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

Xi'an, CHINA


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