does not anticipate any significant change for
unrecognized tax benefits within the next 12 months.  The Group will
classify interest and penalties related to income tax matters, if any, in income
tax expense.





According
to PRC Tax Administration and Collection Law, the statute of limitations for tax
underpayments is three years if the underpayment of taxes is due to
computational errors made by the taxpayer or withholding agent. The statute of
limitations will be extended five years under special circumstances, which are
not clearly defined (but an underpayment of tax liability exceeding RMB 0.1
million is specifically listed as a special circumstance). In the case of a
related party transaction, the statute of limitations is 10 years. There is no
statute of limitations in the case of tax evasion. The Group's PRC subsidiary is
therefore subject to examination by the PRC tax authorities from 2006 through
2009.


F-23


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





15.
            EARNINGS
      (LOSS) PER SHARE





The
weighted average number of outstanding common share as shown in the financial
statements presented herewith was computed based on the Company's number of
outstanding common share, and took into account of the recapitalization
transactions and the reverse acquisition transaction as described in Note 1.
Detail computations are set out as follow,





Date of
                                        issue or
                                        purchase
                                      
                                      No. of
                                        LHL
                                        common
                                        share
                                      
                                      
                                      No. of the
                                        Company's
                                        shares
                                        (restated for
                                        recapitalization
                                        of LHL)
                                      
                                      
                                      No. of days
                                        outstanding Year
                                        ended December 31,
                                      
                                      
                                      Weighted average number
                                        of outstanding common
                                        shares
                                        Year ended December 31,2009
                                      
                                      
                                      2008
                                      
                                      
                                      2009
                                      
                                      
                                      2008Number
      of days in reporting period
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      365
                                      
                                      
                                      
                                      365LHL
      existing shares as of January 1, 2008
                                      
                                      Prior
      to 1/1/2008
                                      
                                      
                                      1
                                      
                                      
                                      
                                      32,383,808
                                      
                                      
                                      
                                      365
                                      
                                      
                                      
                                      365
                                      
                                      
                                      
                                      32,383,808
                                      
                                      
                                      
                                      32,383,808Shares
      issued in exchange for 100% equity of LHL at time of reverse
      acquisition
                                      
                                      10/30/2009
                                      
                                      
                                      
                                      
                                      
                                      
                                      32,383,808Existing
      shares in issue at time of reverse acquisition
                                      
                                      10/30/2009
                                      
                                      
                                      
                                      
                                      
                                      
                                      7,686,207
                                      
                                      
                                      
                                      62
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,305,602
                                      
                                      
                                      
                                      -GCHT
      issued common shares to investors
                                      
                                      10/30/2009
                                      
                                      
                                      
                                      
                                      
                                      
                                      18,900,000
                                      
                                      
                                      
                                      62
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      3,210,411
                                      
                                      
                                      
                                      -58,970,015
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      36,899,821
                                      
                                      
                                      
                                      32,383,808





The
following table sets forth the computation of basic and diluted earnings (loss)
per share for the years indicated,





Year ended
                      December 31,2009
                    
                    
                    2008Net
      income (loss) attribute to common shareholders-basic
                    
                    $
                    339,647
                    
                    
                    $
                    (378,588
                    )Less:
      interest income recorded on convertible promissory notes
                    
                    
                    (22,250
                    )
                    
                    
                    -Gain
      from change in fair value of the warrant liability
                    
                    
                    (65,493
                    )
                    
                    
                    -Net
      income (loss) attribute to common shareholders-diluted
                    
                    $
                    251,904
                    
                    
                    $
                    (378,588
                    )Weighted
      average common shares outstanding-basic
                    
                    
                    36,899,821
                    
                    
                    
                    32,383,808Warrants
                    
                    
                    1,132,507
                    
                    
                    
                    -Convertible  promissory
      notes
                    
                    
                    83,562
                    
                    
                    
                    -Weighted
      average common shares outstanding-diluted
                    
                    
                    38,115,890
                    
                    
                    
                    32,383,808Earnings
      (loss) per share-basic
                    
                    $
                    0.01
                    
                    
                    $
                    (0.01
                    )Earnings
      (loss) per share-diluted
                    
                    $
                    0.01
                    
                    
                    $
                    (0.01
                    )





There
were no anti-dilutive instruments excluded from the computation of diluted
earnings per share for the year ended December 31, 2009. There were no common
share equivalent instruments for the year ended December 31,
2008.


