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