UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2013
OR
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-54514

VIASPACE GREEN ENERGY INC.

(Exact name of registrant as specified in its charter)

British Virgin Islands	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
131 Bells Ferry Lane Marietta, Georgia	30066
(Address of principal executive offices)	(Zip Code)

(678) 805-7472

Issuer’s telephone number

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check One):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $2,799,000

State the number of shares outstanding of each of issuer’s classes of common stock, as of April 15, 2014: 10,480,400

VIASPACE GREEN ENERGY INC.

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	3
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Mine Safety Disclosures	17
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 8.	Financial Statements and Supplementary Data	22 (Commencing F-1)
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	22
Item 9A.	Controls and Procedures	22
Item 9B.	Other Information	24
Part III
Item 10.	Directors, Executive Officers, Promoters, Control Persons and Corporate Governance	24
Item 11.	Executive Compensation	26
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	27
Item 13.	Certain Relationships and Related Transactions, and Director Independence	28
Item 14.	Principal Accountant Fees and Services	29
Part IV
Item 15.	Exhibits and Financial Statement Schedules	31
Signatures		33

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document and the documents incorporated by reference herein contain forward-looking statements. We based these statements on our beliefs and assumptions, based on information currently available to us. These forward-looking statements are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, our total market opportunity and our business plans and objectives set forth under the sections entitled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements are not guarantees of performance.  Our future results and requirements may differ materially from those described in the forward-looking statements. Many of the factors that will determine these results and requirements are beyond our control. In addition to the risks and uncertainties discussed in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” investors should consider those discussed under “Risk Factors” and, among others, the following:

● our ability to successfully implement our business strategy,

● market acceptance of our products and product development,

● the effect of regulation on our ability to commercialize our products,

● the impact of competition and changes to the competitive environment on our products and services, and

● other factors detailed from time to time in our filings with the Securities and Exchange Commission.

These forward-looking statements speak only as of the date of this report. We do not intend to update or revise any forward-looking statements to reflect changes in our business anticipated results of our operations, strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events, except as required by law.

PART I

ITEM 1. BUSINESS

Overview

VIASPACE Green Energy Inc., a British Virgin Islands (“BVI”) international business company (“we”, “us”, “VGE” or the “Company”) is a renewable energy company. Our renewable energy is based on biomass -- in particular our dedicated energy crop with the trademarked name “Giant King^® Grass”. VGE is the parent company of Inter Pacific Arts Corporation, a BVI international business company (“IPA BVI”) and Guangzhou Inter Pacific Arts, a People’s Republic of China (“PRC”) company (“IPA China”). IPA China is a wholly-owned foreign enterprise headquartered in Guangdong province of China. IPA BVI owns all equity interests of IPA China. IPA BVI and IPA China specialize in the manufacturing of high quality, copyrighted, wall décor sold in US retail chain stores. IPA China also has a license for and produces Giant King Grass (“GKG”), a proprietary dedicated energy crop, which can be burned in 100% biomass power plants to generate electricity, made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants, generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation, biochemicals and bio plastics. GKG can also be used as animal feed. GKG has been independently tested by customers and been shown to have excellent energy content, high bio methane production, and the cellulosic sugar content needed for biofuels and biochemicals.

We are growing GKG on approximately 457 acres of leased land in China, which serves as a nursery to provide seedlings for large bioenergy projects, a demonstration plantation for potential partners and customers to visit, to provide samples for testing by potential customers, and as a grass source for our own pellet products.

The Company’s web site is www.VIASPACEGreenEnergy.com.  Information contained on, or accessible through, our website should not be deemed as part of this report.

Corporate History

VGE was formed on July 1, 2008. Prior to October 21, 2008, VGE was 100% owned by VIASPACE Inc. (“VIASPACE”) and had no active operations. On October 21, 2008, the majority shareholder of IPA BVI and IPA China, Sung Hsien Chang (“Chang”), entered into a Securities Purchase Agreement (the "Purchase Agreement") with VGE, VIASPACE and China Gate Technology Co., Ltd., a Brunei Darussalam company ("China Gate"). Under the Purchase Agreement, VGE acquired 100% of IPA BVI and the entire equity interest of IPA China from Chang. In exchange, VIASPACE agreed to pay approximately $16 million in cash and newly issued shares of VIASPACE and VGE stock. In addition, VIASPACE issued shares of its common stock to China Gate for China Gate’s sublicense of certain grass technology to IPA China. On September 30, 2012, VIASPACE, VGE and Chang entered into a recapitalization agreement whereby VIASPACE returned the shares it owned in VGE back to VGE, and VGE subsequently issued 8,384,320 shares to Changs, LLC, a limited liability company controlled by Chang. These shares represented 80% of the outstanding shares of VGE. The shares were issued to Changs, LLC during the fourth quarter of 2012. As of December 31, 2013 and 2012, Changs, LLC owned 80% of the outstanding shares of the Company.

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VGE Becomes Public Company

As required by the Purchase Agreement, VGE filed a Registration Statement on Form S-1 with the Securities and Exchange Commission on June 3, 2009 covering the resale of a portion of VGE common stock issued pursuant to the Purchase Agreement.  The Securities and Exchange Commission declared such Registration Statement effective as of December 31, 2009.  On January 14, 2010, VGE received approval from the Financial Industry Regulatory Authority (“FINRA”) that its shares of common stock were approved for quotation on the OTC Bulletin Board under the ticker symbol VGREF.OB. The first day the Company’s common stock was traded on the OTCBB was November 8, 2010.

Our Business

Grass Business Division

The Company focuses on the commercialization of GKG, a natural hybrid, non-genetically modified, fast-growing, perennial grass which we are growing as a dedicated energy crop. GKG can be used to generate low carbon and renewable electricity by direct burning in a biomass power plant or it can be formed into pellets that can replace a portion of the coal burned in existing power plants to reduce carbon emissions.  GKG may also be used to produce bio methane through anaerobic digestion and as a feedstock for non-food liquid biofuels such as bio ethanol and bio butanol. It can also be used as a feedstock for biochemicals and bio plastics. This perennial grass can grow up to 14 feet high.  It can be harvested at least twice a year in tropical and semitropical areas with a yield of up to 375 metric tons per hectare. 

GKG has been independently tested by multiple potential customers.  To our knowledge, the results have been very positive and consistent. GKG has an energy content of 18.4 megajoules (MJ) per dry kilogram. Its chemical and physical properties are very similar to corn straw, which is material left behind from the corn plant after the ears of corn have been harvested. Corn straw is used as fuel in many biomass power plants, and a leading international biomass power provider has declared GKG as suitable for their power plants. The bio methane production from GKG has been tested in three customer laboratories and shows the outstanding production of 91 liters of methane per kilogram of fresh grass. The methane can be used to generate clean electricity or can be burned to produce process heat. There are potentially thousands of biogas plants worldwide that could use GKG. A large European electric utility has tested GKG and examined prototype pellets. In addition to these current markets, GKG can be used as animal feed and has been tested for this purpose.

GKG can also be used as a feedstock to make cellulosic biofuels such as bio ethanol, bio butane and green gasoline. Three companies have recently tested GKG as a potential feedstock for producing biofuels, biochemicals and bio plastics through fermentation method. Laboratory results from these tests show that GKG has almost identical composition including sugar content as corn straw or wheat straw which are the agricultural waste products often targeted as a feedstock for cellulosic biofuels.  The projected bio ethanol yield is approximately 80 gallons per dry ton of GKG based on these tests.

Corn straw and wheat straw are the leftovers after food production. This agricultural waste material can only be collected after the food is harvested which means that the feedstock supply is very seasonal and must be stored for a long time--up to one year-- between harvests. To support a single biofuel or power plant, agricultural waste must be collected from farms up to 50 or more miles away.  Giant King Grass is a high yield dedicated nonfood energy crop that can be harvested at any time in a tropical or subtropical climate. If the biofuel or power plant is co-located with a GKG plantation, the collection radius will only be about 3 miles. The high yield and logistical advantages mean that GKG can be grown and delivered to a co-located plant at a substantially lower price than currently paid for agricultural waste. The largest operating cost of a biomass power plant or biofuels plant is the cost of the fuel or feedstock, and the low cost and high quality of GKG are of major interest to these customers.

Energy pellets made from dried GKG can be used as a replacement for coal in electricity generating power plants. The Company started selling GKG pellets to customers in China in the fourth quarter of 2012. Reports by the U.S. Department of Energy state that 15% to 20% of coal may be replaced by burning grass in an existing power plant with only minor modifications. This process, called co-firing, allows utilization of the large capital investment in existing coal fired power plants while reducing carbon dioxide emissions by 15 to 20%. GKG and other biomass have lower mercury, arsenic and sulfur emissions than coal.

Our strategy has been to build up our grass production capabilities in China where we have 185 hectare (457 acres) under cultivation. This land serves as a small-scale demonstration plantation and also allows us to provide samples to potential partners and customers. The harvested grass is used in our factory to produce energy pellets. The location also has a nursery to provide seedlings for expansion.

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Having a reliable source of feedstock is critical for all energy users of biomass. Today, power plants and pellet mills use agricultural and forestry waste such as corn straw, wheat straw, rice husks and wood waste as feedstock. Increasing demand for biomass has caused the price of this agricultural and forestry waste to rise dramatically and in some places it is in short supply. Biomass supply issues have caused power plants to become unprofitable, idle or abandoned. It is now well-recognized that dedicated energy crops such as GKG are necessary for successful operation of biomass processing facilities.

Because of its high yield, GKG provides feedstock with less use of land and we believe therefore lower costs compared to alternatives.

Another major advantage of GKG is that it can be harvested at any time -- particularly in a tropical or subtropical area. If the climate permits, GKG can be planted so that it matures continuously and allows just-in-time harvesting, allowing for a continuous source of feedstock.

Higher food prices have led to food shortages around the globe. This argument has resonated with many world leaders and resulted in a global effort to derive biofuels from plants that are not in the human food chain, called cellulosic biofuels, and include grass, shrubs and trees. These plants do not contain a lot of sugar and cannot be fermented directly like corn. They do, however, have a lot of cellulose in their leaves, stalks and branches which contain carbon and hydrogen which can then be converted into cellulosic ethanol.  GKG has been recently tested and shown to have potential for producing cellulosic biofuels, including ethanol, and for making biochemicals and bio plastics using a fermentation process.

The Company has two revenue models for GKG: first, grass plantation integrated with a power plant or processing facility such as a pellet mill under company or joint venture control; and second, contract plantation establishment, support and licensing for a customer that owns and operates the plantation and power plant.

In China, we are pursuing the integrated plantation and processing facility model. We lease the land and employ labor and management to grow GKG and use it to produce pellets in our factory. The grass is to be used to supply domestic Chinese biomass energy markets or exported in pelletized form to energy markets globally. We will manage and control the supply chain from initial land preparation through the FOB source shipment point for the feed or energy market. We may pursue this model using only our own capital resources, or we may elect to use joint ventures with local landowners, energy equipment manufacturers, power plant owner/operators and/or capital providers. The terms of these joint ventures will be negotiated on a case-by-case basis.

Under a contract plantation establishment and licensing model, the customer would provide the land, labor and management and be responsible for growing GKG. We will provide initial seedlings, crop management services and knowledge transfer for a negotiated price.  In addition, there would be an ongoing license fee based on grass production.

Management believes both models will be important contributors to our revenue streams. We believe all our revenues initially will result from the integrated plantation and end-user model. Rapid global expansion requires local joint venture partners that have land and labor, but lack the energy crop and the expertise to grow it. The contract plantation establishment and licensing model with joint venture partners will be used for most of these projects. The Company may also serve as developer for integrated Giant King Grass plantations and bioenergy projects.

Framed Art Business Division

Our subsidiaries, IPA BVI and IPA China (collectively “IPA”) manufacture high quality, copyrighted, framed artwork in its factory in Guangzhou, China, and targets selling the art to large US retailers through its sales organization in Marietta, Georgia.

The factory is located on 1.6 hectares of land in China including two manufacturing buildings, one employee dorm and a dining facility. IPA has an established and stable production facility in China and a sales and distribution network in the United States.

We strategically acquired IPA for its framed art revenue and profits, as well as the grass business. With the profits from the framed art business, we are able to develop the grass business without having to access external capital. We are committed to growing the framed art business by providing top-quality products at attractive prices for our customers.

The Company works with buyers from retail chains and their in-house designers to choose prints and other art forms from catalogs of copyrighted and licensed work. We only purchase prints from reputable publishing companies with whom we have long-standing relationships, and such companies have represented to us that there are no counterfeits and that all royalties have been paid.  We then create mockup versions of various combinations of art, mattes and frames for our customer. Once the customer decides on a print, matte and frame combination, we ship the prints to our factory in Guangzhou, China.  The mattes, frame moldings and glass are sourced in China.  A typical order is 1,400 units of a specific design and a customer usually orders several different designs, which are then packed in containers and shipped directly to the customer in the US.  Our framed artwork typically retails for $50-$300.

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Suppliers

We purchase raw materials such as glass panes, mattes and prints for framed art business from third party vendors. We do not rely on any sole source vendor. We believe such a multiple source supplier base allows us to utilize numerous vendors and obtain competitive prices for our supplies and components, thereby reducing product costs while maintaining high quality.

Marketing

We deploy a targeted partner-customer approach intended to establish key relationships with the appropriate decision makers in the home décor market. This approach also includes invited presentations at industry workshops and conferences and participation at trade industry events.

We send e-mails to current and prospective users and partners regularly that contain invitations to visit various pages or features on our websites. Our ongoing effort to update our customer list is also an opportunity to build and reinforce the personal contacts that are critical in servicing our customer’s needs.

Research and Development

The Company did not record any research and development activities in 2013 or 2012.  If we do in the future, it will be expensed as incurred.

Competition

Framed Art Business

There are many framed art companies that compete with IPA, including, for example, ICA Home Decor, Crown Arts, Wendover Art Group, Midwest Art and Frame, and many more companies in the US, China and other countries. IPA benefits from having its own factory in China and concentrates on large customers that typically order framed artwork by the container load with a typical order of 1,400 copies of a single design. IPA only manufactures art after an order is placed and generally does not stock finished goods inventory, only raw materials inventories are maintained. IPA guarantees its customers that all art is legitimate with full royalties paid, and that it will not sell the same product to another customer. IPA is able to control its expenses through its relationships with suppliers of high quality frame moldings, mattes and glass in China and control quality by assembly at its factory in China. We believe that these processes allow IPA's products to be sold at favorable prices in a competitive environment.

Grass Business Division

Many companies, universities and research laboratories worldwide are researching grass as a feedstock for cellulosic ethanol and other applications. Monsanto is an example of a large company focusing on developing grass as a feedstock. Ceres is a group focusing on biomass and grass in particular. Much of the competition is researching utilization of miscanthus or switchgrass. These grasses are suitable for temperate areas. Much of the competition also is focused on selling seeds. GKG is a natural hybrid that is not genetically modified or generally available, and to our knowledge no one else is growing GKG as a commercial crop. Based on publicly available data on switchgrass and miscanthus, compared to our data on GKG, we believe that GKG has higher productivity than these and other competing grasses.  GKG is most suitable for tropical and subtropical areas, which are the focus of our efforts.  Because GKG is propagated by seedlings and not by seeds, it is not an invasive species.  The Company is focusing on projects involving growing the grass and securing long-term supply contracts for biofuel production, as a replacement for coal and electricity generation, and as animal feed.  With long-term supply contracts and joint ventures, we plan to capture these recurring revenue streams. Other grasses such as alfalfa are suitable for animal feed and are also competitors of GKG in that market.