F-24


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





15.
            EARNINGS
      (LOSS) PER SHARE (CONTINUED)





Subsequent
to the issuance of the Group’s 2008 consolidated financial statements, the Group
determined that there was an error relating to the number of shares outstanding
as of December 31, 2008, as well as the weighted average shares used in the EPS
calculation for the year 2008. However, both the basic and diluted EPS
remained unchanged when the weighted average shares were
corrected.  The comparative number for shares outstanding
and weighted average shares used in the EPS calculation in this report were
modified to reflect the correction of the error.  Management believes that
the correction is immaterial.





16.
            COMMITMENTS
      AND CONTINGENCIES





(a)                Purchase
commitments





As of
December 31, 2009, the Group had outstanding commitments in the amount of
US$28,353,431 for raw material purchases.





(b)                Capital
commitments





As of
December 31, 2009, the Group's capital commitments amounted to US$993,079 in
relation to asset improvement and plant expansion within the next twelve
months.





(c)                Royalty
payment commitments





In 2006,
the Group entered into a technology license related to its development of wind
turbine generator products.  Under this agreement, the Group is
obligated to pay a royalty for each wind turbine generator sold that utilized
the technology covered by this agreement. The Group accrued royalty payments of
US$559,543 and US$110,964 for the years ended December 31, 2009 and 2008,
respectively.





(d)
            Legal
      proceedings





On
December 4, 2009, Nordic Windpower USA, Inc. ("Nordic Windpower") filed a
lawsuit against the Group in the U.S. District Court for the Northern District
of California, alleging trademark infringement, trademark dilution, unfair
competition and trade dress infringement. The Group has substantially complied
with all of Nordic Windpower's requests related it its claims, including
changing their name to "GC China Turbine Corp." on September 14,
2009.





The Group
filed an answer on January 22, 2010. The parties have been actively discussing
settlement and have made substantial progress in reaching an agreement. The
parities agreed to continue the Initial Case Management Conference until April
22, 2010.





The Group
cannot predict the outcome of its unresolved legal proceeding; however,
management believes that the ultimate resolution of the matter will not have a
material impact on the Group's consolidated financial condition or results of
operations.  As of December 31, 2009, no amounts have been accrued in
connection with contingencies related to these lawsuits, as the amounts are not
estimable.





The Group
is not a party to any other legal proceeding, the adverse outcome of which is
likely to have a material adverse effect on the Group's consolidated financial
condition or results of operations.





(e)
            Guarantees





As of
December 31, 2009, the Group had two outstanding guarantees issued to Guangdong
Development Bank and Hankou Bank related to two bank loans in the amount of
US$3,221,933 (RMB22,000,000) and US$5,125,802 (RMB 35,000,000) to a related
party with maturity date in October and January 2010, respectively. The related
party repaid the US$5,125,802 bank loan in January 2010.  The Group
did not record any contingent loss regarding to the guarantees as the management
believed the probability to make payment is remote.


F-25


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





17.
            SEGMENT
      INFORMATION AND MAJOR CUSTOMERS





The Group
follows the provision of ASC 280-10 (pre-codification reference as
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information"), which establishes standards for reporting information about
operating segments.  Operating segments are defined as components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker. The Group's chief
operating decision maker has been identified as the chief executive officer, who
reviews consolidated results when making decisions about allocating resources
and assessing performance of the Group. The Group is a single segment entity
whose business is production and distribution of wind turbine generators in the
PRC. All of its revenues are derived in the PRC. The Group's long-lived assets
and operations are substantially located in the PRC.





18.
            PRC
      EMPLOYEE BENEFITS





Full-time
employees of the Group are entitled to staff welfare benefits including medical
care, welfare subsidies, unemployment insurance and pension
benefits.  The Group is required to accrue for these benefits based on
certain percentages of salaries in accordance with the relevant regulations and
make contributions to the state-sponsored pension, medical and welfare
plans.  The Chinese government is responsible for the medical benefits
and ultimate pension and welfare liabilities to these employees. The total
contribution for such employee benefits were $50,067 and $20,310 for the years
ended December 31, 2009 and 2008, respectively.





