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China Recycling Energy Corporation Reports Results for the Third Quarter of 2020

China Recycling Energy Corporation
·10 min read

XI'AN, China, Nov. 16, 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 September 30, 2020.

“As of September 30, 2020, we maintained a healthy cash and cash equivalents balance of approximately $73.8 million,” stated Mr. Guohua Ku, Chairman and CEO of the Company. In addition, we have accomplished significant cost cutting throughout our entire organization, evidenced by net loss narrowed by approximately 83.6% to approximately $(671,280) in the third quarter ended September 30, 2020, as compared to approximately $(4.1) million in the same period of 2019. 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 expect the company to return to profitability for fiscal year 2020 driven by anticipated sales growth in the four quarter. Longer term, we believe our financial position and contingency plans will allow us to retain the financial flexibility to pursue opportunities in 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 September 30, 2020

  • Cash and cash equivalents were approximately $73.8 million as of September 30, 2020, an increase of approximately $57.6 million as compared to approximately $16.2 million as of December 31, 2019.

  • Net sales were nil and remained the same for the same period of 2019.

  • Loss from operations was approximately $77,015, due to our cost saving initiatives compared to approximately loss from operations of approximately $2.8 million. The decrease was mainly due to decreased bad debts expense of $2,692,953 during the three months ended September 30, 2020.

  • Net loss for three months ended September 30, 2020 was $671,280 or $(0.25) per fully diluted share compared to a net loss of approximately $4.1 million or $(2.54) per fully diluted share for the three months ended September 30, 2019. This decrease in net loss was mainly due to the decrease operating expenses resulting from decrease in bad debts expense, and decrease in interest expense.

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

SEPTEMBER 30,
2020
(UNAUDITED)

DECEMBER 31,
2019

ASSETS

CURRENT ASSETS

Cash

$

73,787,158

$

16,221,297

Accounts receivable, net

24,827,842

42,068,760

Interest receivable on sales type leases

-

5,245,244

Prepaid expenses

62,609

52,760

Operating lease right-of-use assets, net

5,891

-

Other receivables

45,641

1,031,143

Total current assets

98,729,141

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

-

54,078

Property and equipment, net

27,704,004

27,044,385

Construction in progress

-

23,824,202

Total non-current assets

27,704,004

59,225,937

TOTAL ASSETS

$

126,433,145

$

123,845,141

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable

$

2,253,884

$

2,200,220

Taxes payable

2,509,792

4,087,642

Accrued interest on notes

7,599

-

Notes payable, net of unamortized OID

591,974

-

Accrued liabilities and other payables

1,182,642

1,184,751

Operating lease liability

-

56,755

Due to related parties

28,590

41,174

Interest payable on entrusted loans

9,387,757

8,200,044

Entrusted loan payable

20,979,731

20,480,214

Total current liabilities

36,941,969

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

440,522

430,034

Entrusted loan payable

293,681

286,689

Refundable deposit from customers for systems leasing

-

544,709

Total noncurrent liabilities

6,516,828

8,964,795

Total liabilities

43,458,797

45,215,595

CONTINGENCIES AND COMMITMENTS (NOTE 17 & 18)

STOCKHOLDERS’ EQUITY

Common stock, $0.001 par value; 10,000,000 shares authorized,
3,001,146 shares and 2,032,721 shares issued and outstanding as of
September 30, 2020 and December 31, 2019, respectively

3,001

2,033

Additional paid in capital

119,128,530

116,682,374

Statutory reserve

14,667,404

14,525,712

Accumulated other comprehensive loss

(3,959,045

)

(6,132,614

)

Accumulated deficit

(46,865,542

)

(46,447,959

)

Total Company stockholders’ equity

82,974,348

78,629,546

TOTAL LIABILITIES AND EQUITY

$

126,433,145

$

123,845,141

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


CHINA RECYCLING ENERGY CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

NINE MONTHS ENDED
SEPTEMBER 30,

THREE MONTHS ENDED
SEPTEMBER 30,

2020

2019

2020

2019

Revenue

Contingent rental income

$

-

$

702,973

$

-

$

-

Interest income on sales-type leases

-

173,360

-

-

Total operating income

-

876,333

-

-

Operating expenses

Bad debts (reversal)

(1,659,101

)

5,508,377

(9,479

)

2,683,474

Loss on disposal of systems

-

1,250,731

-

-

General and administrative

477,358

2,160,017

86,494

142,681

Total operating (income) expenses

(1,181,743

)