Dependence on a Few Major Customers

For 2013 and 2012, the Company had one customer in our framed artwork business, which made up 96% and 93%, respectively, of our total revenues. We believe this concentration of sales made to a small number of customers will continue in the near future. A loss of any customer by the Company could significantly reduce our future revenues.

6

Intellectual Property

Grass License Agreements

On or about October 20, 2008, IPA China entered into an agreement with China Gate whereby VGE purchased seedlings of GKG and other grasses from China Gate and the parties agreed to assist each other in growing, developing and commercializing GKG. The agreement does not limit IPA China’s right to grow, harvest and market the grass anywhere in the world. No term was specified in the agreement. To our knowledge, China Gate has not entered into similar agreements with any other party.

On September 30, 2012, IPA China granted to VGE a reciprocal worldwide license for GKG, not to exceed the rights IPA China had in GKG.  Additionally on September 30, 2012, VIASPACE and VGE entered into a Supply, License and Commercialization Agreement (“License Agreement”) pursuant to which VGE granted to VIASPACE a nontransferable, royalty-bearing exclusive license to commercialize Giant King Grass everywhere in the world other than China and Taiwan. Additionally, the License Agreement allows VIASPACE to use the Giant King Grass intellectual property and VIASPACE Green Energy trade name in connection with its efforts to commercialize Giant King Grass.

VIASPACE agreed that it would not during the term of the License Agreement and for a three-year period thereafter, manufacture, commercialize or otherwise engage in any research or development of a grass or any other product or material having similar or otherwise competitive properties to Giant King Grass.

In accordance with the License Agreement, VGE will provide VIASPACE with Giant King Grass seedlings at an agreed upon price. Further, VIASPACE will pay VGE a royalty of eight percent (8%) on net sales made in its territory. The initial term of the License Agreement is for two years, thereafter, upon the achievement of certain milestones, VIASPACE has the right to renew the agreement for additional two-year terms.

Art License

We purchase the copyrighted artwork that is placed into our picture frames from reputable publishers who pay the appropriate royalties to the artists. We have long standing relationships with these are companies, and we believe that the risk of copyright infringement by the artwork we sell is minimal.

Trademarks

The Company has registered United States trademarks for “GREEN LOG^®” and “GIANT KING^®”.

Employees

As of December 31, 2013, we had 67 full time employees, 64 of whom are based in China and three in the US. We also have 12 part time employees, 11 of whom are based in China and one in the US. We believe that our relations with our employees are good. We have never had a work stoppage, and our employees are not subject to a collective bargaining agreement.

Regulatory Issues

None.

ITEM 1A. RISK FACTORS

Our business is subject to a number of risks. You should carefully consider the following risk factors, together with all of the other information included or incorporated by reference in this report, before you decide whether to purchase our common stock. The risks set out below are not the only risks we face.  If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. We wish to caution that the following important factors, among others, in some cases have affected and in the future could affect our actual results and could cause such results to differ materially from those expressed in forward-looking statements made by or on behalf of us.

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Risks Related to Our Business

Our limited operating history makes it difficult to evaluate our future prospects and results of operations.

We have a limited operating history. Our consolidated affiliated entities, IPA BVI and IPA China, each commenced operations in the artwork business in 2003 and although we have profit from our artwork business, we have yet to achieve net profitability from our grass business. Accordingly, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in the manufacturing and agricultural industries in China. Some of these risks and uncertainties relate to our ability to:

● maintain or establish a competitive position and compete in each of our business segments with Chinese and international companies, many of which have longer operating histories and greater financial resources than we do, and thus making it difficult to compete;

● offer commercially successful products to attract and retain a larger base of customers of both of our artwork and grass business goods and products;

● retain access to the crop land we currently use for production of our products and obtain access to additional crop land for expansion;

● maintain effective control of our costs and expenses in the grass business due to our start-up nature and inexperience in managing growth; and

● retain our management, including our president Sung Hsien Chang, and skilled technical staff and recruit additional key employees.

If we are unsuccessful in addressing any of these risks and uncertainties, our business, financial condition and results of operations may be materially and adversely affected.

Our future growth prospects may be affected if we are unable to obtain additional capital.

While we believe we have sufficient cash for the next 12 months, we may require additional cash to grow our grass business. We may conduct additional debt or equity financings to provide such capital. The sale or issuance of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We may not be able to obtain financing in amounts or on terms acceptable to us, if at all. We may also not be able to secure or repay debt incurred to fund operations. As a result, our operating results and financial condition may be materially and adversely affected.

Any employee share options, restricted shares or other share incentives we grant in the future may adversely affect our net income.

We adopted a 2009 share incentive plan and reserved 1,400,000 shares of common stock for grant under the plan in June 2009. We are required to account for share-based compensation in accordance with FASB ASC Topic 718, Share-Based Payment, which requires a company to recognize, as an expense, the fair value of share options and other share-based compensation to employees based on the fair value of equity awards on the date of the grant (taking into account the prices payable by the award recipients), with the compensation expense recognized over the period in which the recipient is required to provide service in exchange for the equity award. There are 1,400,000 shares reserved for grant as options under the stock incentive plan at December 31, 2013. There are no stock options issued and outstanding at December 31, 2013.

If we grant any additional options, restricted shares or other equity incentives in the future, we could incur significant compensation charges equal to the fair value of the additional options, restricted shares and other equity incentives (taking into account the prices payable by the award recipients) and our net income could be adversely affected.

We are substantially dependent upon our key personnel, particularly Sung Hsien Chang, our president.

Our performance is substantially dependent on the performance of our executive officer Sung Hsien Chang. The loss of his services could adversely impact our day-to-day operations and customer relationships.

We do not have “key person” life insurance policies on any of our employees. The loss of the services of any of our executive officers or other key employees could substantially impair our ability to successfully implement our business plan.

We rely on our management’s experience in product development, business operations, sales and marketing, and on their relationships with distributors and relevant government authorities. If one or more of our key management personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all. The loss of the services of our key management personnel, in the absence of suitable replacements, could have a material adverse effect on our operations and financial condition, and we may incur additional expenses to recruit and train personnel. Each member of our management team has entered into an employment agreement with us.

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In 2012 we recorded an impairment expense on goodwill, any further impairment in the carrying value of goodwill would negatively impact our consolidated results of operations and net worth.

Goodwill is initially recorded at fair value and is not amortized, but is reviewed for impairment at least annually or more frequently if impairment indicators are present. In assessing the carrying value of goodwill, we make estimates and assumptions about sales, operating margins, growth rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors. Our goodwill valuations are calculated using an income approach based on the present value of future cash flows of each reporting unit and are believed to reflect market participant views which would exist in an exit transaction. Under the income approach, we are required to make various judgmental assumptions about appropriate discount rates. Disruptions in global credit and other financial markets and deterioration of economic conditions, could, among other things, cause us to increase the discount rate used in the goodwill valuations. We could be required to evaluate the recoverability of goodwill prior to the annual assessment if we experience disruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of our business or sustained market capitalization declines. These types of events and the resulting analyses could result in goodwill impairment charges in the future, which could be substantial.

As part of the Company’s annual impairment review as of December 31, 2012, a $4,413,000 goodwill impairment charge was recorded in 2012 within the Company’s framed-artwork reportable segment due to lower than expected revenue and operating income growth. No annual impairment charge was necessary in 2013. Goodwill was $602,000 at December 31, 2013 and 2012.

Goodwill represents 11.7% of total assets at December 31, 2013.

We have limited insurance coverage in China.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited insurance products. Other than automobile insurance on certain vehicles and property and casualty insurance on some of our assets, we do not have insurance coverage on our other assets or inventories and do not have insurance to cover our business or interruption of our business, litigation or product liability. We determined the costs of insuring these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured occurrence of loss or damage to property, litigation or business disruption may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our operating results and financial condition.

We may not pay dividends.

We have not previously paid any cash dividends, and we do not anticipate paying any dividends on our common stock. Our dividend policy is subject to the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements and other factors. Under BVI law, we may only pay dividends from profits or credit from the share premium account (the amount paid for shares over par value), and we must be solvent before and after the dividend payment. If we determine to pay dividends on any of our common stock in the future, as a holding company, we will be dependent on receipt of funds from our operating subsidiaries.

Risks Related to our Grass Business

Our agreement with China Gate does not provide for any protection of the Giant King Grass intellectual property. If a party, which could include China Gate, disputes our rights to, development or commercialization of GKG, our grass business may be severely limited or terminated.

We entered into an agreement with China Gate to purchase seedlings of GKG and other grasses and to cooperate with China Gate to grow, develop and commercialize GKG in China and North America. This agreement did not grant any specific rights to the GKG intellectual property, which we believe to be owned by a third party from which China Gate acquired GKG; however, our agreement with China Gate does not restrict our right to grow, develop or commercialize GKG. China Gate has orally informed us that they have an exclusive license to the GKG in Guangdong province and North America and it has orally granted to us an exclusive sublicense in the same region. Our written and oral agreements with China Gate have no term or notice provision and, therefore, can be terminated at any time without notice. However, because we do not have a direct relationship with the owner of the intellectual property, any material adverse effect to the GKG license held by China Gate would affect our rights as an oral sublicensee.

It is our understanding that the original licensor is aware of our oral and written agreements with China Gate and has consented to them. However, because our license with respect to GKG is oral, not in writing, a party, including China Gate or the original licensor, could challenge our right to grow, develop or commercialize GKG. If we chose not to dispute any such challenge, our grass business may be severely limited or terminated. If we elected to argue against any such challenge, we could expend significant resources and still not be assured that our grass business would not be severely limited or terminated.

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We could be subject to intellectual property rights claims regarding the seedlings.

We are subject to the risk that the seedlings we grow infringe or will infringe upon patents, copyrights, trademarks or other intellectual property rights held by third parties. We acquired rights to grow GKG from a seller that we believe held such rights. If that party does not hold such rights, we may be subject to legal proceedings and claims relating to the intellectual property of others. If any such claim arises in the future, litigation or other dispute resolution proceedings may be necessary to retain our ability to offer our current and future products, which could result in substantial costs and diversion of our management resources and attention even if we prevail in contesting such claims. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property rights, incur additional costs to license or develop alternative products and be forced to pay fines and damages, any of which could materially and adversely affect our business and results of operations, or terminate our grass business entirely.

We currently have few meaningful customers for our grass business purchasing GKG pellets.  If we are unable to maintain our existing customers or attract new customers, our grass business will fail.

We commenced our grass business in October 2008 and only started recording revenues in the grass business in the fourth quarter of 2012. Grass sales were minimal in 2013. While we believe we will be able to attract customers and achieve revenues, we cannot assure you we will. There is no assurance that our potential customers will determine that using GKG for biomass or animal feed purposes will be commercially viable. Further such customers may find other grass or plant products superior to GKG for their needs.  If we fail to attract a sufficient number of customers that purchase a sufficient amount of grass, our grass business will fail.

Natural or man-made disasters could damage our crop production, which would cause us to suffer losses of production and a material reduction of revenues.

We produce GKG in the Guangdong province of China.  This grass is subject to the risks associated with growing crops, including natural disasters such as drought, pestilence, plant diseases and insect infestations, and man-made disasters such as environmental contamination. Other man-made incidents may damage our products, such as arson or other acts that may adversely affect our grass inventory in the winter storage season. Furthermore, natural or man-made disasters may cause farmers to migrate from the farmland, which would decrease the number of end users of our products. We are particularly susceptible to disasters or other incidents in the Guangdong province, where we have the greatest concentration of our operations. In the event of a widespread failure of our grass, we could likely sustain substantial loss of revenues and suffer substantial operating losses. We do not have insurance to protect against such a risk and we are not aware of the availability of any such insurance in China.

Our growth prospects may be materially and adversely affected if we are unable to develop or acquire new products or to produce our existing products in sufficient quantities.

We believe the future growth of our company will depend on the value of our grass business for biofuel, power plant, or animal feed purposes. The ability to obtain orders from customers, if at all, is uncertain due to several factors, many of which are beyond our control. These include changing customer preferences, competitive price pressures, the failure to adapt products to meet the evolving demands of customers in China, the development of higher-quality products by our competitors, and general economic conditions. If we are unable to develop or acquire additional products that meet the demands of our customers, if our competitors develop products that are favored by our customers in China, or if we are unable to produce our existing products in sufficient quantities, our growth prospects may be materially and adversely affected and our revenues and profitability may decline or never develop.

Our plans to increase production capacity in the grass business and expand into new markets may not be successful, which could adversely affect our operating results.

Our plans to develop our grass business and its production capacity has placed and will continue to place, substantial demands on our managerial, operational, technological and other resources. We are addressing three markets for GKG: pellets for producing heat and steam; fuel to burn in electricity generating power plants; and animal feed. We are also reviewing opportunities to grow grass in other areas of China and Taiwan.  These represent growth opportunities for the company, but also represent a potential risk in losing focus and diverting management attention. If we fail to establish and manage the growth of our product offerings, operations and distribution channels effectively and efficiently in such business, we could suffer a material and adverse effect on our operations and our ability to capitalize on new business opportunities, either of which could materially and adversely affect our operating results.

We will need to develop new sales channels into the agricultural pellet, electric power plant, and animal feed markets. Expansion into new markets may present operating and marketing challenges. If we are unable to anticipate the changing demands that expanding operations will impose on our production systems and distribution channels, or if we fail to develop our production systems and distribution channels to meet the demand, we could experience an increase in expenses and our results of operations could be adversely affected.

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Our financial results are sensitive to fluctuations in market prices of the products that we offer.

The profitability of our operations is affected by the selling prices of our products. We intend to benchmark the prices of our grass against the prevailing domestic market prices of grass of similar quality and attributes, and set the prices accordingly. Historically, prices of grass and other agricultural products in China have been volatile, primarily due to fluctuations in supply and demand. If the prices for such products decline in the future, and we are unable sell more products and/or reduce our cost of sales, our revenues will decrease and our profitability will be adversely affected.

The Chinese agricultural market is highly competitive and our growth and results of operations may be adversely affected if we are unable to compete effectively.

The agricultural market in China is highly fragmented, largely regional and competitive and we expect competition to increase and intensify within the sector. We face significant competition in our grass business.  Many of our competitors have greater financial, research and development and other resources than we have. Competition may also develop from consolidation or other market forces within the grass industry in China. Because our licensor has no restrictions outside of Guangdong province and North America, we have no means to restrict our licensor from selling GKG to third parties throughout the rest of the world. Although we believe we are the only business that will grow a significant amount of GKG sufficient to support biomass related power plants in China, we have no assurance this is the case. Other growers of GKG could potentially compete with us. In addition, our competitors may develop other types of grasses that are superior to GKG and more favored by our potential customers.  Our business could be materially and adversely affected by such competition.

Our competitors may be better able to take advantage of industry consolidation and acquisition opportunities than we are. In China, the reform and restructuring of state-owned equity in agricultural enterprises could likely lead to the reallocation of market share in the grass industry, and our competitors may increase their market share by participating in the restructuring of the state-owned seed companies. Such privatization would likely mean that these producers will need to develop more efficient and commercially viable business models in order to survive. In addition, the PRC government currently restricts foreign ownership of any domestic agricultural development and production business to no more than 50% unless otherwise approved by the PRC government. When and if such restrictions are lifted, multinational corporations engaged in the seed business may expand into the agricultural market in China. These companies have significantly greater financial, technological and other resources than we do and may become our major competitors in China. As competition intensifies, our margins may be compressed by more competitive pricing in the short term and may continue to be compressed in the long term and we may lose our market share and experience a reduction in our revenues and profit.

If we are unable to estimate customers’ future needs accurately and to match our production to the demand of our direct customers, our business, financial condition and results of operations may be materially and adversely affected.