19.
            PROFIT
      APPROPRIATION AND STATUTORY RESERVES IN
CHINA





GC-Nordic
is a wholly foreign owned enterprise incorporated in the PRC, and is required to
make appropriations from after-tax profits to non-distributable reserve
funds.  The subsidiary, after recouping their losses, must make
appropriations to general reserve fund and staff bonus and welfare fund, in
accordance with the Law of the PRC on Enterprises Operated Exclusively with
Foreign Capital. The general reserve fund requires annual appropriations of 10%
of after-tax profit (determined by generally accepted accounting principles in
the PRC (“PRC GAAP”)) until such fund has reached 50% of the subsidiaries’
registered capital; the percentage of appropriation for staff bonus and welfare
fund is determined at the discretion of its Board.  The statutory
reserves can only be used for specific purposes, such as offsetting accumulated
losses, enterprise expansion or staff welfare.  These reserves are not
distributable to the shareholders except in the event of liquidation.
Appropriations to these funds are accounted for as transfers from retained
earnings to the statutory reserves.





As of
December 31, 2009, the Group did not make any appropriations to the statutory
reserve funds as GC-Nordic was in a net loss position under PRC
GAAP.





Relevant
PRC statutory laws and regulations permit payments of dividends by the Company’s
PRC subsidiaries only out of their retained earnings, if any, as determined in
accordance with PRC accounting standards and regulations. PRC laws and
regulations require that annual appropriations of 10% of after-tax income should
be set aside prior to payment of dividends as a general reserve fund. In
addition, there are restrictions on the distribution of share capital from the
Group’s PRC subsidiary. As a result of these PRC laws and regulations, the
Group’s PRC subsidiary is restricted in its ability to transfer a portion of its
net assets to the Group in the form of dividends, loans or advances. Such
restricted portions amounted to US$17,776,327 as of December 31,
2009.


F-26


GC
China Turbine Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Amounts
expressed in US dollars, except share data)





20.
            SUBSEQUENT
      EVENTS





In
January 2010, the Group entered into agreement to acquire 70% ownership of
Baicheng Guoce Wind Power Development Co., Ltd ("Baicheng Guoce") for a
consideration of US$205,032 (RMB1,400,000) in cash from a related party Wuhan
Guoce Electricity Investment Co., Ltd.  Baicheng Guoce was established
in September 2009 and located in Baicheng Private Development Zone, Jiling
Province PRC.  The registered capital and paid in capital of Baicheng
Guoce was US$1,464,515 and US$292,903, respectively. Baicheng Guoce is mainly
engaged in production and erection of wind turbines and providing technical
support during installation, operation, maintenance and after-sales service for
wind turbines.  The Group is required to inject additional capital
funds in the amount of US$820,129 by December 31, 2011.





In
January 2010, the Group incorporated a company named Baicheng Kairui Wind Power
Co., Ltd ("Baicheng Kairui") located in Baicheng SiJianFang, Jiling Province
PRC. Baicheng Kairui was established in January 2010, with registered capital of
US$1,464,515. The first capital injection from the Group in January 2010 was
US$732,257(RMB5,000,000) in cash. Baicheng Kairui is mainly engaged in
production and erection of wind turbines and providing technical support during
installation, operation, maintenance and after-sales service for wind turbines.
The Group is required to inject additional capital funds in the amount of
US$732,257 by December 31, 2011.


F-27





GC
China Turbine Corp.


ADDITIONAL
INFORMATION - FINANCIAL STATEMENT SCHEDULE I


BALANCE
SHEET


(Amounts
expressed in US dollars, except share data)





December 31,
                        2009ASSETSCurrent
      assets:Prepaid
      expenses and other current assets
                      
                      $
                      2,515Total
      current assets
                      
                      
                      2,515Investment
      in subsidiaries
                      
                      
                      21,393,012Total
      assets
                      
                      $
                      21,395,527LIABILITIESCurrent
      liabilities:Other
      current liabilities
                      
                      $
                      74,000Total
      current liabilities
                      
                      
                      74,000Non-current
      liabilities:Due
      to related parties
                      
                      
                      391,000Warrant
      liability
                      
                      
                      1,267,388Convertible
      Promissory Notes
                      
                      
                      1,182,750Total
      liabilities
                      
                      
                      2,915,138EQUITYCommon
      share (US$0.001 par value; 100,000,000 shares authorized, 58,970,015
      shares issued and outstanding as of December 31, 2009)
                      
                      
                      58,970Additional
      paid-in capital
                      
                      
                      16,385,299Accumulated
      profit
                      
                      
                      1,877,363Accumulated
      other comprehensive income
                      
                      
                      158,757Total
      shareholders’ equity
                      
                      
                      18,480,389Total
      liabilities and shareholders’ equity
                      
                      $
                      21,395,527


F-28


GC
China Turbine Corp.


