China Recycling Energy Corporation Reports Results for the Second Quarter of 2020
XI'AN, China, Aug. 14, 2020 (GLOBE NEWSWIRE) -- China Recycling Energy Corporation (NASDAQ: CREG) ("CREG" or "the Company"), an industrial waste-to-energy solution provider in China, today reported certain highlights of its operating results for the quarter ended June 30, 2020.
“As of June 30, 2020, we maintained a healthy cash and cash equivalents balance of approximately $62.7 million,” stated Mr. Guohua Ku, Chairman and CEO of the Company. "In addition, our company successfully collected approximately $2.8 million from overdue accounts receivable in the quarterly period ended June 30, 2020. Coupled with our continuing cost cutting efforts throughout our entire organization, our company has recognized net income of $993,940 in this quarter, or $0.43 per basic and diluted share. We are executing what we believe is a clear plan to manage our business efficiently and effectively through the coronavirus pandemic, prioritizing the health and safety of our customers and teams. We believe our financial position and contingency plans will allow us to retain the financial flexibility to pursue the fast-growing smart power sector. We feel we are back on track to continue evaluating several exciting strategic opportunities to reinvest in innovative growth initiatives. We expect to reposition our energy sustainability business in direct relation to smart power integrated solutions to vastly improve climate change efficiency in China in order to better serve our clients, employees and shareholders. As such, we will maintain our focus on expense and working capital discipline, so that we can move forward with a strengthened platform to attempt to capitalize on the significant opportunities we see for growth.”
Financial Summary for the Quarter Ended June 30, 2020
Cash and cash equivalents were approximately $62.7 million as of June 30, 2020, an increase of approximately $46.5 million as compared to approximately $16.2 million as of December 31, 2019.
Net sales were nil as compared to $80,924 for the same period of 2019, due to the shutdown of our business during the COVID-19 pandemic.
Income from operations was approximately $1.4 million, due to the reversal of bad debts allowance compared to approximately loss from operations of approximately $3.3 million.
Net income for three months ended June 30, 2020 was $993,940 or $0.43 per fully diluted share compared to a net loss of approximately $5.3 million or $(0.33) per fully diluted share for the three months ended June 30, 2019, a decrease of net loss of approximately $6.5 million. This decrease in net loss was mainly due to the decrease in operating expenses resulting from a reversal of bad debts expense as described above.
About China Recycling Energy Corp.
China Recycling Energy Corporation (Nasdaq: CREG) ("CREG" or "the Company") is based in Xi'an, China and provides environmentally friendly waste-to-energy technologies to recycle industrial byproducts for steel mills, cement factories and coke plants in China. Byproducts include heat, steam, pressure, and exhaust to generate large amounts of lower-cost electricity and reduce the need for outside electrical sources. The Chinese government has adopted policies to encourage the use of recycling technologies to optimize resource allocation and reduce pollution. Currently, recycled energy represents only an estimated 1% of total energy consumption and this renewable energy resource is viewed as a growth market due to intensified environmental concerns and rising energy costs as the Chinese economy continues to expand. The Company’s management and engineering teams have over 20 years of experience in industrial energy recovery in China. For more information about CREG, please visit http://creg-cn.investorroom.com.
Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of CREG and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including, but not limited to, the risks and uncertainties associated with market conditions and the satisfaction of customary closing conditions relating to the registered direct offering and those discussed in the Company's annual and periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, | DECEMBER | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 62,666,385 | $ | 16,221,297 | ||||
Accounts receivable, net | 31,793,218 | 42,068,760 | ||||||
Interest receivable on sales type leases | - | 5,245,244 | ||||||
Prepaid expenses | 51,078 | 52,760 | ||||||
Other receivables | 44,653 | 1,031,143 | ||||||
Total current assets | 94,555,334 | 64,619,204 | ||||||
NON-CURRENT ASSETS | ||||||||
Investment in sales-type leases, net | - | 8,287,560 | ||||||
Long term deposit | - | 15,712 | ||||||
Operating lease right-of-use assets, net | 21,655 | 54,078 | ||||||
Property and equipment, net | 26,649,769 | 27,044,385 | ||||||
Construction in progress | - | 23,824,202 | ||||||
Total non-current assets | 26,671,424 | 59,225,937 | ||||||
TOTAL ASSETS | $ | 121,226,758 | $ | 123,845,141 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 2,168,116 | $ | 2,200,220 | ||||
Taxes payable | 2,483,681 | 4,087,642 | ||||||
Accrued interest on notes | 3,935 | - | ||||||
Notes payable, net of unamortized OID | 913,410 | - | ||||||
Accrued liabilities and other payables | 1,165,256 | 1,184,751 | ||||||
Operating lease liability | 25,611 | 56,755 | ||||||
Due to related parties | 28,720 | 41,174 | ||||||
Interest payable on entrusted loans | 8,711,500 | 8,200,044 | ||||||
Entrusted loan payable | 20,181,378 | 20,480,214 | ||||||
Total current liabilities | 35,681,607 | 36,250,800 | ||||||
NONCURRENT LIABILITIES | ||||||||
Accrued interest on notes | - | 368,362 | ||||||
Income tax payable | 5,782,625 | 5,782,625 | ||||||
Notes payable, net of unamortized OID | - | 1,552,376 | ||||||
Long term payable | 423,759 | 430,034 | ||||||
Entrusted loan payable | 282,506 | 286,689 | ||||||
Refundable deposit from customers for systems leasing | - | 544,709 | ||||||
Total noncurrent liabilities | 6,488,890 | 8,964,795 | ||||||
Total liabilities | 42,170,497 | 45,215,595 | ||||||
CONTINGENCIES AND COMMITMENTS (NOTE 17 & 18) | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock, $0.001 par value; 10,000,000 shares authorized, 2,493,197 | 2,493 | 2,033 | ||||||
Additional paid in capital | 117,995,829 | 116,682,374 | ||||||
Statutory reserve | 14,666,206 | 14,525,712 | ||||||
Accumulated other comprehensive loss | (7,415,203 | ) | (6,132,614 | ) | ||||
Accumulated deficit | (46,193,064 | ) | (46,447,959 | ) | ||||
Total Company stockholders’ equity | 79,056,262 | 78,629,546 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 121,226,758 | $ | 123,845,141 | ||||
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
SIX MONTHS ENDED | THREE MONTHS | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue | ||||||||||||||||
Contingent rental income | $ | - | $ | 702,973 | $ | - | $ | 80,924 | ||||||||
Interest income on sales-type leases | - | 173,360 | - | - | ||||||||||||
Total operating income | - | 876,333 | - | 80,924 | ||||||||||||
Operating expenses | ||||||||||||||||
Bad debts (reversal) | (1,649,622 | ) | 2,824,903 | (1,649,622 | ) | 2,716,507 | ||||||||||
Loss on disposal of systems | - | 1,264,256 | - | - | ||||||||||||
General and administrative | 390,864 | 2,017,336 | 236,686 | 682,912 | ||||||||||||
Total operating (income) expenses | (1,258,758 | ) | 6,106,495 | (1,412,936 | ) | 3,399,419 | ||||||||||
Income (loss) from operations | 1,258,758 | (5,230,162 | ) | 1,412,936 | (3,318,495 | ) | ||||||||||
Non-operating income (expenses) | ||||||||||||||||
Loss on note redemption / conversion | (198,330 | ) | (893,958 | ) | (95,163 | ) | - | |||||||||
Interest income | 72,617 | 82,610 | 45,611 | 41,498 | ||||||||||||
Interest expense | (697,028 | ) | (3,793,920 | ) | (341,784 | ) | (1,861,815 | ) | ||||||||