Due to the nature of the grass industry, we normally grow according to our production plan before we sell and deliver grass to distributors and our direct customers. The potential end users of our grass, such as biofuel providers and livestock owners, generally make purchasing decisions for our products based on market prices, economic and weather conditions and other factors that we may not be able to anticipate accurately in advance. If we fail to accurately estimate the volume and types of products sought by our customers, we may produce more grass that is in demand by our distributors resulting in aged crops. In the event we decide not to sell the crop due to our concerns about the quality, the aged inventory could eventually be sold at greatly reduced prices. Aged inventory could result in asset impairment, in which case we would suffer a loss and incur an increase in our operating expenses. On the other hand, if we underestimate demand, we may not able to satisfy our customers’ demand for grass, and thus damage our customer relations and end-user loyalty. Our failure to estimate our customers’ future needs and to match our production to the demand of our direct customers may materially and adversely affect our business, financial condition and results of operations.

Grass prices and sales volumes may decrease in any given year with a corresponding reduction in sales, margins and profitability.

There may be periods of instability during which commodity prices and sales volumes may fluctuate greatly. Commodities can be affected by general economic conditions, weather, disease outbreaks and factors affecting demand, such as availability of financing and competition. Our attempts to differentiate our products from those of other grass producers have not prevented the grass market from having the characteristics of a commodity market. As a result, the price we are able to demand for our grass is dependent on the size of the supply of our grass and the grass of other producers. Therefore, the potential exists for fluctuation in supply, and consequently in price, in our own markets, even in the absence of significant external events that might cause volatility. As a result, the amount of revenue that we receive in any given year is subject to change. As production levels are determined prior to the time that the volume and the market price for orders is known, we may have too much or too little product available, which may materially and adversely affect our revenues, margins and profitability.

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Risks Related to our Framed Art Business

We are heavily dependent on one major customer for our revenues

For 2013 and 2012, sales to one customer comprised 96% and 93%, respectively, of our total revenues. We believe this concentration of sales to one customer will continue in the near future. We do not have a long-term contract with this customer. A loss of this customer or even a dramatic reduction in sales could significantly reduce our future revenues and profitability.

Failure of our internal controls over financial reporting could harm our business and financial results.

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States.  Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Our growth could place significant additional pressure on our system of internal control over financial reporting.  Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.  A significant financial reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence and decline in the market price of our common stock.

We may not be able to compete with existing or potential competitors in our framed art business.

The visual content and art framing businesses are highly competitive. We believe competitive factors include quality of images, branding, reputation, service, breadth of content, depth of content, technology, pricing, and sales and marketing. Overall, many of our competitors are significantly larger, have far greater resources, a notably larger customer base, a far greater content provider base, significantly more technology infrastructure, and more well-recognized names in the marketplace than we do, all of which may make it difficult for us to compete effectively.

We rely on outside content providers; therefore, our revenues will be materially and adversely affected without adequate supply of content.

We rely on outside sources to provide us visual content for our artwork, which we aggregate and make available to our customers. Although we work with entities we believe are reputable vendors, we cannot assure you such outside content provider will have the resources or personnel to provide us with content and artwork that is attractive to potential customers. If we are not able to acquire quality content in sufficient quantities that are favored by our customers, our revenue will be materially and adversely affected.

We may be subject to intellectual property rights claims or other claims in the future which could result in substantial costs and diversion of our financial and management resources away from our business.

We are subject to the risk that the products, technology and processes we license infringe or will infringe upon patents, copyrights, trademarks or other intellectual property rights held by third parties. We purchase copyrighted artwork prints from reputable publishers that have license agreements with the copyright holders. These publishers will indemnify us in the event that an infringement action occurs.  We may be subject to legal proceedings and claims relating to the intellectual property of others. If any such claim arises in the future, litigation or other dispute resolution proceedings may be necessary to retain our ability to offer our current and future products, which could result in substantial costs and diversion of our management resources and attention even if we prevail in contesting such claims. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property rights, incur additional costs to license or develop alternative products and be forced to pay fines and damages, any of which could materially and adversely affect our business and results of operations, or terminate our grass business entirely.

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Our failure to protect our intellectual property rights may undermine our competitive position, and legal action to protect our intellectual property rights may be costly and divert our management resources.

We rely primarily on trademark law, and other contractual restrictions to protect our intellectual property. We also rely on China Gate and its licensor to protect our licensed intellectual properties. These afford only limited protection and the actions we take to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our licensed proprietary technologies or other intellectual property rights, which could have a material adverse effect on our business, financial condition or operating results. Preventing unauthorized use of proprietary technology can be difficult and expensive. Also, 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. There is a risk the outcome of such potential litigation will not be in our favor. Such litigation may be costly and may divert management attention as well as expend other resources which could otherwise have been devoted to 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 may have a material adverse effect on our business, results of operations and financial condition.

Historically, implementation of PRC intellectual property-related laws has been lacking, primarily because of ambiguities in the PRC 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, which increases the risk that we may not be able to adequately protect our intellectual property.

We may not possess all the licenses required to operate our business, or may fail to maintain the licenses we currently hold. This could subject us to fines and other penalties, which could have a material adverse effect on our results of operations.

We are required to hold a variety of permits and licenses to conduct our framed art and grass businesses in China. To our knowledge, we hold all the permits and licenses required for each of our business segments, however, we cannot assure you we possess all the permits and licenses required for each of our business segments. In addition, there may be circumstances under which the approvals, permits or licenses granted by the governmental agencies are subject to change without substantial advance notice, and it is possible we could fail to obtain the approvals, permits or licenses required to expand our business as we intend. If we fail to obtain or to maintain such permits or licenses or renewals are granted with onerous conditions, we could be subject to fines and other penalties and be limited in the number or the quality of the products that we would be able to offer. As a result, our business, result of operations and financial condition could be materially and adversely affected.

We may be subject to product quality or liability claims, which may cause us to incur litigation expenses and to devote significant management time to defending such claims and, if determined adversely to us, could require us to pay significant damage awards.

Although we are not subject to any claims now, we may be subject to legal proceedings and claims from time to time relating to, among other things, our products in the future.   The defense of these proceedings and claims could be costly and time-consuming and significantly divert the efforts and resources of our management personnel. An adverse determination in any such proceedings could subject us to significant liability. In addition, any such proceeding, even if ultimately determined in our favor, could damage our market reputation and prevent us from maintaining or increasing sales and market share. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase of our products.

Risks Related to Doing Business in China

PRC laws and regulations governing our businesses are uncertain. If we are found to be in violation, we could be subject to sanctions. In addition, changes in such PRC laws and regulations may materially and adversely affect our business.

The PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new PRC laws or regulations on our businesses. We cannot assure you our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and materially adversely affect our competitive position.

We conduct substantially all of our operations and generate most of our revenues in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The PRC economy differs from the economies of most developed countries in many respects, including:

• the higher level of government involvement;

• the early stage of development of the market-oriented sector of the economy;

• the rapid growth rate;

• the higher level of control over foreign exchange; and

• the allocation of resources.

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While the PRC economy has grown significantly since the late 1970s, the growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on our business. 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.

The PRC economy has been transitioning from a planned to a more market-oriented economy. Although the PRC government has in recent years implemented measures emphasizing the utilization of market forces for economic reform, the PRC government continues to exercise significant control over economic growth in China through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and imposing policies that impact particular industries or companies in different ways.

Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.

We conduct substantially all of our business through our operating subsidiary in the PRC, IPA China, which is a wholly foreign owned enterprise in China. IPA China is generally subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws and regulations has significantly enhanced the protections afforded to various forms of foreign investments in China. However, since these laws and regulations are relatively new and the PRC 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 you and us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

China’s economic policies could affect our business.

A substantial portion of our assets are located in China and a significant portion of our revenue is derived from our operations in China. Accordingly, our results of operations and prospects are subject, to a significant extent, to the economic, political and legal developments in China. While China’s economy has experienced significant growth in the past twenty years, such growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy of the PRC, but they may also have a negative effect on us. For example, our operating results and financial condition may be adversely affected by the government control over capital investments or changes in tax regulations. The economy of the PRC has been changing from a planned economy to a more market-oriented economy. In recent years, the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform and the reduction of state ownership of productive assets, and the establishment of corporate governance in business enterprises. However, a substantial portion of productive assets in the PRC are still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over the PRC’s economic growth through the allocation of resources, the control of payment of foreign currency-denominated obligations, the setting of monetary policy and the provision of preferential treatment to particular industries or companies.

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

Most of our revenues and expenses are denominated in Renminbi. Under PRC law, the Renminbi is currently convertible under the “current account,” which includes dividends and trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans. Currently, IPA China may purchase foreign currencies for settlement of current account transactions, including payments of dividends to us, without the approval of the State Administration of Foreign Exchange (“SAFE”), by complying with certain procedural requirements. However, the relevant PRC government authorities may limit or eliminate our ability to purchase foreign currencies in the future. Since a significant amount of our future revenues will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China that are denominated in foreign currencies.

Foreign exchange transactions by IPA China under the capital account continue to be subject to significant foreign exchange controls and require the approval of or need to register with PRC government authorities, including SAFE. In particular, if IPA China borrows foreign currency through loans from us or other foreign lenders, these loans must be registered with SAFE, and if we finance IPA China by means of additional capital contributions, these capital contributions must be approved by certain government authorities, including the National Development and Reform Commission, or the NDRC, the Ministry of Commerce, or MOFCOM, or their respective local counterparts. These limitations could affect IPA China’s ability to obtain foreign exchange through debt or equity financing.

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Recent PRC regulations relating to the establishment of offshore special purpose vehicles by PRC residents, if applied to us, may subject the PRC resident shareholders of us or our parent company to personal liability and limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiaries’ ability to distribute profits to us or otherwise materially adversely affect us.

In October 2005, the SAFE issued a public notice, the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, or the SAFE notice, which requires PRC residents, including both legal persons and natural persons, to register with the competent local SAFE branch before establishing or controlling any company outside of China, referred to as an “offshore special purpose company,” for the purpose of overseas equity financing involving onshore assets or equity interests held by them. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required to amend its SAFE registration with the local SAFE branch with respect to that offshore special purpose company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. Moreover, if the offshore special purpose company was established and owned the onshore assets or equity interests before the implementation date of the SAFE notice, a retroactive SAFE registration is required to have been completed before March 31, 2006. If any PRC shareholder of any offshore special purpose company fails to make the required SAFE registration and amendment, the PRC subsidiaries of that offshore special purpose company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the offshore special purpose company. Moreover, failure to comply with the SAFE registration and amendment requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

Due to lack of official interpretation, some of the terms and provisions in the SAFE notice remain unclear and implementation by central SAFE and local SAFE branches of the SAFE notice has been inconsistent since its adoption. Because of uncertainty over how the SAFE notice will be interpreted and implemented, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with the SAFE notice by our or our parent company’s PRC resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by the SAFE notice. We also have little control over either our present or prospective direct or indirect shareholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident shareholders to comply with the SAFE notice, if SAFE requires it, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

The Chinese government could change its policies toward private enterprise or even nationalize or expropriate private enterprises, which could result in the total loss of our investment in that country.

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

Changes in policies, laws and regulations or in their interpretation or the imposition of confiscatory taxation, restrictions on currency conversion, restrictions or prohibitions on dividend payments to stockholders, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business. Nationalization or expropriation could even result in the total loss of our investment in China and in the total loss of your investment in us.

Shareholder rights under British Virgin Islands law may differ materially from shareholder rights in the United States, which could adversely affect the ability of us and our shareholders to protect our and their interests.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, by the Business Companies Act (No 16 of 2004) and the common law of the BVI. The rights of shareholders to take action against the directors, actions by minority shareholders, and the fiduciary responsibilities of our directors to us under BVI law are to a large extent governed by the common law of the BVI. The common law in the BVI is derived in part from comparatively limited judicial precedent in the BVI as well as from English common law, the decisions of whose courts are of persuasive authority but are not binding on a court in the BVI. The rights of our shareholders and the fiduciary responsibilities of our directors under BVI law in this area may not be as clearly established as they would be under statutes or judicial precedent in existence in some jurisdictions in the United States. In particular, the BVI has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate laws. Moreover, our company could be involved in a corporate combination in which dissenting shareholders would have no rights comparable to appraisal rights which would otherwise ordinarily be available to dissenting shareholders of United States corporations. Also, we are not aware of a significant number of reported class actions or derivative actions having been brought in BVI courts. Such actions are ordinarily available in respect of United States corporations in US courts. Finally, BVI companies may not have standing to initiate shareholder derivative action before the federal courts of the United States. As a result, our public shareholders may face different considerations in protecting their interests in actions against the management, directors or our controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States, and our ability to protect our interests may be limited if we are harmed in a manner that would otherwise enable us to sue in a United States federal court.

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As we are a British Virgin Islands company and most of our assets are outside the United States, it will be extremely difficult to acquire jurisdiction and enforce liabilities against us and our officers, directors and assets based in China.

We are a BVI international business company, and our corporate affairs are governed by our Memorandum and Articles of Association and by the BVI Business Companies Act (No 16 of 2004) and other applicable BVI laws. Certain of our directors and officers primarily reside outside of the United States. In addition, the Company’s assets will be located outside the United States although we do sell our products into the United States. As a result, it may be difficult or impossible to effect service of process within the United States upon our directors or officers and our subsidiaries, or enforce against any of them court judgments obtained in United States’ courts, including judgments relating to United States federal securities laws. In addition, there is uncertainty as to whether the courts of the BVI and of other offshore jurisdictions would recognize or enforce judgments of United States’ courts obtained against us predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in the BVI or other offshore jurisdictions predicated upon the securities laws of the United States or any state thereof. Furthermore, because the majority of our assets are located in China, it would also be extremely difficult to access those assets to satisfy an award entered against us in United States court.

The laws of the British Virgin Islands provide little protection for minority shareholders, so minority shareholders will have little or no recourse if the shareholders are dissatisfied with the conduct of the affairs of our company.

Under the laws of the BVI, there is some statutory law for the protection of minority shareholders under the Act. The principal protection under statutory law is that shareholders may bring an action to enforce our Amended and Restated Memorandum and Articles of Association. The Act sets forth the procedure to bring such a claim. Shareholders are entitled to have the affairs of the company conducted in accordance with the general law and the Amended and Restated Memorandum and Amended and Restated Articles of Association. Companies are not obligated to appoint an independent auditor and shareholders are not entitled to receive the audited financial statements of the company.

There are common law rights for the protection of shareholders that may be invoked (such rights have also now been given statutory footing under the Act), largely dependent on English company law, since the common law of the BVI for business companies is limited. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company’s affairs by the majority of the board of directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to law and the constituent documents of the corporation. As such, if those who control the company have persistently disregarded the requirements of company law or the provisions of the company’s memorandum or articles of association, then the courts will grant relief. Generally, the areas in which the courts will intervene are the following: (i) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority, (ii) acts that constitute fraud on the minority where the wrongdoers control the company, (iii) acts that infringe on the personal rights of the shareholders, such as the right to vote, and (iv) where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded minority shareholders under the laws of many states in the US.

Risks Related To An Investment In Our Stock

There may not be an active, liquid trading market for our common stock.

Our common stock is quoted for trading on the OTC Bulletin Board. The first public trading in our Company stock began on November 8, 2010. There is no active liquid market for our shares and there is no guarantee of an active trading market in the future.

The market price for our common stock may be volatile, which could result in substantial losses to investors.

The market price for our common stock is likely to be volatile and subject to wide fluctuations in response to factors including the following:

● actual or anticipated fluctuations in our quarterly operating results;

● changes in the Chinese energy and livestock industries;

● changes in the Chinese economy;

● announcements by our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

● additions or departures of key personnel; or

● potential litigation.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. As a result, to the extent shareholders sell our common stock in negative market fluctuation, they may not receive a price per share that is based solely upon our business performance. We cannot guarantee that shareholders will not lose some or all of their investment in our common stock.

