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

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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


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