8,919,125

77,015

2,826,155

Income (loss) from operations

1,181,743

(8,042,792

)

(77,015

)

(2,826,155

)

Non-operating income (expenses)

Gain (loss) on note conversion

(496,853

)

24,240

(298,523

)

24,240

Interest expense-inducement on note conversion

-

(893,958

)

-

-

Interest income

124,305

120,903

51,688

38,293

Interest expense

(1,037,183

)

(5,888,819

)

(340,155

)

(2,094,899

)

Other income (expenses), net

(47,903

)

332,397

(7,275

)

1,919

Total non-operating expenses, net

(1,457,634

)

(6,305,237

)

(594,265

)

(2,030,447

)

Loss before income tax

(275,891

)

(14,348,029

)

(671,280

)

(4,856,602

)

Income tax benefit

-

(3,041,884

)

-

(755,840

)

Net loss attributable to China Recycling Energy Corporation

(275,891

)

(11,306,145

)

(671,280

)

(4,100,762

)

Other comprehensive items

Foreign currency translation gain (loss)

2,173,569

(2,582,759

)

3,456,157

(2,486,200

)

Comprehensive income (loss) attributable to China Recycling Energy Corporation

$

1,897,678

$

(13,888,904

)

$

2,784,877

$

(6,586,962

)

Basic and diluted weighted average shares outstanding

2,381,180

1,467,114

2,687,609

1,615,919

Basic and diluted loss per share

$

(0.12

)

$

(7.71

)

$

(0.25

)

$

(2.54

)

* The basic and diluted loss per share are the same due to antidilutive options and warrants resulting from the Company’s net loss.

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


CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

NINE MONTHS ENDED
SEPTEMBER 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(275,891

)

$

(11,306,145

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Amortization of OID and debt issuing costs of notes

45,833

84,661

Stock compensation expense

10,999

-

Operating lease expenses

49,034

-

Bad debts expense (reversal)

(1,659,101

)

5,508,377

Loss on disposal of 40% ownership of Fund Management Co

-

46,761

Loss on transfer of Chengli Boxing system

-

628,170

Loss on transfer of Xuzhou Huayu system

-

399,601

Loss on transfer of Shenqiu Phase I & II systems

-

209,707

Loss on disposal of fixed assets

-

289

Loss (gain) on note conversion

496,853

(24,240

)

Interest expense-inducement on note conversion

-

893,958

Changes in deferred tax

-

(3,044,371

)

Changes in assets and liabilities:

Interest receivable on sales type leases

-

(171,506

)

Collection of principal on sales type leases

13,959,334

-

Accounts receivable

43,765,943

64,306

Prepaid expenses

(8,339

)

(20,320

)

Other receivables

(3,141

)

(132,920

)

Accounts payable

-

(2,857,402

)

Taxes payable

(2,133,778

)

(1,323,919

)

Payment of lease liability

(57,442

)

-

Interest payable on entrusted loan

962,052

5,551,651

Accrued liabilities and other payables

46,968

(109,867

)

Refundable deposit for systems leasing

-

(481,462

)

Net cash provided by (used in) operating activities

55,199,324

(6,084,671

)

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from disposal of property & equipment

-

5,106

Net cash provided by investing activities

-

5,106

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of notes payable

-

2,000,000

Issuance of common stock

497,187

3,309,475

Net cash provided by financing activities

497,187

5,309,475

EFFECT OF EXCHANGE RATE CHANGE ON CASH

1,869,350

(1,607,514

)

NET INCREASE (DECREASE) IN CASH

57,565,861

(2,377,604

)

CASH, BEGINNING OF PERIOD

16,221,297

53,223,142

CASH, END OF PERIOD

$

73,787,158

$

50,845,538

Supplemental cash flow data:

Income tax paid

$

-

$

223,369

Interest paid

$

-

$

-

Supplemental disclosure of non-cash operating activities

Transfer of Tian’an project from construction in progress to accounts receivable

$

23,771,386

$

-

Supplemental disclosure of non-cash operating and financing activities

Transfer of Xuzhou Huayu Project and Shenqiu Phase I & II projects to Mr. Bai

$

-

$

34,931,358

Conversion of convertible debt into common shares

$

-

$

1,272,000

Conversion of long-term notes into common shares

$

1,442,086

$

-

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


Investor Relations Inquiries:
Vivian Chen
vivianchen@irimpact.com