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Future sales of our common stock may depress our share price.

The market price of our common stock could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of equity. There were 8,600,000 shares of common stock registered for resale to the public by certain of our current shareholders pursuant to our Form S-1 Registration Statement declared effective by the Securities and Exchange Commission (“SEC”) on December 31, 2009. All of the shares of common stock registered for resale pursuant to such registration statement are freely transferable without restriction or further registration under the Securities Act, except for any shares sold by our “affiliates,” as defined in Rule 144 of the Securities Act. At December 31, 2013, the Company had 606,680 common shares that are unrestricted securities and freely-tradeable. The remaining 9,873,720 issued and outstanding shares of our common stock are “restricted securities” as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act. We have also registered, on a Form S-8 registration statement, 1,400,000 shares of common stock which may be sold upon the exercise of options that may be granted under the VIASPACE Green Energy Inc. 2009 Stock Incentive Plan. There are no stock options issued and outstanding at December 31, 2013. If future options are granted and later exercised and resold under this registration statement, such sales could have a further depressing effect on the share price of our common stock. 

Changs, LLC controls a majority of our common stock, decreasing your influence on shareholder decisions.

Our major shareholder is Changs, LLC, a limited liability company controlled by our president Sung Hsien Chang, which held 8,384,320 shares of common stock at December 31, 2013, or approximately 80% of our outstanding shares of common stock. A party related to our president Sung Hsien Chang owns 400,000 shares of common stock.  This concentration of ownership and voting power may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our common stock. These actions may be taken even if they are opposed by our other shareholders, including those who purchase shares in the Company. See “Principal Shareholders.”

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We currently lease a corporate office at 131 Bells Ferry Lane, Marietta, Georgia and pay $2,400 per month to Cindy Chang, spouse of Company president Sung Chang. Our framed artwork business operates at San Sheng Road, DaLi Village, TaiHe Town, Guangzhou, China. Our rental rate for this operation location is $2,700 per month. Our grass business operates in the Guangdong Province, China and leases land at various locations for approximately $6,700 per month.  We believe the space we currently occupy for corporate purposes and our artwork and grass segments is adequate for our immediate needs. Additional space may be required as we expand our operations. We do not foresee any significant difficulties in obtaining any required additional place.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

17

PART II

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

Market Prices

On January 14, 2010, VGE received approval from the Financial Industry Regulatory Authority that its shares of common stock were approved for quotation on the OTC Bulletin Board (“OTCBB”) under the ticker symbol “VGREF”. The first day the Company’s common stock was traded on the OTCBB was November 10, 2010. The quoting and trading of our common stock is sporadic, therefore, we believe that there is no established trading market for our common stock.

The following table sets forth, for the fiscal quarters indicated, the high and low bid quotations for our common stock, as reported on the OTCBB. The price information in the table below reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Quarterly period	High		Low
Fiscal year ended December 31, 2013:
First Quarter	$	1.95	$	1.50
Second Quarter	$	1.40	$	1.20
Third Quarter	$	1.30	$	1.20
Fourth Quarter	$	1.30	$	1.10

Quarterly period	High		Low
Fiscal year ended December 31, 2012:
First Quarter	$	3.30	$	3.30
Second Quarter	$	3.30	$	1.25
Third Quarter	$	2.00	$	0.50
Fourth Quarter	$	1.50	$	0.22

Holders

At April 15, 2014, there were 37 shareholders of record of the Company’s common stock.

Dividends

We have not paid any cash dividends on our common stock since our inception and do not anticipate paying any cash dividends on our common stock in the foreseeable future. There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends in the future.  Our future dividend policy will be examined periodically by our board of directors based upon conditions then existing, including our earnings and financial condition, capital requirements and other relevant factors.

Equity Compensation Plan

The Company’s equity compensation plan is discussed under the section titled “Equity Compensation Plan Information” under “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stock Matters” below.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

ITEM 6. SELECTED FINANCIAL DATA

Not required.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements, related notes, and other detailed information included elsewhere in this Annual Report on Form 10-K. Our financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Certain information contained below and elsewhere in this Annual Report on Form 10-K, including information regarding our plans and strategy for our business, constitute forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements.”

Our Business

VIASPACE Green Energy Inc., a British Virgin Islands (“BVI”) international business company (“we”, “us”, “VGE” or the “Company”) is a renewable energy company. Our renewable energy is based on biomass -- in particular our dedicated energy crop with the trademarked name “Giant King^® Grass”. VGE is the parent company of Inter Pacific Arts Corporation, a BVI international business company (“IPA BVI”) and Guangzhou Inter Pacific Arts, a People’s Republic of China (“PRC”) company (“IPA China”). IPA China is a wholly-owned foreign enterprise headquartered in Guangdong province of China. IPA BVI owns all equity interests of IPA China. IPA BVI and IPA China specialize in the manufacturing of high quality, copyrighted, wall décor sold in US retail chain stores. IPA China also has a license for and produces Giant King Grass (“GKG”), a proprietary dedicated energy crop, which can be burned in 100% biomass power plants to generate electricity, made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants, generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation, biochemicals and bio plastics. GKG can also be used as animal feed. GKG has been independently tested by customers and been shown to have excellent energy content, high bio methane production, and the cellulosic sugar content needed for biofuels and biochemicals.

We are growing GKG on approximately 457 acres of leased land in China, which serves as a nursery to provide seedlings for large bioenergy projects, a demonstration plantation for potential partners and customers to visit, to provide samples for testing by potential customers, and as a grass source for our own pellet products.

Results of Operations

Year Ended December 31, 2013 versus Year Ended December 31, 2012

Revenues

Revenues were $2,881,000 and $3,493,000 for the year ended December 31, 2013 and 2012, respectively, a decrease of $612,000, or 18%, due to lower customer orders received for artwork sales in the US. Approximately $2,858,000 of revenues recorded during the year ended December 31, 2013 are from framed artwork sales and $23,000 of revenues are from grass related sales. For the year ended December 31, 2012, framed artwork sales were $3,310,000 and grass related revenues were $183,000.

Cost of Revenues

Cost of revenues were $1,968,000 and $2,314,000 for the year ended December 31, 2013 and 2012, respectively, a decrease of $346,000, or 15%, primarily due to a decrease in customer orders received for artwork sales in 2013 as compared with 2012. Cost of revenues in producing framed artwork were $1,962,000 and $2,287,000 for the year ended December 31, 2013 and 2012, respectively. Cost of revenues in grass related sales were $6,000 and $27,000 for 2013 and 2012, respectively.

Gross Profit

The resulting effect on these changes in revenues and cost of revenues for the year ended December 31, 2013 compared to the same period in 2012 was a decrease in gross profit from $1,179,000 (gross margin of 34%) for the year ended December 31, 2012 to $913,000 (gross margin of 32%) for the year ended December 31, 2013, a decrease of $266,000, or 23%.

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Operations Expenses

Operations expenses were $109,000 and $151,000 for the year ended December 31, 2013 and 2012, respectively, a decrease of $42,000. Operations expenses are composed salaries, consulting, plantation costs, travel costs, depreciation, fertilizer, maintenance, utilities and fuel costs associated with growing Giant King Grass. The decrease is primarily due to lower payroll expenses as well as a decrease in plantation costs because the Company is no longer paying the costs for a test plot growing Giant King Grass in the US.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1,162,000 and $1,437,000 for the year ended December 31, 2013 and 2012, respectively, a decrease of $275,000, or 19%.

Payroll and benefits decreased $65,000 during the year ended December 31, 2013 as compared with the same period in 2012 due to lower compensation levels in 2013 due to the Company not paying compensation for a chief executive officer as a result of the separation from VIASPACE. Stock option compensation expense decreased $111,000 in 2013 as compared with 2012 since stock options completed vesting in the first quarter of 2012 and that was the only period of 2012 with stock option compensation expense. Legal fees decreased $68,000 in 2013 as compared to 2012 due to legal fees paid in the third quarter of 2012 related to the separation of the Company from VIASPACE. Travel costs decreased $29,000 in 2013 as compared with 2012 due to reduced travel to the PRC in 2013 as compared with the same period in 2012 and due to no travel costs incurred by the Company’s former chief executive officer in 2013. Rent increased $23,000 during 2013 as compared to 2012 as the Company is now paying rent on its offices in Marietta, Georgia, with a lease agreement entered and started from September, 2012. Insurance costs decreased $24,000 due to the Company not purchasing directors and officers insurance in 2013. Bad debt expense decreased $13,000 in 2013 due to the Company recording as uncollectible lower amounts in 2013 as compared to 2012. Other selling, general and administrative expenses, net, increased by $12,000 in 2013 compared to 2012.

Goodwill Impairment Expense

The Company performed goodwill impairment tests for the reporting unit IPA BVI and IPA China as of December 31, 2013 and 2012. The purpose of the tests was to determine whether any potential goodwill impairment existed pursuant to ASC 350 Intangibles-Goodwill and Other (“ASC 350”) issued by FASB. ASC 350-20-35 provides for a two-step impairment test to be used: (1) to identify potential goodwill impairment and (2) measure the amount of a goodwill impairment loss to be recognized (if any). Based on results of the Step 1 test in 2012, the Company performed the Step 2 analysis on the affected reporting unit. The measurement date for the impairment tests was December 31, 2013 and December 31, 2012, respectively. As of a result of these tests, the Company recorded an impairment charge to its goodwill of $4,413,000 for the year ended December 31, 2012. In 2013, Step 1 was performed and it was determined that Step 2 was not necessary. There was no impairment charged deemed necessary for the year ended December 31, 2013.

Income (Loss) from Operations

The resulting effect on these changes in gross profits, operations expenses, selling, general and administrative expenses, and goodwill impairment expense was a decrease in the loss from operations from $4,822,000 for the year ended December 31, 2012 to a loss from operations of $358,000 for the year ended December 31, 2013, a decrease of $4,464,000.

Of the total amounts, the framed artwork segment excluding goodwill impairment expense had decreased income from operations of $140,000 for the year ended December 31, 2013 compared to the same period in 2012. The grass segment had a decreased loss from operations of $191,000 for the year ended December 31, 2013 compared to the same period in 2012. Goodwill impairment expenses decreased $4,413,000 from 2012 to 2013.

Other Income (Expense), Net

Other Income

Other income decreased $175,000 for the year ended December 31, 2013 compared to the same period in 2012, primarily due to the Company realizing income due to the forgiveness of indebtedness related to accounts payable of IPA China in 2012.

Liquidity and Capital Resources

The Company’s net loss for the year ended December 31, 2013 was $357,000. Non-cash expenses totaled $223,000 for the year ended December 31, 2013 composed of depreciation expense of $137,000 and amortization expense of $86,000. Related party receivables and payables, net, provided $35,000 of cash from operating activities. Working capital provided $240,000 in 2013. Total net cash provided by operating activities was $141,000 for the year ended December 31, 2013.

Net cash used in investing activities was $203,000 for 2013. Capital expenditures of $66,000 were incurred by the Company related to equipment used for its GKG business and $2,000 for equipment in its framed artwork business. The Company made a land lease payment of $135,000 on new land totaling 231 acres being leased to grow Giant King Grass in the PRC.

20

The Company expects cash on hand as of December 31, 2013 and future operating cash flow to fund operations for a minimum of the next twelve months, and as such, the Company has no immediate need for additional outside financing. However, if revenue forecasts are not met or if future operating expenses or capital requirements increase beyond our control; the Company may need to seek additional cash resources through the sale of equity securities or debt securities.

Tabular Disclosure of Contractual Obligations

This information is not required of smaller reporting companies.

Inflation and Seasonality

We have not experienced material inflation during the past two years.  Seasonality has historically not had a material effect on our operations.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements as of December 31, 2013.

Critical Accounting Policies and Estimates

Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”) issued by the SEC, suggests companies provide additional disclosure and commentary on those accounting policies considered most critical.  FRR 60 considers an accounting policy to be critical if it is important to the company’s financial condition and results of operations, and requires significant judgment and estimates on the part of management in its application.

Basis of Presentation

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, which are based on historical experience and on various other assumptions believed to be reasonable under the circumstances.  The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions. The accounting policies discussed below require significant management judgments and estimates.

Revenue Recognition

IPA BVI, IPA China and VGE have generated revenues on product shipments from artwork sales and energy pellet sales made from our Giant King Grass. In accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition”, codified in FASB ASC Topic 605, IPA recognizes product revenue provided (1) persuasive evidence of an arrangement exists, (2) delivery to the customer has occurred, (3) the selling price is fixed or determinable and (4) collection is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. The price is considered fixed or determinable when it is not subject to refund or adjustments.  Our standard shipping terms are free on board shipping point. Some of the Company’s products are sold in the PRC and are subject to Chinese value-added tax. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their finished product. Revenue is recorded net of VAT taxes.

Use of Estimates

The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. There is no assurance actual results will not differ from these estimates.

Goodwill Impairment

In accordance with FASB ASC 350-20-35, “Intangibles - Goodwill and Other”, management tests our goodwill for impairment annually, or more frequently if events or changes in circumstances suggest that the carrying amount may not be recoverable. As part of the Company’s annual impairment review as of December 31, 2012, a $4,413,000 goodwill impairment charge was recorded in 2012 within the Company’s framed-artwork reportable segment due to lower than expected revenue and operating income growth. No annual impairment charge was necessary in 2013. Goodwill was $602,000 at December 31, 2013 and 2012.

21

Impairment of Long Lived Assets

In accordance with FASB ASC 360-10-35, “Property, Plant, and Equipment”, management reviews our long-lived asset groups, including property and equipment and other intangible assets, for impairment whenever events indicate that their carrying amounts may not be recoverable. Some of the events that we consider as impairment indicators for our long-lived assets, including goodwill, are:

● our significant underperformance relative to expected operating results;

● significant adverse change in legal factors or in the business climate;

● an adverse action or assessment by a regulator;

● unanticipated competition;

● a loss of key personnel;

● significant decrease in the market value of a long-lived asset; and

● significant adverse change in the extent or manner in which a long-lived asset is being used or its physical condition.

When management determines that one or more impairment indicators are present for an asset group, we compare the carrying amount of the asset group to net future undiscounted cash flows that the asset group is expected to generate. If the carrying amount of the asset group is greater than the net future undiscounted cash flows, an impairment loss is recognized for the excess of the carrying amount of the asset group over its fair value. The management of the Company has concluded that there were no impairment indicators relating to long-lived assets as of the end of fiscal years 2013 and 2012.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information is not required of smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements to be provided in this Annual Report on Form 10-K are included following Part IV, Item 15, commencing on page F-1.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures to provide reasonable assurance of achieving the control objectives, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based on their evaluation as of December 31, 2013, the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective due to the material weaknesses described below.

22

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company maintains internal controls over financial reporting to include those policies and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission's ("SEC's") rules and forms, and that such information is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the internal controls over financial reporting, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of management, including the Company's principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included an assessment of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on this evaluation, our principal executive officer and principal financial officer concluded as of December 31, 2013, our internal controls over financial reporting were not effective at the reasonable assurance level due to the material weaknesses discussed below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure that our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Report.

Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Material Weakness and Related Remediation Initiatives

Set forth below is a summary of the various significant deficiencies that caused management to conclude that we had the material weakness in our disclosure controls and procedures. Through the efforts of management, external consultants, and our directors, we have developed a specific action plan to remediate the material weaknesses. We expect to implement these various action plans during 2014. If we are able to complete these action plans in a timely manner, we anticipate that all control deficiencies and material weaknesses will be remediated by December 31, 2014.

