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

/EIN News/ -- XI'AN, China, June 29, 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 March 31, 2020.

“As of March 31, 2020, we maintained a healthy cash and cash equivalents balance of approximately $55.0 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 69.2% to approximately $(0.6) million in the first quarter ended March 31, 2020, as compared to approximately $(1.9) 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 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 that we expect will reposition our energy sustainability business in direct relation to smart power integrated solutions to vastly improve climate change efficiency in China, which we believe will better serve our clients, employees and shareholders. As such, we will maintain our focus on expense and working capital discipline so that we move forward with a strengthened platform to attempt to capitalize on the significant opportunities we see for growth.” 

"Lastly, I want to thank all our employees for their service to the business and to our loyal customers.  I am confident we will emerge from this challenge even stronger, given the strength of our brand, our people and the new opportunities ahead of us."  

Financial Summary for the Full Year Ended December 31, 2019

  • Cash and cash equivalents were approximately $55.0 million as of March 31, 2020, an increase of approximately $38.8 million as compared to approximately $16.2 million as of December 31, 2019.
  • Net sales were nil as compared to $0.6 million for the same period of 2019 due to the shutdown of business during the COVID-19 pandemic.
  • Operating expenses were $154,178 for the three months ended March 31, 2020, compared to $2,699,990 for the three months ended March 31, 2019, a decrease of $2,545,812 or 94%. The decrease was mainly due to decreased bad debts expense by $108,396, decreased operating expense by $1,095,907 of Erdos TCH due to cease of the operation, and decreased loss on disposal of systems by $1,257,170. We disposed Chengli Boxing system, Xuzhou Huayu system, and Shenqiu Phase I & II systems during the three months ended March 31, 2019 for the repayment of entrusted loan.
  • Net loss for three months ended March 31, 2020 was $598,551 or $(0.28) per fully diluted share compared to $1,942,294 or $(1.61) per fully diluted share for the three months ended March 31, 2019, a decrease of loss of $1,343,743. This decrease in net loss was mainly due to the decrease operating expenses 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 

    MARCH 31,
2020
    DECEMBER 31,
2019
 
    (UNAUDITED)        
ASSETS            
             
CURRENT ASSETS            
Cash   $ 55,028,489     $ 16,221,297  
Accounts receivable, net     40,010,739       42,068,760  
Interest receivable on sales type leases     -       5,245,244  
Prepaid expenses     51,038       52,760  
Other receivables     40,164       1,031,143  
                 
Total current assets     95,130,430       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     37,499       54,078  
Property and equipment, net     26,628,705       27,044,385  
Construction in progress     -       23,824,202  
                 
Total non-current assets     26,666,204       59,225,937  
                 
TOTAL ASSETS   $ 121,796,634     $ 123,845,141  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
CURRENT LIABILITIES                
Accounts payable   $ 2,166,401     $ 2,200,220  
Taxes payable     4,589,662       4,087,642  
Accrued interest on notes     403,489       -  
Notes payable, net of unamortized OID     1,134,876       -  
Accrued liabilities and other payables     1,155,734       1,184,751  
Operating lease liability     40,794       56,755  
Due to related parties     28,723       41,174  
Interest payable on entrusted loans     8,389,311       8,200,044  
Entrusted loan payable     20,165,427       20,480,214  
                 
Total current liabilities     38,074,417       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     423,424       430,034  
Entrusted loan payable     282,283       286,689  
Refundable deposit from customers for systems leasing     -       544,709  
                 
Total noncurrent liabilities     6,488,332       8,964,795  
                 
Total liabilities     44,562,749       45,215,595  
                 
CONTINGENCIES AND COMMITMENTS (NOTE 17 &18)                
                 
STOCKHOLDERS’ EQUITY                
Common stock, $0.001 par value; 10,000,000 shares authorized, 2,179,387 shares and 2,032,721 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively     2,179       2,033  
Additional paid in capital     117,226,394       116,682,374  
Statutory reserve     14,525,712       14,525,712  
Accumulated other comprehensive loss     (7,473,890 )     (6,132,614 )
Accumulated deficit     (47,046,510 )     (46,447,959 )
                 