Other income (expenses), net | (40,628 | ) | 344,003 | (27,660 | ) | (19,450 | ) | |||||||||
Total non-operating expenses, net | (863,369 | ) | (4,261,265 | ) | (418,996 | ) | (1,839,767 | ) | ||||||||
Income (loss) before income tax | 395,389 | (9,491,427 | ) | 993,940 | (5,158,262 | ) | ||||||||||
Income tax (benefit) expense | - | (2,286,044 | ) | - | 104,827 | |||||||||||
Net income (loss) attributable to China Recycling Energy Corporation | 395,389 | (7,205,383 | ) | 993,940 | (5,263,089 | ) | ||||||||||
Other comprehensive items | ||||||||||||||||
Foreign currency translation gain (loss) | (1,282,589 | ) | (96,559 | ) | 58,688 | (1,907,185 | ) | |||||||||
Comprehensive income (loss) attributable to China Recycling Energy Corporation | $ | (887,200 | ) | $ | (7,301,942 | ) | $ | 1,052,628 | $ | (7,170,274 | ) | |||||
Basic and diluted weighted average shares outstanding | 2,226,282 | 13,914,784 | 2,317,223 | 15,743,533 | ||||||||||||
Basic and diluted loss per share | $ | 0.18 | $ | (0.52 | ) | $ | 0.43 | $ | (0.33 | ) | ||||||
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED | ||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | 395,389 | $ | (7,205,383 | ) | |||
Adjustments to reconcile net income (loss) | ||||||||
to net cash provided by (used in) operating activities: | ||||||||
Amortization of OID and debt issuing costs of notes | 39,583 | 72,161 | ||||||
Stock compensation expense | 10,999 | - | ||||||
Operating lease expenses | 32,502 | - | ||||||
Bad debts expense (reversal) | (1,649,622 | ) | 2,824,901 | |||||
Loss on disposal of 40% ownership of Fund Management Co | - | 47,267 | ||||||
Loss on transfer of Chengli Boxing system | - | 634,963 | ||||||
Loss on transfer of Xuzhou Huayu system | - | 403,922 | ||||||
Loss on transfer of Shenqiu Phase I & II systems | - | 211,975 | ||||||
Loss on disposal of fixed assets | - | 293 | ||||||
Loss on notes redemption / conversion | 198,330 | 893,958 | ||||||
Changes in deferred tax | - | (2,364,088 | ) | |||||
Changes in assets and liabilities: | ||||||||
Interest receivable on sales type leases | - | (173,360 | ) | |||||
Collection of principal on sales type leases | 13,879,575 | - | ||||||
Accounts receivable | 35,552,191 | 65,001 | ||||||
Prepaid expenses | 919 | - | ||||||
Other receivables | (3,589 | ) | (1,074,031 | ) | ||||
Accounts payable | - | (2,888,301 | ) | |||||
Taxes payable | (2,121,622 | ) | (1,283,246 | ) | ||||
Payment of lease liability | (31,174 | ) | - | |||||
Interest payable on entrusted loan | 635,375 | 3,720,566 | ||||||
Accrued liabilities and other payables | 57,740 | (371,026 | ) | |||||
Refundable deposit for systems leasing | - | (486,668 | ) | |||||
Net cash provided by (used in) operating activities | 46,996,596 | (6,971,096 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from disposal of property & equipment | - | 5,162 | ||||||
Net cash provided by investing activities | - | 5,162 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Issuance of notes payable | - | 2,000,000 | ||||||
Issuance of common stock | - | 3,309,475 | ||||||
Net cash provided by financing activities | - | 5,309,475 | ||||||
EFFECT OF EXCHANGE RATE CHANGE ON CASH | (551,508 | ) | (80,341 | ) | ||||
NET INCREASE (DECREASE) IN CASH | 46,445,088 | (1,736,800 | ) | |||||
CASH, BEGINNING OF PERIOD | 16,221,297 | 53,223,142 | ||||||
CASH, END OF PERIOD | $ | 62,666,385 | $ | 51,486,342 | ||||
Supplemental cash flow data: | ||||||||
Income tax paid | $ | - | $ | 225,784 | ||||
Interest paid | $ | - | $ | - | ||||
Supplemental disclosure of non-cash operating activities | ||||||||
Transfer of Tian’an project from construction in progress to accounts receivable | $ | 23,635,489 | $ | - | ||||
Supplemental disclosure of non-cash financing activities | ||||||||
Transfer of Xuzhou Huayu Project and Shenqiu Phase I & II projects to Mr. Bai | $ | - | $ | 35,938,441 | ||||
Conversion of convertible debt into common shares | $ | - | $ | 1,070,000 | ||||
Conversion of long-term notes into common shares | $ | 1,104,586 | $ | - | ||||
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