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China Recycling Energy Corporation Reports Third Quarter and Nine Months of 2019 Unaudited Financial Results

November 15, 2019 GMT

XI’AN, China, Nov. 15, 2019 (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 unaudited fiscal third quarter financial results for the three months and nine months ended September 30, 2019.

“As of September 30, 2019, we maintained a strong cash and cash equivalent balance of $50.85 million, although this represents a slight decrease of $2.37 million compared to $53.22 million as of December 31, 2018,” stated Mr. Guohua Ku, Chairman and CEO of the Company. “At the current time, we have evaluated several exciting strategic opportunities for the use of our cash to reinvest in innovative growth initiatives that will reposition our energy sustainability business in direct relation to smart power integrated solutions. Our objective is to vastly improve climate change efficiency in China, which we believe will better serve our clients, employees and shareholders. We look forward to potentially unveiling a major strategic initiative in the near future.”

Financial Summary for the Three Months ended September 30, 2019

-- Cash and cash equivalent were $50.85 million as of September 30, 2019, a decrease of $2.37 million as compared to $53.22 million as of December 31, 2018. -- Net sales were $nil as compared to $1.14 million for the same period of 2018. The Company’s recent sales were generated by Erdos TCH Energy Saving Development Co. (“Erdos TCH”) to Erdos Metallurgy Co. Ltd. (“Erdos”). As of May 2019, Erdos TCH ceased its operations due to renovations and furnace safety upgrades of Erdos, and the Company expects the resumption of operations in 2020. During this period, Erdos will compensate Erdos TCH approximately $145,460 per month until operations resume; the Company expects the resumption of operations of Erdos TCH in February 2020. -- Interest income on sales-type leases was $nil as compared to $0.51 million for the same period of 2018. The decreased interest income was due to the transfer of the Shenqiu Phase I and II systems to Mr. Bai in February 2019. During the three months ended September 30, 2019, there was no interest income; in February 2019, the Shenqiu Phase I and II systems were transferred to Mr. Bai, and the Company only had Pucheng Phase I and II systems during three months ended September 30, 2019, which the Company has ceased to accrue interest income since April 2018 because Pucheng power generation systems was suspended due to strict environmental protection policies and lack of supply of biomass waste raw materials. Pucheng has not resumed operations to date. -- Total operating income was $nil as compared to $1.65 million for the same period of 2018. -- Total operating expenses were $2.83 million, a decrease of 24.34% as compared to the $3.74 million for the same period of 2018. The decrease was mainly due to a decrease in operating expenses of $1.13 million attributable to Erdos TCH due to its ceasing of operations, which was partly offset by an increase in bad debt expense of $0.22 million. -- Net loss attributable to the Company was ($4.10) million, or ($0.25) per fully diluted share, compared to a net loss of ($2.54) million or ($0.31) per diluted share in the prior year period.

Financial Summary for the Nine Months ended September 30, 2019

-- Net sales were $0.70 million, a decrease of 82.20% as compared to $3.95 million for the same period of 2018. The sales generated in the period was from electricity sold by Erdos TCH. However, Erdos TCH has ceased its operations due to renovations and furnace safety upgrades of Erdos. The Company expects the resumption of operations of Erdos TCH in February 2020. -- Interest income on sales-type leases was $0.17 million, a decrease of 93.74% as compared to $2.77 million for the same period of 2018. The decreased interest income was due to the transfer of the Shenqiu Phase I and II systems to Mr. Bai in February 2019 and the suspension of the Pucheng power generation systems due to strict environmental protection policies and lack of supply of biomass waste raw materials, as well as the Company’s ceasing to accrue interest income since April 2018. Pucheng has not resumed operations to date. -- Total operating income was $0.88 million, a decrease of 86.96% as compared to $6.72 million for the same period of 2018. -- Total operating expenses were $8.92 million, an increase of 20.08% as compared to $7.43 million for the same period of 2018. The increase was mainly due to an increase in bad debt expense of $2.21 million for the Pucheng and Zhongtai systems and a $1.25 million increase in the loss on the disposals of systems, which were partly offset by a decrease in operating expenses of $1.97 million attributable to Erdos. -- Net loss attributable to the Company was ($11.31) million or ($0.77) per basic and fully diluted share, compared to a net loss of ($4.08) million or ($0.49) per basic and diluted share for the prior nine-month period.

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 percent 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 management and engineering teams have over 20 years of experience in industrial energy recovery in China.

