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.