Our principal executive officer and principal financial officer concluded that as of December 31, 2013, the following material weaknesses existed:

1. Due to the Company’s budget constraints, the Company’s accounting department does not maintain the number of accounting personnel (either in-house or external) necessary to ensure more complete and effective financial reporting controls. Due to this situation, we did not perform timely and sufficient internal or external review of our current fiscal year financial reporting which resulted in several audit adjustments.

23

Remediation of Internal Control Deficiencies and Expenditures

It is reasonably possible that, if not remediated, one or more of the material weaknesses described above could result in a material misstatement in our reported financial statements that might result in a material misstatement in a future annual or interim period. We are developing specific action plans for each of the above material weaknesses. We are uncertain at this time of the costs to remediate all of the above listed material weaknesses.

Through these steps, we believe that we are addressing the deficiencies that affected our internal control over financial reporting as of December 31, 2013. Because the remedial actions may require hiring of additional personnel, and relying extensively on manual review and approval, the successful operation of these controls for at least several quarters may be required before management may be able to conclude that the material weaknesses have been remediated. We intend to continue to evaluate and strengthen our internal control over financial reporting systems. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting systems, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our SEC reporting obligations.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

MANAGEMENT

Executive Officers and Directors

The following table sets forth our executive officers and directors, their ages and the positions held by them. None of the directors listed below are independent directors:

Name	Age	Position Held	Director Since
Mr. Sung Hsien Chang	51	President and Director	2008
Mr. Samuel Chen	67	Director	2010
Mr. Stephen Muzi	50	Chief Financial Officer

Sung Hsien Chang.  Mr. Chang has been the president and a director of VIASPACE Green Energy since October 2008.  Mr. Chang became a Director of VIASPACE Inc. in May 2010. He is also the chief executive officer and founder of Inter-Pacific Arts, Inc., a subsidiary of VIASPACE Green Energy Inc. since 2002. In 1988, Mr. Chang began operations in America by creating JJ International, Inc., an import and trading company. JJ International, Inc. has now been in operations for over 22 years selling indoor, outdoor home furnishings, and home organization products to retailers throughout the U.S. Prior to 1988, Mr. Chang worked at Jun Jung Metal prior to 1998.  Mr. Chang is a member of the World Taiwanese Chambers of Commerce, board member of the Atlanta Taiwanese Chamber of Commerce, and director of the Shi-Tai United Fund Inc. which is committed to building a better and more beautiful living environment.

Samuel Chen.  Mr. Chen has been a director of the Company since May 2010. Mr. Chen has been the president and chief executive officer of Global Commerce Bank since February 2007. Mr. Chen has amassed over 25 years of banking experience. In 1998, he co-founded American First National Bank, and served as an executive director until 2005. In 1987, Mr. Chen co-founded Metro Bank, a New York Stock Exchange listed corporation based in Houston, Texas. Mr. Chen is the founder and president of Chen's Financial Group, Inc., a Federal SBA Licensee under the Small Business Investment Act of 1958. He also holds a real estate license in Texas and is actively involved in the management and development of multifamily apartments, franchised hotels, and commercial properties. Mr. Chen is a member and director of Houston Taiwanese Innkeepers Association, charter founder of Houston Chinese American Lions Club, member and honorary Vice President of Houston Chinese Chamber of Commerce, and a member of the Atlanta Taiwanese Chamber of Commerce.

24

Stephen Muzi.  Mr. Muzi has been the chief financial officer, treasurer and secretary of VIASPACE Green Energy Inc. since October 2008. He is also the chief financial officer, treasurer and secretary of VIASPACE Inc. since June 2005. He was the controller for SpectraSensors, Inc., a spun-off former subsidiary of VIASPACE from 2003 to 2005.  He was also a controller for ViaLogy Corp., a spun-off former subsidiary of VIASPACE Inc. from 2003 to 2005. From 2004 to 2005, he also served as a consultant to Direct Methanol Fuel Cell Corporation and Ionfinity LLC, subsidiaries of VIASPACE Inc. Mr. Muzi joined ViaSpace Technologies LLC (predecessor of VIASPACE Inc.) in May 2000. Mr. Muzi obtained his B.S. degree from Rochester Institute of Technology and an M.B.A. from the State University of New York at Buffalo. He is a Certified Public Accountant.

Board of Directors and Board Committees

Our board of directors currently consists of two (2) members. We expect all current directors will continue to serve in their capacity. 

There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting. There are no other arrangements or understandings pursuant to which our directors are selected or nominated.

As of December 31, 2013, the Company does not have any Board Committees.

Family Relationships

There are no family relationships between or among any of the current directors, executive officers or persons charged by the Company to become directors or executive officers.

Section 16(a) Beneficial Ownership Reporting Compliance

Not applicable.

Code of Ethics

The Company expects to adopt its own separate formal code of ethics in 2014.

Involvement in Certain Legal Proceedings

During the past ten years, none of our officers, directors, promoters or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K.

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ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows the annual compensation paid by us to Mr. Sung Chang, our principal executive officer, for the year ended December 31, 2013 and our executive officers who were paid more than $100,000 per annum. Other than the officers listed, no other officer had total compensation during either of the previous two years of more than $100,000.  The Named Executive Officers are the Company’s president, chief financial officer and former chief executive officer.

Name and Principal Position	Year	Salary (1) ($)		Bonus ($)	Stock Awards ($)	Option Awards (2)($)	All Other Compensation ($)		Total ($)
Sung Hsien Chang	2013		240,000	―	―	―		―		240,000
President of VIASPACE Green Energy and Chief Executive Officer of IPA BVI and IPA China	2012		240,000	―	―	45,354		―		285,354
(Principal Executive Officer)	2011		240,000	—	—	181,416		—		421,416
Stephen Muzi	2013		60,000	―	―	―		―		60,000
Chief Financial Officer (Principal Financial Officer)	2012		30,000	―	―	20,616		―		50,616
	2011		―	—	—	82,464		—		82,464

__________________

(1)

Salary amounts shown are amounts paid by the Company to the officers listed. VIASPACE Inc., former parent company of the Company paid salary in 2012 and 2011 to Stephen Muzi, which amounts are not included in the executive compensation table of the Company but rather shown in the executive compensation table of VIASPACE Inc.

(2)

Represents the dollar amount recognized as compensation expense for financial statement reporting purposes for 2010 under FASB ASC Topic 718, Share-Based Payment, and not an amount paid to or realized by the Named Executive Officer. The amount shown in option awards represents awards granted in 2010.  There were no new option awards granted in 2012. Assumptions used in the calculation of this amount are included in the footnotes to the Company’s consolidated audited financial statements. There can be no assurance the amounts determined by FASB ASC Topic 718 will ever be realized.

Employment and Consulting Agreements

On April 19, 2012, our board of directors approved a one-year employment agreement beginning June 1, 2012 for Mr. Chang. Pursuant to the agreement, Mr. Chang will receive a salary of $240,000 per annum and will also be entitled to a bonus as determined by the VGE Board of Directors, customary insurance and health benefits, 20 business days paid leave per year, and reimbursement for out-of-pocket expenses in the course of his employment. This agreement is still ongoing.

On September 30, 2012, Mr. Muzi signed a consulting agreement with VGE that will pay Mr. Muzi $5,000 monthly to serve as the chief financial officer, treasurer and secretary of the Company. This agreement will automatically renew monthly unless either party terminates the agreement.

Stock Option Grants

There were no stock options granted in 2013 to any of the Company’s Named Executive Officers.

Outstanding Equity Awards at Fiscal Year End

There were no stock option awards outstanding at December 31, 2013. There were no shares of the Company’s common stock issued during 2013 for the exercise of previously issued stock options.

Retirement Plans

The Company does not have any retirement plans that executives participate in at December 31, 2013.

Director Compensation

Employee directors do not receive any compensation for their services. Non-employee directors may receive cash, stock or stock options for their service on the board of directors. In addition, non-employee directors are entitled to receive compensation for their actual travel expenses for each board of directors meeting attended. The Company did not provide director compensation in 2013. The Company will review its compensation plan for the Company’s non-employee directors during 2014.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding beneficial ownership of our common stock as of March 28, 2013 by (i) each person who beneficially owns more than 5% of all outstanding shares of our common stock, (ii) each director and the executive officer identified below, and (iii) all directors and executive officers as a group. Percentage of beneficial ownership is based on 10,480,400 shares outstanding as of April 15, 2014. The mailing address for each shareholder identified in this table is 131 Bells Ferry Lane, Marietta, Georgia 30066.

Name	Number of Shares Beneficially Owned		Exercisable Options Beneficially Owned (a)		Total Number of Shares and Exercisable Options Beneficially Owned		Percent of Class of Common Stock (b)
Directors:
Sung Hsien Chang, president (c)		8,784,320		―		8,784,320		83.8	%
Samuel Chen		―		―		―		―
Other Named Officers:
Stephen J. Muzi, chief financial officer		―		―		―		―
All Named Executive Officers and Directors as a group (3 persons)		8,784,320		―		8,784,320		83.8	%
Other 5% Owners:
Ko Hung Wang		525,000		―		525,000		5.0	%

(a)	Includes options that are exercisable within 60 days.
(b)	The percent of common stock owned is calculated using the sum of the number of shares of common stock owned as of April 15, 2014 and the number of options of the beneficial owner that are exercisable within 60 days divided by the sum of the number of shares of common stock outstanding as of April 15, 2014 and the number of options of the beneficial owner that are exercisable within 60 days.

(c) Includes 400,000 shares held by a company of which his wife and mother are the control persons, and 8,384,320 shares held by Changs, LLC, a limited liability company controlled by Mr. Chang.

Securities Authorized for Issuance under Equity Compensation Plans

Our board of directors and shareholders adopted the VIASPACE Green Energy Inc. 2009 Stock Incentive Plan that provides for stock option and stock grants for our employees, directors and consultants. Under the stock incentive plan, 1,400,000 shares of common stock were initially reserved for grant under the plan (representing 13.36% of our outstanding shares at December 31, 2013). The stock incentive plan provides that the number of shares reserved for grant thereunder will adjust annually and be set at 16.28% of outstanding shares. As of December 31, 2013, we have not yet increased the number of shares of common stock reserved for grant under the stock incentive plan. The options will vest at a rate determined by the board of directors and must have an exercise price of at least 80% of the market price of our shares on the date the options are granted.  There are no options outstanding at December 31, 2013.

27

Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	--	--	1,400,000
Equity compensation plans not approved by security holders	--	--	--
Total	--	--	1,400,000

Changes in Control Arrangements

No change in control arrangements existed at December 31, 2013.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Other than as listed below, we have not been a party to any significant transactions, proposed transactions, or series of transactions, and in which, to our knowledge, any of our directors, officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.

Related Party Receivables

Included in the Company’s consolidated balance sheets at December 31, 2013 and December 31, 2012 are Related Party Receivables and Payables. The Related Party Receivables and Payables are as follows. Sung Hsien Chang is a director and president of the Company and CEO of IPA China and IPA BVI. Chang is also an owner of JJ. As discussed in Note 6, JJ paid down $1,221,426 of the amount owed to the Company on April 5, 2013 with shares of VSPC common stock. As of December 31, 2013 and December 31, 2012, the Company had a receivable due from JJ in the amount of $105,000 and $1,241,000, respectively. This balance consists of the following:

· Loan made to JJ by IPA BVI in the amount of $0 and $400,000 at December 31, 2013 and December 31, 2012, respectively.

· Advances made to JJ by IPA BVI and VGE. Expenses that JJ pays on behalf of IPA BVI and VGE reduce these advances. As of December 31, 2013 and December 31, 2012, included in the Due from JJ receivable shown below are net advances made to JJ in the amount of $6,000 and $20,000, respectively.  Additionally, at December 31, 2013, $56,000 owed by IPA BVI to JJ is included in the related party payables summary below.

· Interest accruing on the loan receivable and other outstanding balances due to IPA BVI. For 2013 and 2012, the Company recorded interest income from JJ in the amount of $0 and $19,000, respectively, which is included in Other Income in the Company’s Consolidated Statements of Operations. As of December 31, 2013 and December 31, 2012, included in the Due from JJ receivable shown below is cumulative interest charged to JJ in the amount of $0 and $176,000, respectively.

· IPA China recorded revenues of $95,000 and $94,000 for sales made to JJ for 2013 and 2012, respectively. As of December 31, 2013 and December 31, 2012, included in the Due from JJ receivable are trade receivables of $99,000 and $645,000, respectively.

28

The following table represents a summary of Related Party Receivables at December 31, 2013 and December 31, 2012:

	2013		2012
Short Term
Due from JJ International	$	105,000	$	20,000
Due from employee of IPA China		30,000		146,000
Total short term		135,000		166,000
Long Term
Due from JJ International		―		1,221,000
Due from VIASPACE		40,000		40,000
Total long term		40,000		1,261,000
Total short term and long term	$	175,000	$	1,427,000

VIASPACE has each agreed to pay the Company $40,000 as reimbursement for legal fees and costs in connection with the separation of the Company and VIASPACE. This amount is due by September 30, 2014.

Related Party Payables

The following table is a summary of Related Party Payables at December 31, 2013 and December 31, 2012:

	2013		2012
Due to employee of IPA China	$	―	$	23,000
Due to Cindy Chang		7,000		9,000
Due to JJ International		56,000		―
Total	$	63,000		32,000

On October 1, 2012, IPA BVI and VGE entered into an office lease agreement with Cindy Chang, spouse of Sung Hsien Chang, whereby IPA BVI and VGE would pay to Cindy Chang $1,200 each per month for rent on the Company’s headquarters in Marietta, Georgia. For 2013, the Company recorded rent expense of $28,800 under this lease.

Review, Approval or Ratification of Transactions with Related Persons

Under BVI law, a director may vote in respect of any contract or transaction in which he is interested; provided, however the nature of the interest of any director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote on that matter. A general notice or disclosure to the directors or otherwise contained in the minutes of a meeting or a written resolution of the directors or any committee thereof that a director is a shareholder of any specified firm or company and is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure and after such general notice it shall not be necessary to give special notice relating to any particular transaction.

Director Independence

For purposes of determining independence, the Company has adopted the definition of independence as contained in NASDAQ Market Place Rules 4200. Pursuant to the definition, the Company has determined that Mr. Samuel Chen qualifies as an "independent" board member.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

	2013		2012
Audit Fees – Malone Bailey	$	9,000	$	―
Audit Fees – Hein & Associates LLP		77,000		87,000
Audit Fees – Goldman Kurland and Mohidin, LLP		―		2,000
Audit-Related Fees		―		―
Tax Fees		―		―
Other Fees		2,000		1,000
	$	88,000	$	90,000

29

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Company will consider establishing an Audit Committee in 2014. Consistent with SEC policies regarding auditor independence, our Audit Committee will have the responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, the Audit Committee will establish a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.

Prior to engagement of the independent auditor for the next year's audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.

1. Audit services include audit work performed in the preparation of financial statements, as well as work generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

2. Audit-Related services are for assurance and related services traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

3. Tax services include all services performed by the independent auditor's tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

4. Other Fees are those associated with services not captured in the other categories.

Prior to the engagement, the Audit Committee will pre-approve these services by category of service. The fees are budgeted and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval.  In those instances, the Audit Committee requires specific pre-approval before engaging the independent auditor.

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

30

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Financial Statements

Reference is made to Item 8. Financial Statements and Supplementary Data of this Form 10-K.

List of Exhibits

Exhibit Number	Description of Exhibit
3.1	Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 filed June 3, 2009).
3.2	Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 filed November 25, 2009).
10.1	Securities Purchase Agreement dated as of October 21, 2008 by and among VIASPACE Inc., Sung Hsien Chang, the Company and the other persons listed therein (incorporated herein by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1 filed June 3, 2009).
10.2	Shareholder Agreement dated as of October 21, 2008 by and among VIASPACE Inc., Chang and the other persons listed therein, and the Company (incorporated herein by reference to Exhibit 10.2 of the Company’s Registration Statement on Form S-1 filed June 3, 2009).