Total Company stockholders’ equity     77,233,885       78,629,546  
                 
TOTAL LIABILITIES AND EQUITY   $ 121,796,634     $ 123,845,141  

CHINA RECYCLING ENERGY CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED) 

    THREE MONTHS ENDED
MARCH 31,
 
    2020     2019  
             
Revenue                
Contingent rental income   $ -     $ 621,174  
                 
Interest income on sales-type leases     -       174,235  
                 
Total operating income     -       795,409  
                 
Operating expenses                
Bad debts     -       108,396  
Loss on disposal of systems     -       1,257,170  
General and administrative     154,178       1,334,424  
                 
Total operating expenses     154,178       2,699,990  
                 
Loss from operations     (154,178 )     (1,904,581 )
                 
Non-operating income (expenses)                
Loss on note redemption / conversion     (103,167 )     (893,958 )
Interest income     27,006       41,112  
Interest expense     (355,244 )     (1,932,105 )
Other income (expenses), net     (12,968 )     356,367  
                 
Total non-operating expenses, net     (444,373 )     (2,428,584 )
                 
Loss before income tax     (598,551 )     (4,333,165 )
Income tax benefit     -       (2,390,871 )
                 
Net loss attributable to China Recycling Energy Corporation     (598,551 )     (1,942,294 )
                 
Other comprehensive items                
Foreign currency translation loss     (1,341,276 )     1,810,626  
                 
Comprehensive loss attributable to China Recycling Energy Corporation   $ (1,939,827 )   $ (131,668 )
                 
Basic and diluted weighted average shares outstanding     2,135,340       1,206,572  
                 
Basic and diluted loss per share   $ (0.28 )   $ (1.61 )

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

CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 

    THREE MONTHS ENDED
MARCH 31,
 
    2020     2019  
             
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net Loss   $ (598,551 )   $ (1,942,294 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Amortization of OID and debt issuing costs of convertible note     12,500       59,661  
Stock compensation expense     10,999       -  
Operating lease expenses     16,374       -  
Bad debts expense     -       108,396  
Loss on disposal of 40% ownership of Fund Management Co     -       47,506  
Loss on transfer of Chengli Boxing system     -       638,167  
Loss on transfer of Xuzhou Huayu system     -       405,959  
Loss on transfer of Shenqiu Phase I & II systems     -       213,044  
Loss on disposal of fixed assets     -       293  
Loss on notes redemption / conversion     103,167       893,958  
Changes in deferred tax     -       (2,530,614 )
Changes in assets and liabilities:                
Interest receivable on sales type leases     -       (174,235 )
Collection of principal and interest on sales type leases     13,984,746       -  
Accounts receivable     25,791,539       (720,561 )
Prepaid expenses     926       -  
Other receivables     911       (144,398 )
Construction in progress     -       1,156,480  
Taxes payable     818       234,534  
Payment of lease liability     (15,705 )     -  
Interest payable on entrusted loan     320,095       1,900,658  
Accrued liabilities and other payables     22,701       (430,025 )
Refundable deposit for systems leasing     -       (489,123 )
                 
Net cash provided by (used in) operating activities     39,650,520       (772,594 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Proceeds from disposal of property & equipment     -       5,188  
                 
Net cash provided by investing activities     -       5,188  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Issuance of notes payable     -       2,000,000  
Issuance of common stock     -       1,620,800  
                 
Net cash provided by financing activities     -       3,620,800  
                 
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS     (843,328 )     1,023,068  
                 
NET INCREASE IN CASH     38,807,192       3,876,462  
CASH, BEGINNING OF PERIOD     16,221,297       53,223,142  
                 
CASH, END OF PERIOD   $ 55,028,489     $ 57,099,604  
                 
Supplemental cash flow data:                
Income tax paid   $ -     $ -  
Interest paid   $ -     $ -  
                 
Supplemental disclosure of non-cash operating activities
Transfer of Tian’an project from construction in progress to accounts receivable.
  $ 23,814,532     $ -  
                 
Supplemental disclosure of non-cash financing activities
Conversion of long-term notes into common shares
  $ 430,000     $ -  

Contact:

Investor Relations Inquiries:
Vivian Chen
vivianchen@irimpact.com

Media Inquiries:
Cathy Loos
cathyloos@irimpact.com


  

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