ADDITIONAL
INFORMATION - FINANCIAL STATEMENT SCHEDULE I


STATEMENT
OF OPERATIONS


(Amounts
expressed in US dollars, except share data)





Year Ended
                    December 312009Operating
      expenses:General
      and administrative expenses
                  
                  $
                  339,241Loss
      from operations
                  
                  
                  339,241Interest
      expense
                  
                  
                  48,720Interest
      income
                  
                  
                  (22,250
                  )Loss
      from debt extinguishment
                  
                  
                  57,802Gain
      from change in fair value of warrant liability
                  
                  
                  (65,493
                  )Income
      in investment in subsidiaries
                  
                  
                  2,235,383Net
      profit (loss) attributable to shareholders
                  
                  $
                  1,877,363


F-29


GC
China Turbine Corp.


ADDITIONAL
INFORMATION - FINANCIAL STATEMENT SCHEDULE I


STATEMENT
OF OPERATIONS


(Amounts
expressed in US dollars, except share data)





Year
      ended
                          December
      31, 2009OPERATING
      ACTIVITIES:Net
      profit
                        
                        $
                        1,877,363Adjustments
      to reconcile net income to net cash used in operating
      activities:Income
      from investment in subsidiaries
                        
                        
                        (2,235,383
                        )Amortization
      of premium of convertible debt
                        
                        
                        (22,250
                        )Gain
      from change in fair value of warrant liability
                        
                        
                        (65,493
                        )Loss
      from debt extinguishment
                        
                        
                        57,802Changes
      in operating assets and liabilities:Increase
      in amount due to related parties
                        
                        
                        74,000Increase
      in other current liabilities
                        
                        
                        249,113Net
      cash used in operating activities
                        
                        
                        (64,848
                        )INVESTING
      ACTIVITIES:Investment
      in subsidiaries
                        
                        
                        (18,131,281
                        )Cash
      used in investing activities
                        
                        
                        (18,131,281
                        )FINANCING
      ACTIVITIES:Net
      proceeds from issuance of common share
                        
                        
                        7,275,014Net
      proceeds from issuance of Convertible Promissory Notes
                        
                        
                        9,906,115Proceeds
      from issuance of promissory notes
                        
                        
                        1,015,000Net
      cash provided by financing activities
                        
                        
                        18,196,129NET
      CHANGE IN CASH AND CASHH EQUIVALENTS
                        
                        
                        -Cash
      and cash equivalents at the beginning of the year
                        
                        
                        -Cash
      and cash equivalents at the end of the year
                        
                        $
                        -





Note to
Schedule I:





The
parent company financial statements have been prepared using the same accounting
principles and policies described in the notes to the consolidated financial
statements, with the only exception being that the Company accounts for its
subsidiaries using the equity method. Please refer to the notes to the
consolidated financial statements presented above for additional information and
disclosures with respect to these financial statements.  As the parent
company is acquired through a reverse recapitalization (Note 1) in 2009, the
condensed financial information of the parent company presented herein
represents the accounts of Luckcharm Holdings Limited for the period from June
28, 2009 to October 30, 2009, and the accounts of the Company for the period
from October 31, 2009 to December 31, 2009.  LHL was deemed as the
parent company of the Group prior to the consummation of the Exchange
Transaction, which was established in June 2009, therefore no comparative
financial statements were presented to 2009.




Schedule
I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04(c) of
Regulation S-X, which require condensed financial information as to the
financial position, changes in financial position and results of operations of a
parent company as of the same dates and for the same periods for which audited
consolidated financial statements have been presented when the restricted net
assets of consolidated subsidiaries exceed 25 percent of consolidated net assets
as of the end of the most recently completed fiscal year.


F-30





SIGNATURES





In
accordance with 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.





GC
      CHINA TURBINE CORP.a
      Nevada corporationDated:
      April 15, 2010
              /s/ Qi NaBy:
      Qi NaIts:
      Chief Executive Officer and Director(Principal
      Executive Officer)





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





Dated:
      April 15, 2010
              /s/ Qi NaQi
      Na,Chief
      Executive Officer and DirectorDated:
      April 15, 2010
              /s/ Zhao YingZhao
      Ying, Chief Financial Officer(Principal
      Financial Officer and Principal Accounting Officer)Dated:
      April 15, 2010
              /s/ Hou Tie XinHou
      Tie Xin,Chairman
      of the BoardDated:
      April 15, 2010
              /s/ Xu Jia RongXu
      Jia Rong,Director


65