10.3	2009 Stock Incentive Plan (incorporated herein by reference to Exhibit 99.1 of the Company’s Registration Statement on Form S-1 filed June 3, 2009).
10.4	Agreement between IPA China and China Gate Technology Co., Ltd. dated on or about October 2008 (incorporated herein by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1 filed August 12, 2009).
10.5	Memorandum of Understanding dated as of September 2, 2009 by and among Dragon Power Ltd, the Company and VIASPACE Inc. (incorporated herein by reference to Exhibit 99.4 of the Company’s Registration Statement on Form S-1 filed September 4, 2009).
10.6	Amendment No. 1 dated as of June 22, 2009 to the Securities Purchase Agreement dated as of October 21, 2008 by and among VIASPACE Inc., Sung Hsien Chang, the Company and the other persons (incorporated herein by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1 filed September 4, 2009).
10.7	Amendment No. 2 dated as of August 21, 2009 to the Securities Purchase Agreement dated as of October 21, 2008 by and among VIASPACE Inc., Sung Hsien Chang, the Company and the other persons (incorporated herein by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1 filed September 4, 2009).
10.8	Amendment No. 3 dated as of October 14, 2009 to the Securities Purchase Agreement dated as of October 21, 2008 by and among VIASPACE Inc., Sung Hsien Chang, the Company and the other persons (incorporated herein by reference to Exhibit 10.10 of the Company’s Registration Statement on Form S-1 filed October 15, 2009).

10.9	Amendment No. 4 dated as of November 21, 2009 to the Securities Purchase Agreement dated as of October 21, 2008 by and among VIASPACE Inc., Sung Hsien Chang, the Company and the other persons (incorporated herein by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-1 filed November 25, 2009).
10.10	Amendment No. 5 dated as of November 25, 2009 to the Securities Purchase Agreement dated as of October 21, 2008 by and among VIASPACE Inc., Sung Hsien Chang, the Company and the other persons (incorporated herein by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1 filed November 25, 2009).

31

10.11 Amendment No. 6 dated as of December 18, 2009 to the Securities Purchase Agreement dated as of October 21, 2008 by and among VIASPACE Inc., Sung Hsien Chang, the Company and the other persons (incorporated herein by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1 filed December 18, 2009).

10.12	Subsidiary Guarantee dated May 14, 2010 by and between the Company, Inter-Pacific Arts Corporation, Guangzhou Inter Pacific Arts and Sung Hsien Chang (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8-K filed May 18, 2010).
10.13	Form of Security Agreement dated May 14, 2010 by and between the Company, Inter-Pacific Arts Corporation, Guangzhou Inter Pacific Arts and Sung Hsien Chang (incorporated herein by reference to Exhibit 10.2 of the Company’s Form 8-K filed May 18, 2010).
10.14	Form of Stock Pledge Agreement dated May 14, 2010 by and between the Company, Inter-Pacific Arts Corporation and Sung Hsien Chang (incorporated herein by reference to Exhibit 10.3 of the Company’s Form 8-K filed May 18, 2010).
10.15	Registration Rights Agreement dated May 14, 2010 by and between the Company and Chang (incorporated herein by reference to Exhibit 10.7 of the Company’s Form 8-K filed May 18, 2010).
10.16	Recapitalization Agreement dated September 30, 2012 by and among VIASPACE, the Company, Sung Chang, Changs LLC, Carl Kukkonen and Stephen Muzi (incorporated herein by reference to Exhibit 10.01 of the Company’s Form 8-K filed October 5, 2012)
10.17	Supply License and Commercialization Agreement dated September 30, 2012 by and among VIASPACE and the Company (incorporated herein by reference to Exhibit 10.02 of the Company’s Form 8-K filed October 5, 2012).
10.18	Mutual Limited Release dated September 30, 2012 by and among VIASPACE, the Company, Schewe, Kukkonen, Muzi, Chang and the other parties listed therein (incorporated herein by reference to Exhibit 10.03 of the Company’s Form 8-K filed October 5, 2012).
10.19	Supply License and Commercialization Agreement dated September 30, 2012 by and among the Company and Guangzhou Inter-Pacific Arts Corp. (incorporated herein by reference to Exhibit 10.04 of the Company’s Form 8-K filed October 5, 2012).
10.20	Consulting Agreement by and between the Company and Stephen Muzi dated as of September 30, 2012 (incorporated herein by reference to Exhibit 10.05 of the Company’s Form 8-K filed October 5, 2012).
10.21	Payment of Obligation and Limited Release Agreement dated April 5, 2013, between JJ International Inc., the Registrant, Inter-Pacific Arts Corp. and Guangzhou Inter-Pacific Arts Corp. (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8-K filed April 11, 2013).
21.1	List of Subsidiaries of the Registrant (1)
23.1	Consent of Malone Bailey LLP dated April 15, 2014 (1)
23.2	Consent of Hein & Associates LLP dated April 15, 2014 (1)
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002  (1)
31.2	Certification of President and Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002  (1)
32	Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  (1)

101.INS	XBRL Instance Document (1)
101.SCH	XBRL Schema Document (1)
101.CAL	XBRL Calculation Linkbase Document (1)
101.DEF	XBRL Definition Linkbase Document (1)
101.LAB	XBRL Label Linkbase Document (1)
101.PRE	XBRL Presentation Linkbase Document (1)

________________

(1) Filed herewith.

32

Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April 15, 2014.

VIASPACE GREEN ENERGY INC.
	(Registrant)
By:	/s/ SUNG HSIEN CHANG
	Name: Sung Chang
	Title: President
	(Principal Executive Officer and Director)
By:	/s/ STEPHEN J. MUZI
	Name: Stephen J. Muzi
	Title: Chief Financial Officer
	(Principal Financial and Accounting Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ SUNG HSIEN CHANG	President	April 15, 2014
Sung Hsien Chang	(Principal Executive Officer and Director)
/s/ STEPHEN J. MUZI	Chief Financial Officer	April 15, 2014
Stephen J. Muzi	(Principal Financial and Accounting Officer)
/s/ HUAN-CHING HSU	Director	April 15, 2014
Huan-Ching Hsu

33

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

VIASPACE GREEN ENERGY INC.

TABLE OF CONTENTS

	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-3
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Other Comprehensive Loss	F-6
Consolidated Statements of Stockholders’ Equity	F-7
Consolidated Statements of Cash Flows	F-8
Notes to Consolidated Financial Statements	F-9

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

VIASPACE Green Energy Inc.

We have audited the accompanying consolidated balance sheet of VIASPACE Green Energy Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2013, and the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VIASPACE Green Energy Inc. and its subsidiaries as of December 31, 2013, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ MaloneBailey, LLP 

www.malonebailey.com

Houston, Texas

April 15, 2014 

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

VIASPACE Green Energy Inc.

We have audited the accompanying consolidated balance sheet of VIASPACE Green Energy Inc. and subsidiaries as of December 31, 2012, and the related consolidated statements of operations and other comprehensive loss, stockholders' equity, and cash flows for the year ended December 31, 2012. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VIASPACE Green Energy Inc. and Subsidiaries as of December 31, 2012 and the results of its operations and its cash flows for the year then ended, in conformity with US generally accepted accounting principles.

/S/ HEIN & ASSOCIATES LLP

HEIN & ASSOCIATES LLP

Irvine, California

April 15, 2013

F-3

VIASPACE GREEN ENERGY INC.

CONSOLIDATED BALANCE SHEETS

	December 31, 2013			December 31, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	144,000		$	202,000
Accounts receivable		59,000			305,000
Inventory		225,000			315,000
Prepaid expenses		26,000			32,000
Related party receivables		135,000			166,000
Other current assets		10,000			13,000
TOTAL CURRENT ASSETS		599,000			1,033,000
FIXED ASSETS, net		1,013,000			1,082,000
OTHER ASSETS:
Land use rights, net		702,000			627,000
License to grass, net		376,000			402,000
Goodwill		602,000			602,000
Marketable securities		1,791,000			455,000
Related party receivables		40,000			1,261,000
Other assets		10,000			10,000
TOTAL OTHER ASSETS		3,521,000			3,357,000
TOTAL ASSETS	$	5,133,000		$	5,472,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	112,000		$	295,000
Related party payables		63,000			32,000
Accrued expenses		208,000			154,000
Income taxes payable		28,000			27,000
TOTAL CURRENT LIABILITIES		411,000			508,000
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY:
Common stock, $0.001 par value, 50,000,000 shares authorized, 10,480,400 issued and outstanding in 2013 and 2012		10,000			10,000
Additional paid-in capital		17,983,000			17,983,000
Accumulated other comprehensive income		115,000			―
Accumulated deficit		(13,386,000	)		(13,029,000	)
Total stockholders’ equity		4,722,000			4,964,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	5,133,000		$	5,472,000

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

F-4

VIASPACE GREEN ENERGY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2013			2012
REVENUES	$	2,786,000		$	3,399,000
REVENUES – RELATED PARTIES		95,000			94,000
TOTAL REVENUES		2,881,000			3,493,000
COST OF REVENUES		1,968,000			2,314,000
GROSS PROFIT		913,000			1,179,000
OPERATING EXPENSES
Operations		109,000			151,000
Selling, general and administrative		1,162,000			1,437,000
Goodwill impairment		―			4,413,000
Total operating expenses		1,271,000			6,001,000
LOSS FROM OPERATIONS		(358,000	)		(4,822,000	)
OTHER INCOME (EXPENSE)
Other expense		(17,000	)		(5,000	)
Other income		25,000			200,000
Total other income		8,000			195,000
LOSS BEFORE INCOME TAXES		(350,000	)		(4,627,000	)
Income taxes expense (benefit)		7,000			(88,000	)
NET LOSS	$	(357,000	)	$	(4,539,000	)
NET LOSS PER SHARE OF COMMON STOCK - Basic and diluted	$	(0.03	)	$	(0.50	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – Basic and diluted		10,480,400			9,077,807

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

F-5

VIASPACE GREEN ENERGY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	Years Ended December 31,
	2013			2012
NET LOSS	$	(357,000	)	$	(4,539,000	)
Other Comprehensive Income:
Unrealized gain on marketable securities		115,000			―
Subtotal		115,000			―
COMPREHENSIVE LOSS	$	(242,000	)	$	(4,539,000	)

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

F-6

VIASPACE GREEN ENERGY INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2013 AND 2012

	Common Stock
					Additional			Accumulated Other		Retained Earnings
					Paid in			Comprehensive		(Accumulated
	Shares		Amount		Capital			Income		Deficit)			Total
BALANCE, DECEMBER 31, 2011	8,600,000	$	9,000	$	18,280,000		$	―	$	(8,490,000	)	$	9,799,000
Net loss										(4,539,000	)		(4,539,000	)
Stock compensation expense related to stock options					111,000								111,000
Capital contribution from VIASPACE Inc. for executive compensation					31,000								31,000
Forgiveness of receivable due from VIASPACE pursuant to recapitalization agreement entered					(2,319,000	)							(2,319,000	)
Issuance of common shares to Changs, LLC after recapitalization agreement	1,880,400	$	1,000		1,880,000								1,881,000
BALANCE, DECEMBER 31, 2012	10,480,400	$	10,000	$	17,983,000		$	―	$	(13,029,000	)	$	4,964,000
Net loss										(357,000	)		(357,000	)
Unrealized gain on marketable securities								115,000					115,000
BALANCE, DECEMBER 31, 2013	10,480,400	$	10,000	$	17,983,000		$	115,000	$	(13,386,000	)	$	4,722,000

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

F-7

VIASPACE GREEN ENERGY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Years Ended December 31,
		2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(357,000	)	$	(4,539,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		137,000			106,000
Amortization		86,000			60,000
Goodwill impairment		―			4,413,000
Stock option compensation		―			111,000
Non-cash payroll expenses paid by VIASPACE Inc. allocated to the Company		―			31,000
Bad debt expense		―			36,000
Loss on disposal of fixed assets		―			3,000
Changes in operating assets and liabilities:
Accounts receivable		247,000			(163,000	)
Inventory		93,000			(48,000	)
Related party receivables		(19,000	)		(365,000	)
Prepaid expenses		14,000			11,000
Other assets		(5,000	)		6,000
Accounts payable		(188,000	)		(115,000	)
Related party payables		54,000			(43,000	)
Income taxes payable		(1,000)			27,000
Accrued expenses		80,000			(34,000	)
Net cash provided by (used in) operating activities		141,000			(503,000	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of fixed assets		(68,000	)		(96,000	)
Cash paid for land leases		(135,000	)		(144,000	)
Proceeds from disposal of fixed assets		―			1,000
Net cash used in investing activities		(203,000	)		(239,000	)
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS		4,000			―
NET DECREASE IN CASH AND CASH EQUIVALENTS		(58,000	)		(742,000	)
CASH AND CASH EQUIVALENTS, Beginning of year		202,000			944,000
CASH AND CASH EQUIVALENTS, End of year	$	144,000		$	202,000
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	―		$	―
Income taxes	$	8,000		$	―
Noncash Investing and Financing Activities:
Change in fair value of available-for-sale securities	$	115,000		$	―
Available-for-sale securities received for related party receivable	$	1,221,000		$	―

Supplemental Disclosure of Non-Cash Activities for 2012:

● On September 30, 2012, the Company entered into a recapitalization agreement with VIASPACE Inc. On the date of the recapitalization, the Company wrote-off $2,318,000 of related party receivables, net, and charged this amount to additional paid in capital. Included in the related party receivables amount was $1,880,400 representing the fair market value of 1,880,400 newly-issued common shares of the Company that were issued to Changs, LLC as required by the recapitalization agreement.

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

F-8

VIASPACE GREEN ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 AND 2012

Note 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business – VIASPACE Green Energy Inc., a British Virgin Islands (“BVI”) international business company (“we”, “us”, “VGE” or the “Company”) is a renewable energy company. Our renewable energy is based on biomass -- in particular our dedicated energy crop with the trademarked name “Giant King^® Grass”. VGE is the parent company of Inter Pacific Arts Corporation, a BVI international business company (“IPA BVI”) and Guangzhou Inter Pacific Arts, a People’s Republic of China (“PRC”) company (“IPA China”). IPA China is a wholly-owned foreign enterprise headquartered in Guangdong province of China. IPA BVI owns all equity interests of IPA China. IPA BVI and IPA China specialize in the manufacturing of high quality, copyrighted, wall décor sold in US retail chain stores. IPA China also has a license for and produces Giant King Grass (“GKG”), a proprietary dedicated energy crop, which can be burned in 100% biomass power plants to generate electricity, made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants, generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation, biochemicals and bio plastics. GKG can also be used as animal feed. GKG has been independently tested by customers and been shown to have excellent energy content, high bio methane production, and the cellulosic sugar content needed for biofuels and biochemicals.

We are growing GKG on approximately 457 acres of leased land in China, which serves as a nursery to provide seedlings for large bioenergy projects, a demonstration plantation for potential partners and customers to visit, to provide samples for testing by potential customers, and as a grass source for our own pellet products.

