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CER Reports Financial Results for the Fiscal Year Ended December 31, 2010

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Significant Investment in New State-of-the-Art Manufacturing Facilities in 2010 Sets Stage for $115 Million in 2011 Production

SHANGHAI, April 20, 2011 /PRNewswire-Asia/ -- China Energy Recovery Inc. (CGYV) ("CER"), an emerging growth company and international leader in the development of cutting-edge waste heat energy recovery systems, is returning to full reporting with today's filing of its financial results for its fiscal year ended December 31, 2010. China Energy Recovery's present auditing firm is PricewaterhouseCoopers.

In 2010 China Energy Recovery invested in the construction and implementation of new 150,000 sq ft state-of-the-art manufacturing facilities in Yangzhou that were officially inaugurated on January 8, 2011. This significant investment, which dramatically increases the company's production capacity, along with the development of a stronger engineering base, has given China Energy Recovery the necessary infrastructure to meet its future growth initiatives.

"2010 was a year of significant transition, as it marks the first phase of a three-year plan to give the company enhanced manufacturing and design capabilities, in order to absorb the growing number of orders we are receiving, and emerge as one of the principal leaders at the forefront of the energy recovery sector in China, and around the word," said Qinghuan Wu, China Energy Recovery's Chairman and Chief Executive Officer.

"CER's investment in these new state-of-the-art facilities, the move of our manufacturing from Shanghai to Yangzhou and the hiring and training of new staff and engineers, resulted in delays in delivery and substantial additional cost, which understandably translated into a smaller recognized revenue and a loss in 2010," continued Mr. Wu. "However, this investment was a necessity to allow the company to undertake the future production pipeline and satisfy the needs of a fast increasing demand of the market. This strategy has already translated in nearly $115 million in works for 2011, or five times the total revenue of 2010. This spectacular surge in orders effectively confirms the validity of the company's long-term strategic vision."

For the fiscal year ending December 31, 2010, CER generated $21.2 million in revenue compared to $22.2 million in revenue in fiscal 2009. Selling, general and administrative (SG&A) costs for fiscal 2010 were $6.4 million compared to $5.8 million in the same period last year. The increase in SGA expense was due primarily to an increase in labor and training costs as the company added over 100 new management and professional staff in 2010. CER recorded a net loss of $3.5 million or ($0.11) per share in fiscal 2010 compared with a net loss of $886,480 or ($0.03) per share in the same period a year ago.

CER had $3.0 million in cash at the end of the period.

Mr. Wu concluded, "The results for fiscal 2010 reflect a period of substantial transformation for the company. CER made the shift from a much smaller, single-product contract manufacturing company to a far larger firm, more focused on EPC contracts for which the company realizes much higher revenue. It was only at the end of the year that CER was able to move from its manufacturing quarters in Shanghai to the much larger, state-of-the-art facilities in Yangzhou. With this transition completed, CER is now able to focus on expanding its operations to suit its larger-scale EPC-oriented sales development, and ready to embrace the next phase of its planned development. We strive to keep our prospective investors and our loyal shareholders informed of our expansion initiatives in 2011, and we look forward to providing updates on our progress in the coming weeks and months."

What is Waste Heat Energy Recovery?

Industrial facilities release significant amounts of excess heat into the atmosphere in the form of hot exhaust gases or high-pressure steam. Energy recovery is the process of recovering as much as two-thirds of that wasted energy and converting it into usable heat energy or electricity, dramatically lowering energy costs. Energy recovery systems are also capable of lowering heat pollution and capturing harmful pollutants that would otherwise be released into the environment. It is estimated that if energy currently wasted by all the U.S. industrial facilities could be recovered, it could produce power equivalent to 20% of U.S. electricity generation capacity without burning any additional fossil fuel, and could help many industries to meet stringent environmental regulations.

About China Energy Recovery, Inc.

China Energy Recovery Inc. (CGYV.PK) is a leading international engineering and manufacturing company that specializes in the design, fabrication and installation and of cutting-edge waste heat energy recovery systems. Using patented technology developed by a team of over 100 engineers, CER's energy recovery systems capture and convert waste energy that is produced by heavy industrial processes into low-cost electrical power. CER's environmentally friendly technology enables industrial manufacturers to reduce their energy costs, shrink their emissions footprint and generate saleable emissions credits.  Not only is the technology good for the environment, investments in CER's waste heat recovery systems typically pay off in energy savings over a one-to-three-year period. The company's primary focus is the market in China, which represents one of the largest concentrations of heavy industry in the world. However, due to increasing international interest, CER's systems are now operating in heavy industrial plants located in Egypt, Korea, Vietnam and Malaysia. In 2010 CER finished the construction of China's first state-of-the-art energy recovery system research and fabrication facility, which will allow CER to meet increased demand for its products and services worldwide.

For more information on CER, please visit: www.chinaenergyrecovery.com.

Forward-Looking Statement Disclaimer

This press release includes "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, included in the press release that address activities, events or developments that CER believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors that CER believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of CER and may not materialize, including, without limitation, the efficacy and market acceptance of CER's products and services, CER's ability to execute on its business plan and strategies and CER's ability to successfully complete orders and collect revenues therefrom. Investors are cautioned that any such statements are not guarantees of future performance. Actual results or developments may differ materially from those projected in the forward-looking statements as a result of many factors. Furthermore, CER does not intend (and is not obligated) to update publicly any forward-looking statements, except as required by law. The contents of this release should be considered in conjunction with the warnings and cautionary statements contained in CER's filings with the Securities and Exchange Commission.

CHINA ENERGY RECOVERY, INC. AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2009 AND 2010




ASSETS



 


December 31

2009


December 31

2010

CURRENT ASSETS:



Cash

$       2,386,573

$       2,996,076

Restricted cash

-

218,346

Notes receivable

411,049

1,341,359

Accounts receivable, net of allowance for doubtful accounts

6,601,921

7,059,935

Inventories

8,574,775

8,661,800

Other current assets and receivables

892,657

1,185,032

Deferred financial cost - current

674,748

215,623

Deferred tax assets - current

67,276

-

Advances on purchases

4,271,054

15,200,669

Total current assets

23,880,053

36,878,840


 

 

PROPERTY, PLANT AND EQUIPMENT, net

758,888

10,101,755


 

 

OTHER ASSETS:



Deferred tax assets

133,758

171,776

Intangible assets

2,439,022

2,477,959

Deferred financial cost

215,623

-

Long-term accounts receivable

6,830,615

4,679,121

Total other assets

9,619,018

7,328,856


 

 

Total assets

$      34,257,959

$      54,309,451


 

 

LIABILITIES AND SHAREHOLDERS' EQUITY




 

 

CURRENT LIABILITIES:



Accounts payable

$        4,188,205

$        4,557,848

Accrued expenses and other liabilities

1,745,082

1,912,544

Advances from customers

11,226,273

27,530,065

Taxes payable

2,956,476

1,631,507

Long-term loans, current

-

3,177,973

Short-term bank loans

880,200

4,333,700

Derivative liability, current

435,500

374,846

Convertible note, current

2,023,720

-

Total current liabilities

23,455,456

43,518,483


 

 

NON-CURRENT LIABILITIES:



Warrant liability

1,372,947

1,332,760

Derivative liability

435,500

48,461

Convertible note

1,938,408

4,691,582

Long-term loan from related party

-

543,778

Total non-current liabilities

3,746,855

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