Corporate History – VGE was formed on July 1, 2008. Prior to October 21, 2008, VGE was 100% owned by VIASPACE Inc. (“VIASPACE”) and had no active operations. On October 21, 2008, the majority shareholder of IPA BVI and IPA China, Sung Hsien Chang (“Chang”), entered into a Securities Purchase Agreement (the "Purchase Agreement") with VGE, VIASPACE and China Gate Technology Co., Ltd., a Brunei Darussalam company ("China Gate"). Under the Purchase Agreement, VGE acquired 100% of IPA BVI and the entire equity interest of IPA China from Chang. In exchange, VIASPACE agreed to pay approximately $16 million in cash and newly issued shares of VIASPACE and VGE stock. In addition, VIASPACE issued shares of its common stock to China Gate for China Gate’s sublicense of certain grass technology to IPA China. On September 30, 2012, VIASPACE, VGE and Chang entered into a recapitalization agreement whereby VIASPACE returned the shares it owned in VGE back to VGE, and VGE subsequently issued 8,384,320 shares to Changs, LLC, a limited liability company controlled by Chang. These shares represented 80% of the outstanding shares of VGE. The shares were issued to Changs, LLC during the fourth quarter of 2012. As of December 31, 2013 and 2012, Changs, LLC owned 80% of the outstanding shares of the Company.

Basis of Presentation – The accompanying audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and the instructions to Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated on consolidation. Certain reclassifications of prior year’s data have been made to conform to 2013 classifications. Such classifications had no effect on net loss reported in the consolidated statements of operations.

Liquidity - At December 31, 2013, the Company had cash and cash equivalents of $144,000 and an accumulated deficit of $13,386,000. Additionally, for the year ended December 31, 2013, the Company provided cash from operations of $141,000. Management anticipates that the artwork segment will continue to be profitable in 2014 with revenue continuing at the same level as 2013. The profits generated by the artwork segment are used for the corporate expenses of the Company and to fund expenses to expand GKG operations. In addition, revenue from pellet sales is expected to increase in 2014. The Company believes profits generated from the artwork and pellet sales will be adequate to meet its anticipated working capital and capital expenditure requirements for at least the next twelve months.

Principles of Consolidation – VGE owns 100% of IPA BVI and IPA China and accounts for these subsidiaries by consolidation. Under this method, an affiliated company’s results of operations are reflected within the Company’s consolidated statement of operations. Transactions between consolidated affiliated companies are eliminated in consolidation. The Company adopted “Business Combinations”, codified in FASB ASC Topic 805, which requires use of the purchase method for all business combinations.

Fiscal Year End – The Company’s fiscal year ends December 31.

F-9

Use of Estimates in the Preparation of the Financial Statements – The preparation of 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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are required as part of determining the allowance for doubtful accounts, the useful lives and impairment for property, plant and equipment, goodwill and acquired intangible assets. Actual results could differ from those estimates.

Cash and Cash Equivalents – Cash and cash equivalents consist of cash on hand and highly liquid short-term deposits which are unrestricted as to withdrawal and use, and which have maturities of three months or less when purchased.

Concentration of Credit Risk – The Company’s financial instruments exposed to concentration of credit risk consist primarily of cash equivalents, accounts receivable and related party receivable. The Company maintains all of its cash accounts with high credit quality institutions. Such balances with any one institution may exceed FDIC insured limits. Bank accounts in the PRC do not have FDIC coverage.

Accounts Receivable and Allowance for Doubtful Accounts – Trade accounts receivable are presented at face value, net of the allowance for doubtful accounts. The Company sells framed artwork and energy pellets generally without requiring collateral. The Company maintains an allowance for doubtful accounts for balances that appear to have specific collection issues. The collection process is based on the age of the invoice and requires attempted contacts with the customer at specified intervals. If, after a specified number of days, the Company has been unsuccessful in its collection efforts, a bad debt allowance is recorded for the balance in question. Delinquent accounts receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined. The factors considered in reaching this determination are the apparent financial condition of the customer and the Company’s success in contacting and negotiating with the customer. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of ability to make payments, additional allowances may be required.

Inventory – Inventory is stated at the lower of cost or market.  Cost is determined using the average cost method. Market is determined using net realizable value. The Company writes down its inventory for estimated obsolescence, excess quantities and other factors in evaluating net realizable value.

The following is a summary of inventory at December 31, 2013:

	Raw Materials		Finished Goods		Total
Framed-Artwork	$	155,000	$	25,000	$	180,000
Grass		25,000		20,000		45,000
Total	$	180,000	$	45,000	$	225,000

The following is a summary of inventory at December 31, 2012:

	Raw Materials		Finished Goods		Total
Framed-Artwork	$	315,000	$	–	$	315,000
Total	$	315,000	$	–	$	315,000

Fixed Assets – Fixed assets are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals and betterments are capitalized. When fixed assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of fixed assets is provided using the straight-line method for substantially all assets and estimated lives as follows:

Building	20 to 30 years
Machinery and equipment	10 years
Office equipment	5 years
Vehicles	5 years
Computers	3 years

Land Use Rights – All land in the PRC is government owned and cannot be sold to any individual or company. IPA BVI acquired land use rights for the land occupied by its manufacturing facility in 2005. Additionally, VGE has land use rights of approximately 185 hectares, or 457 acres in Guangdong province of the PRC where its GKG is being grown. Amounts are being amortized over the period the Company has use of the land, ranging from 20 to 30 years.

F-10

License – IPA China has rights to a fast-growing, high yield, low carbon, nonfood energy crop called GKG which can be burned in 100% biomass power plants to generate electricity, made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants, generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation. IPA China purchased seedlings of GKG and other grasses from China Gate. In connection with the purchase, the parties entered into an agreement whereby VGE and China Gate agreed to assist each other in growing, developing and commercializing GKG in China and North America. The agreement did not grant any specific rights to the GKG intellectual property, but does not limit IPA China’s right to grow, harvest and market the grass anywhere in the world.  China Gate has informed us that they have an exclusive license to the GKG in Guangdong province and North America and it has orally granted to us an exclusive sublicense in the same region.  Our written and oral agreements with China Gate have no term or notice provision and, therefore, can be terminated at any time without notice. IPA China did not directly pay for the sublicense. VIASPACE issued shares of its common stock to China Gate upon the acquisition of IPA China by VIASPACE and VGE on October 21, 2008 to pay for the oral sublicense. The sublicense is being amortized over 20 years.

On September 30, 2012, VGE obtained a worldwide sublicense for GKG from IPA China, limited by the terms of its oral license from China Gate.  On the same date, VGE then entered into a sublicense agreement with VIASPACE whereby VGE retains the exclusive rights to the GKG license in China and Taiwan, and VIASPACE has an exclusive GKG worldwide license outside of China and Taiwan.  The sublicense agreement has milestones that VIASPACE must meet every two years in order to retain rights to the sublicense.

Intangible Assets – The Company amortizes intangible assets with definite lives using the straight-line method over their established lives, generally 1-30 years. Additionally, the Company tests these assets with established lives for impairment if conditions exist that indicate that carrying values may not be recoverable. Possible conditions leading to the unrecoverability of these assets include changes in market conditions, changes in future economic conditions or changes in technological feasibility that impact the Company’s assessments of future operations. If the Company determines that an impairment charge is needed, the charge will be recorded in selling, general and administrative expenses in the consolidated statements of operations.

Goodwill – Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortized but tested for impairment annually and whenever impairment indicators require. Goodwill is tested for impairment annually or more frequently if an event or circumstance indicates that an impairment loss may have been incurred. Application of the goodwill impairment test requires judgment by management using a discounted cash flow methodology. This requires us to use significant judgment including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, the useful life over which cash flows will occur, determination of our weighted average cost of capital and relevant market data. VIASPACE and VGE acquired IPA China and IPA BVI on October 21, 2008 and recorded goodwill of $12,322,000 related to the acquisition. As part of the Company’s annual impairment review as of December 31, 2012, a $4,413,000 goodwill impairment charge was recorded in 2012 within the Company’s framed-artwork reportable segment due to lower than expected revenue and operating income growth. The Company performed an impairment test for goodwill on December 31, 2013. Based on the results that the fair value of the reporting unit exceeds its carrying amount (following the impairment loss discussed above), no impairment charge was recognized in 2013.

Marketable Securities – All marketable securities are classified as available-for-sale securities. Available-for-sale securities are carried at fair value with resulting unrealized gains and losses, reported as a component of accumulated other comprehensive loss. Long-term marketable securities have remaining maturities at the balance sheet date of one year or greater.

Impairment of Long-lived Assets – The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may no longer be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. For purposes of estimating future cash flows from impaired assets, the Company groups assets at the lowest level from which there is identifiable cash flows that are largely independent of the cash flow of other groups of assets.

Fair Value – Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Authoritative literature provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

F-11

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Fair Value of Financial Instruments – “Disclosures about Fair Value of Financial Instruments,” codified in FASB ASC Topic 850, requires the Company disclose estimated fair values of financial instruments at least annually. The recorded value of accounts receivables, prepaid expenses related party receivables (current portion), related party payables, accounts payable and accrued expenses approximate their fair values based on their short-term nature. The recorded value of related party receivables (non-current portion) approximates their fair value.

Income Taxes – The Company utilizes “Accounting for Income Taxes,” codified in FASB ASC Topic 740, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. For IPA China, the statutory corporate income tax rate for foreign enterprises in the PRC was 25% for 2013 and 2012. VGE and IPA BVI are British Virgin Islands international companies and not subject to United States income taxes. The Company does not have any deferred tax assets or liabilities recorded for the periods covered by the accompanying financial statements due to no significant book to tax basis differences existing.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense, net and other income (expense), net, respectively.

Revenue Recognition – IPA BVI, IPA China and VGE have generated revenues on product shipments from artwork sales and energy pellet sales made from our Giant King Grass. In accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition”, codified in FASB ASC Topic 605, IPA recognizes product revenue provided that (1) persuasive evidence of an arrangement exists, (2) delivery to the customer has occurred, (3) the selling price is fixed or determinable and (4) collection is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. The price is considered fixed or determinable when it is not subject to refund or adjustments. Our standard shipping terms are free on board shipping point. Some of the Company’s products are sold in the PRC and are subject to Chinese value-added tax. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their finished product. Revenue is recorded net of VAT taxes.

Cost of Revenues – Cost of revenues consists primarily of material costs, employee compensation, depreciation and related expenses, which are directly attributable to the production of products. Any write-down of inventory to lower of cost or market is also recorded in cost of revenues.

Shipping and Handling Costs – Shipping and handling costs of products sold are included in selling expenses and amounted to $28,000 and $21,000, for the years ended December 31, 2013 and 2012, respectively.

Foreign Currency Translation – IPA China’s local currency is the Renminbi (“RMB”) and its functional currency is US dollars (“USD”). For financial reporting purposes, RMB has been remeasured into United States dollars ("USD") as the functional currency. Remeasurement adjustments arising from the use of different exchange rates from period to period are recorded in the Company’s statements of operations. There has been no significant fluctuation in exchange rate for the conversion of RMB to USD after the balance sheet date. The functional currency of IPA BVI and VGE is USD.

Segment Reporting and Geographic Information – "Disclosures about Segments of an Enterprise and Related Information", codified in FASB ASC Topic 280, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Segment detail is shown in the footnotes below.

Net Loss Per Share - The Company computes net loss per share in accordance with “Earnings per Share”, codified in FASB ASC Topic 260. Under the provisions of this topic, basic and diluted net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Dilutive securities include stock options.

F-12

Reclassifications – Certain prior year amounts were reclassified to conform to the manner of presentation in the current period.

Recent Accounting Standards - There are currently no new accounting pronouncements with a future effective date that are of significance, or potential significance, to us.

Subsequent Events - We have evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, we are not aware of any events or transactions (other than those disclosed elsewhere) that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in our consolidated financial statements.

NOTE 2 – ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:

	As of December 31,
	2013		2012
Accounts receivable	$	59,000	$	305,000
Less: Allowance for doubtful accounts		―		―
Total	$	59,000	$	305,000

NOTE 3 – FIXED ASSETS

Fixed assets are comprised of the following at December 31, 2013 and December 31, 2012:

	2013		2012
Building	$	823,000	$	800,000
Machinery and equipment		586,000		551,000
Office equipment		82,000		80,000
Vehicles		233,000		225,000
Total fixed assets		1,724,000		1,656,000
Less: Accumulated depreciation		711,000		574,000
Fixed assets, net	$	1,013,000	$	1,082,000

Depreciation was $137,000 for 2013 and $106,000 for 2012.

NOTE 4 – LAND USE RIGHTS

Land use rights are composed of the following at December 31, 2013 and December 31, 2012:

	2013		2012
Land use rights	$	999,000	$	864,000
Less: Accumulated amortization		297,000		237,000
Land use rights, net	$	702,000	$	627,000

During the third quarter of 2012, the Company made deposits of $144,000 for an additional land lease site of approximately 93 hectares, or 230 acres in China which requires a prepayment of the first five years of lease. The remaining amount of approximately $136,000 was made in the third quarter of 2013.

Amortization was $60,000 for 2013 and $34,000 for 2012. The amortization for the next five years from December 31, 2013 will be: 2014 - $95,000; 2015 - $95,000; 2016 - $95,000; 2017 - $63,000; and 2018 - $26,000.

F-13

NOTE 5 – INTANGIBLE ASSETS

License to Grass

VGE acquired IPA China and IPA BVI on October 21, 2008.  IPA China has a worldwide license to cultivate and sell a fast-growing high yield hybrid grass called GKG that has the potential to be used in the production of nonfood biofuels and, in the more immediate term, animal feedstock for dairy cows, pigs, sheep, goats, fish and other animals.  VIASPACE issued 30,576,007 shares of its common stock to the licensor of the GKG valued at $507,000 on the date of acquisition.  The grass license is amortized over an estimated useful life of 20 years. On September 30, 2012, VGE obtained a worldwide sublicense regarding GKG from IPA China.  On the same date, VGE then entered into a sublicense agreement with VIASPACE whereby VGE retains the exclusive rights to the GKG license in China and Taiwan, and VIASPACE has an exclusive GKG worldwide license outside of China and Taiwan. The sublicense agreement has milestones that VIASPACE must meet every two years in order to retain rights to the sublicense.

Amortization was $26,000 in 2013 and $25,000 in 2012. The amortization expense for the next five years from December 31, 2013 will be $25,000 in each year.

License to Grass is composed of the following at December 31, 2013 and December 31, 2012:

	2013		2012
License to Grass	$	507,000	$	507,000
Less: Accumulated amortization		131,000		105,000
License to Grass, net	$	376,000	$	402,000

Goodwill

VGE acquired IPA China and IPA BVI on October 21, 2008 and recorded goodwill of $12,322,000 related to the acquisition. As part of the Company’s annual impairment review as of December 31, 2012, a $4,413,000 goodwill impairment charge was recorded in 2012 within the Company’s framed-artwork reportable segment due to lower than expected revenue and operating income growth. The Company performed an impairment test for goodwill on December 31, 2013. Based on the results that the fair value of the reporting unit exceeds its carrying amount (following the impairment loss recorded in 2011 and 2012), no impairment charge was recognized in 2013. Goodwill was $602,000 at December 31, 2013 and 2012.

NOTE 6 – MARKETABLE SECURITIES, AVAILABLE FOR SALE

The Company owns common shares of VIASPACE Inc., a company quoted on the OTC Capital Markets under the symbol “VSPC”. Prior to the separation of the Company from VIASPACE on September 30, 2012, the Company accounted for the common shares it held in VIASPACE, its parent company, on a cost basis. Subsequent to the separation, the Company has determined that its VSPC shares are available-for-sale securities in accordance with ASC Topic 320-10-35-1; therefore, unrealized holding gains and losses are reported as a component of accumulated other comprehensive loss until realized.

On April 5, 2013, JJ International Inc. (“JJ”), a related party of the Company, entered into a Payment of Obligation and Limited Release Agreement (the “Agreement”) with VGE, IPA BVI and IPA China, whereby the parties agreed that JJ would give the Company 78,801,687 common shares of VIASPACE Inc., in full satisfaction of certain outstanding receivables. The number of common shares given by JJ was determined based on a closing price of $0.0155 of VIASPACE Inc. common stock on that date and had a fair market value of $1,221,426 on the date of the Agreement. No gain or loss was generated as there is no difference between the fair value of the shares received and the related party receivables settled.

As of December 31, 2013, the Company owned 135,691,337 shares in VSPC, with an estimated fair value of $1,791,000, which is based on the closing price of VSPC’s common stock on December 31, 2013. During 2013, the Company recorded an unrealized holding gain of approximately $115,000, as a component of accumulated other comprehensive loss on the consolidated balance sheet.

The Company’s investments owned by level within the fair value hierarchy at December 31, 2013 and 2012 are as follows:

Assets		Fair value			Fair value Hierarchy
		December 31, 2013		December 31, 2012
Stocks	$	1,791,000	$	455,000	Level 1

F-14

Below is a summary of changes in the Company’s investment in VSPC for 2013 and 2012:

	2013		2012
Beginning balance at separation date	$	455,000	$	455,000
Additional shares received at fair market value to settle related party receivables		1,221,000		–
Subtotal		1,676,000		455,000
Total gain (loss) included in earnings		–		–
Change in unrealized gain (loss) included in comprehensive income		115,000		–
Ending balance	$	1,791,000	$	455,000

NOTE 7 – RELATED PARTIES

Other than as listed below, we have not been a party to any significant transactions, proposed transactions, or series of transactions, and in which, to our knowledge, any of our directors, officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.

Related Party Receivables

Included in the Company’s consolidated balance sheets at December 31, 2013 and December 31, 2012 are Related Party Receivables and Payables. The Related Party Receivables and Payables are as follows. Sung Hsien Chang is a director and president of the Company and CEO of IPA China and IPA BVI. Chang is also an owner of JJ. As discussed in Note 6, JJ paid down $1,221,426 of the amount owed to the Company on April 5, 2013 with shares of VSPC common stock. As of December 31, 2013 and December 31, 2012, the Company had a receivable due from JJ in the amount of $105,000 and $1,241,000, respectively. This balance consists of the following:

· Loan made to JJ by IPA BVI in the amount of $0 and $400,000 at December 31, 2013 and December 31, 2012, respectively.

· Advances made to JJ by IPA BVI and VGE. Expenses that JJ pays on behalf of IPA BVI and VGE reduce these advances.  As of December 31, 2013 and December 31, 2012, included in the Due from JJ receivable shown below are net advances made to JJ in the amount of $6,000 and $20,000, respectively.  Additionally, at December 31, 2013, $56,000 owed by IPA BVI to JJ is included in the related party payables summary below.

· Interest accruing on the loan receivable and other outstanding balances due to IPA BVI. For 2013 and 2012, the Company recorded interest income from JJ in the amount of $0 and $19,000, respectively, which is included in Other Income in the Company’s Consolidated Statements of Operations. As of December 31, 2013 and December 31, 2012, included in the Due from JJ receivable shown below is cumulative interest charged to JJ in the amount of $0 and $176,000, respectively.

· IPA China recorded revenues of $95,000 and $94,000 for sales made to JJ for 2013 and 2012, respectively. As of December 31, 2013 and December 31, 2012, included in the Due from JJ receivable are trade receivables of $99,000 and $645,000, respectively. During 2012, IPA China recorded bad debt expense of $36,000 related to due from JJ, and this amount was written off in 2013.

The following table represents a summary of Related Party Receivables at December 31, 2013 and December 31, 2012:

	2013		2012
Short Term
Due from JJ International	$	105,000	$	20,000
Due from employee of IPA China		30,000		146,000
Total short term		135,000		166,000
Long Term
Due from JJ International		–		1,221,000
Due from VIASPACE		40,000		40,000
Total long term		40,000		1,261,000
Total short term and long term	$	175,000	$	1,427,000

VIASPACE has agreed to pay the Company $40,000 as reimbursement for legal fees and costs in connection with the separation of the Company and VIASPACE in 2012. This amount is due by September 30, 2014.

Related Party Payables

The following table is a summary of Related Party Payables at December 31, 2013 and December 31, 2012:

	2013		2012
Due to employee of IPA China	$	–	$	23,000
Due to Cindy Chang		7,000		9,000
Due to JJ International		56,000		–
Total	$	63,000		32,000

On October 1, 2012, IPA BVI and VGE entered into an office lease agreement with Cindy Chang, spouse of Sung Hsien Chang, whereby IPA BVI and VGE would each pay to Cindy Chang $1,200 per month for rent on the Company’s headquarters in Marietta, Georgia. For 2013, the Company recorded rent expense of $28,800 under this lease.

NOTE 8 – INCOME TAXES

IPA BVI and VGE Income Taxes

IPA BVI and VGE are British Virgin Islands international company and not subject to any United States income taxes. Companies in the United States that receive money from IPA BVI and VGE are responsible for paying United States income taxes on the money received. IPA BVI and VGE do not have any deferred tax assets or liabilities recorded for the periods covered by the accompanying financial statements.

IPA China Income Taxes

IPA China is governed by the Income Tax Law of the PRC concerning the private-run enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriated tax adjustments.

The components of the Company’s income tax expense from operations for the year ended December 31, 2013 and December 31, 2012 for consisted of: 

	2013		2012
Current:
PRC	$	7,000	$	(87,000	)
Income tax expense	$	7,000	$	(87,000	)

IPA China had a tax loss for the year ended December 31, 2010 and had taxable income for the years ended December 31, 2011 through 2013. During 2012, the Income Tax Law of the PRC made a tax ruling that allowed IPA China to carry forward tax losses from previous years to years with taxable income. As a result of this, IPA China has recorded at December 31, 2012, a net income tax benefit in the amount of $87,000. At December 31, 2013 and 2012, IPA China has accrued income taxes payable of $28,000 and $27,000, respectively.

The following table reconciles the statutory rate to the Company’s effective tax rate for 2013:

	2013
PRC statutory rate		25.0%
Effect of expenses not deductible for tax purpose		(0.5%)
Effect of income tax exemptions		(27.1%)
Others		0.6%
Effective income tax rate		(2.0%)

At December 31, 2013, the Company had no increase or decrease in unrecognized income tax benefits for the year as a result of uncertain tax positions taken in a prior or current period. There was no accrued interest or penalties relating to tax uncertainties at December 31, 2013 and 2012. Unrecognized tax benefits are not expected to increase or decrease within the next twelve months.

F-15

NOTE 9 – STOCK INCENTIVE PLAN

On June 2, 2009, the Board of VGE adopted the VIASPACE Green Energy Inc. 2009 Stock Incentive Plan (the “VGE Plan”). The VGE Plan was also approved by the holders of a majority of the Company’s common stock. The VGE Plan provided for the reservation for issuance under the plan of 1,400,000 shares of VGE common stock.

The VGE Plan is designed to provide additional incentive to employees, directors and consultants of the Company through the awarding of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and other awards. The VGE Board administers the VGE Plan, selects the individuals to whom options will be granted, determines the number of options to be granted, and the term and exercise price of each option. Stock options granted pursuant to the terms of the VGE Plan generally cannot be granted with an exercise price of less than 100% of the fair market value on the date of the grant. The term of the options granted under the Plan cannot be greater than 10 years. Options to employees and directors generally vest over a period determined by the VGE Board of Directors. 1,400,000 shares were available for future grant at December 31, 2013. There were no stock options issued during 2013. There are no stock options outstanding at December 31, 2013 or December 31, 2012.

NOTE 10 – NET LOSS PER SHARE

The Company computes net loss per share in accordance with FASB ASC Topic 260. Under its provisions, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings would customarily include, if dilutive, potential shares of common stock issuable upon the exercise of stock options and warrants. The dilutive effect of outstanding stock options and warrants is reflected in earnings per share in accordance with FASB ASC Topic 260 by application of the treasury stock method. For the periods presented, the computation of diluted loss per share equaled basic loss per share as the inclusion of any dilutive instruments would have had an antidilutive effect on the earnings per share calculation in the periods presented.

The following table sets forth common stock equivalents (potential common stock) at December 31, 2013 and 2012 that are not included in the loss per share calculation since their effect would be anti-dilutive for the periods indicated:

	2013		2012
Stock Options		―		―

The following table sets forth the computation of basic and diluted net loss per share for 2013 and 2012, respectively:

	2013			2012
Basic and diluted net loss per share:
Numerator:
Net loss attributable to common stock	$	(357,000	)	$	(4,539,000	)
Denominator:
Weighted average shares of common stock outstanding		10,480,400			9,077,807
Net loss per share of common stock, basic and diluted	$	(0.03	)	$	(0.50	)

NOTE 11 – OTHER COMMITMENTS AND CONTINGENCIES

Leases

On October 1, 2012, IPA BVI and VGE entered into an office lease agreement with Cindy Chang, spouse of Company president Sung Chang, whereby IPA BVI and VGE would each pay to Cindy Chang $1,200 per month for rent on the Company’s headquarters in Marietta, Georgia. Previously, no rent was charged to either IPA BVI or VGE. Related party rent expense charged to operations for 2013 and 2012 was $28,800 and $7,200, respectively. Future minimum lease payments due under this lease are as follows: 2014 - $28,800, 2015 - $28,800, 2016 - $28,800 and 2017 – 21,600. Total future minimum lease payments are $108,000.

Lease on land in the PRC is discussed in Note 1 and Note 4 and charged to amortization expense. Rent expense charged to operations for IPA China for 2013 and 2012 was $33,000 and $31,000, respectively. Future minimum lease payments due under this lease are as follows: 2014 - $32,800, 2015 - $32,800, 2016 - $34,400, 2017 - $34,400, 2018 – 34,400 and thereafter – 578,100. Total future minimum lease payments are $746,900.

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Operations in the PRC

IPA China’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

IPA China’s sales, purchases and expenses transactions are denominated in RMB and all of the Company’s assets and liabilities are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance.

Employment Agreements

On April 19, 2012, our board of directors approved a one-year employment agreement beginning June 1, 2012 for Mr. Chang. Mr. Chang would receive a salary of $240,000 per annum and would also be entitled to a bonus as determined by the VGE Board of Directors, customary insurance and health benefits, 20 business days paid leave per year, and reimbursement for out-of-pocket expenses in the course of his employment. This agreement is still ongoing.

On September 30, 2012, Mr. Muzi signed a consulting agreement with VGE that will pay Mr. Muzi $5,000 monthly to serve as the chief financial officer, treasurer and secretary of the Company. This agreement will automatically renew monthly unless either party terminates the agreement.

NOTE 12 – OPERATING SEGMENTS

The Company evaluates its reportable segments in accordance with FASB ASC Topic 280 “Disclosures about Segments of an Enterprise and Related Information”. As of September 30, 2013, the Company’s President, Sung Hsien Chang, was the Company’s Chief Operating Decision Maker (“CODM”) pursuant to FASB ASC Topic 280. The CODM allocates resources to the segments based on their business prospects, product development and engineering, and marketing and strategy.

The Company operates in two reportable segments:

Framed-Artwork Segment:

(i) IPA China and IPA BVI: Specialize in manufacturing high-quality, copyrighted, framed artwork in the PRC which is sold to retail stores in the US.

Grass Segment:

(i) VGE (but not including operations of its subsidiaries, IPA China and IPA BVI): VGE grows a fast-growing, high yield, low carbon, nonfood energy crop called Giant King Grass (“GKG”) in the PRC. GKG can be burned in 100% biomass power plants to generate electricity; made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants; generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation. GKG can also be used as animal feed.  On September 30, 2012, VGE obtained a worldwide sublicense regarding GKG from IPA China.  On the same date, VGE then entered into a sublicense agreement with VIASPACE whereby VGE retains the exclusive rights to the GKG license in China and Taiwan, and VIASPACE has an exclusive GKG worldwide license outside of China and Taiwan.  The sublicense agreement has milestones that VIASPACE must meet every two years in order to retain rights to the sublicense.

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The accounting policies of the reportable segments are described in the summary of significant accounting policies (see Note 1 to these financial statements). The Company evaluates segment performance based on income (loss) from operations excluding infrequent and unusual items.

Information on reportable segments for 2013 and 2012 is shown below:

	2013			2012
Revenues:
Framed-Artwork	$	2,858,000		$	3,310,000
Grass		23,000			183,000
Total	$	2,881,000		$	3,493,000
Depreciation and amortization:
Framed-Artwork	$	106,000		$	81,000
Grass		117,000			85,000
Total	$	223,000		$	166,000
Loss From Operations:
Framed-Artwork	$	363,000		$	(3,910,000	)
Grass		(721,000	)		(912,000	)
Loss From Operations	$	(358,000	)	$	(4,822,000	)

	December 31, 2013		December 31, 2012
Assets:
Framed-Artwork	$	3,877,000	$	4,158,000
Grass		1,256,000		1,314,000
Total Assets	$	5,133,000	$	5,472,000

	December 31, 2013		December 31, 2012
Identifiable long-lived assets, net:
Framed-Artwork	$	1,012,000	$	1,114,000
Grass		1,079,000		996,000
Total Identifiable long-lived assets, net	$	2,091,000	$	2,110,000

For the year ended December 31, 2013 and 2012, the Company had one customer which made up 96% and 93%, respectively, of our total revenues.

NOTE 13 – RECAPITALIZATION OF VIASPACE GREEN ENERGY

Recapitalization Agreement

Effective September 30, 2012, the Company, VIASPACE, Chang, Stephen Muzi, our chief financial officer, Carl Kukkonen, our former chief executive officer, and Changs, LLC entered into the Recapitalization Agreement (“Recap Agreement”), pursuant to which VIASPACE returned 6,503,920 shares of the Company’s common stock to the Company (representing VIASPACE’s entire ownership of the Company) and the Company issued 8,384,320 shares of the Company’s common stock to Changs, LLC, representing an 80% common share interest in the Company under the terms of the Recap Agreement. As a result, the Company is no longer a subsidiary of VIASPACE. The value of the newly issued shares of $1,880,400 at September 30, 2012 was recorded as a loan to VIASPACE.

In exchange for the shares of the Company’s common stock, Changs, LLC forgave the payment of the Note owed by VIASPACE to Chang in the amount of $5,131,025 plus accrued interest of $626,402. In addition, VIASPACE agreed to reimburse VGE up to $40,000 in legal fees and costs in connection with the negotiation and preparation of the Recap Agreement and other related agreements.

In connection with the Recap Agreement, all parties involved executed a Mutual and Limited Release Agreement, pursuant to which each of the parties released each other from any future claims that may have against the other party. Pursuant to this agreement, the amount that VIASPACE owed to the Company at September 30, 2012, of $2,318,000 was forgiven. As such, the Company wrote the related receivable off, which was accounted for as a capital transaction.

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License Agreement

On September 30, 2012, IPA China granted to VGE a reciprocal worldwide license for GKG, not to exceed the rights IPA China had in GKG. Additionally on September 30, 2012, VIASPACE and VGE entered into a Supply, License and Commercialization Agreement (“License Agreement”) pursuant to which VGE granted to VIASPACE a nontransferable, royalty-bearing exclusive license to commercialize Giant King Grass everywhere in the world other than China and Taiwan. Additionally, the License Agreement allows VIASPACE to use the Giant King Grass intellectual property and VIASPACE Green Energy trade name in connection with its efforts to commercialize Giant King Grass.

VIASPACE agreed that it would not during the term of the License Agreement and for a three-year period thereafter, manufacture, commercialize or otherwise engage in any research or development of a grass or any other product or material having similar or otherwise competitive properties to Giant King Grass.

In accordance with the License Agreement, VGE will provide VIASPACE with Giant King Grass seedlings at an agreed upon price. Further, VIASPACE will pay VGE a royalty of eight percent (8%) on net sales made in its territory. The initial term of the License Agreement is for two years, thereafter, upon the achievement of certain milestones, VIASPACE has the right to renew the agreement for additional two-year terms.

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