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 SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

SEPTEMBER 30, DECEMBER 31, 2019 2018 ------------- ------------- (UNAUDITED) ASSETS CURRENT ASSETS Cash and equivalents $ 50,845,538 $ 53,223,142 Accounts receivable, net 43,670,925 11,755,251 Interest receivable on sales type leases 5,173,531 9,336,140 Prepaid expenses 51,126 32,395 Other receivables 1,013,369 1,559,116 - ----------- - ----------- Total current assets 100,754,489 75,906,044 NON-CURRENT ASSETS Investment in sales-type leases, net 8,174,254 24,962,056 Long term investment - 475,635 Long term deposit 15,497 15,971 Property and equipment, net 26,674,637 27,495,049 Construction in progress 24,353,518 42,582,177 - ----------- - ----------- Total non-current assets 59,217,906 95,530,888 - ----------- - ----------- TOTAL ASSETS $ 159,972,395 $ 171,436,932 - ----------- - ----------- LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 2,168,743 $ 5,591,876 Taxes payable 3,451,111 3,636,559 Accrued liabilities and other payables 1,139,403 1,617,997 Due to related parties 41,179 41,168 Interest payable on entrusted loans 22,335,362 17,473,492 Entrusted loan payable 46,939,728 48,373,936 - ----------- - ----------- Total current liabilities 76,075,526 76,735,028 NONCURRENT LIABILITIES Convertible note payable, net of unamortized OID and debt issuing costs - 1,016,589 Accrued interest on notes 326,620 40,572 Income tax payable 6,390,625 6,390,625 Deferred tax liability, net - 3,040,346 Notes payable, net of unamortized OID 1,829,250 - Long term payable 424,154 - Refundable deposits from customers for systems leasing 537,262 1,034,503 - ----------- - ----------- Total noncurrent liabilities 9,507,911 11,522,635 - ----------- - ----------- Total liabilities 85,583,437 88,257,663 CONTINGENCIES AND COMMITMENTS STOCKHOLDERS’ EQUITY Common stock, $0.001 par value; 100,000,000 shares authorized, 16,510,498 shares and 10,295,280 shares issued and outstanding as of September 30, 2019 16,510 10,295 and December 31, 2018, respectively Additional paid in capital 116,031,772 114,484,018 Statutory reserve 14,525,712 14,525,712 Accumulated other comprehensive loss (7,203,689 ) (4,620,930 ) Accumulated deficit (48,981,347 ) (37,675,202 ) - ----------- - ----------- Total Company stockholders’ equity 74,388,958 86,723,893 Noncontrolling interest - (3,544,624 ) - ----------- - ----------- Total equity 74,388,958 83,179,269 - ----------- - ----------- TOTAL LIABILITIES AND EQUITY $ 159,972,395 $ 171,436,932 - ----------- - -----------

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

CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(UNAUDITED)

NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------ ---------------------------- 2019 2018 2019 2018 ------------- ------------- ------------ ------------ Revenue Contingent rental income $ 702,973 $ 3,948,505 $ - $ 1,144,237 Interest income on sales-type leases 173,360 2,771,452 - 506,971 - ----------- - ----------- - ---------- - ---------- Total operating income 876,333 6,719,957 - 1,651,208 Operating expenses Bad debts 5,508,377 3,299,458 2,683,474 2,463,587 Loss on disposal of systems 1,250,731 - - - General and administrative 2,160,017 4,128,345 142,681 1,271,810 - ----------- - ----------- - ---------- - ---------- Total operating expenses 8,919,125 7,427,803 2,826,155 3,735,397 - ----------- - ----------- - ---------- - ---------- Loss from operations (8,042,792 ) (707,846 ) (2,826,155 ) (2,084,189 ) Non-operating income (expenses) Gain on note conversion 24,240 - 24,240 - Interest income 120,903 113,942 38,293 36,722 Interest expense (5,888,819 ) (4,035,107 ) (2,094,899 ) (1,116,642 ) Other income (expense), net 332,397 622 1,919 1,903 - ----------- - ----------- - ---------- - ---------- Interest expense-inducement on note 893,958 - - - conversion - ----------- - ----------- - ---------- - ---------- Total non-operating expenses, net (6,305,237 ) (3,920,543 ) (2,030,447 ) (1,078,017 ) - ----------- - ----------- - ---------- - ---------- Loss before income tax (14,348,029 ) (4,628,389 ) (4,856,602 ) (3,162,206 ) Income tax benefit (3,041,884 ) (272,998 ) (755,840 ) (540,916 ) - ----------- - ----------- - ---------- - ---------- Loss before noncontrolling interest (11,306,145 ) (4,355,391 ) (4,100,762 ) (2,621,290 ) Less: loss attributable to noncontrolling - (273,235 ) - (86,052 ) interest - ----------- - ----------- - ---------- - ---------- Net loss attributable to China Recycling (11,306,145 ) (4,082,156 ) (4,100,762 ) (2,535,238 ) Energy Corporation Other comprehensive items Foreign currency translation loss attributable to China Recycling Energy (2,582,759 ) (8,090,700 ) (2,486,200 ) (6,110,231 ) Corporation - ----------- - ----------- - ---------- - ---------- Foreign currency translation gain - 35,361 - 22,735 attributable to noncontrolling interest - ----------- - ----------- - ---------- - ---------- Comprehensive loss attributable to China $ (13,888,904 ) $ (12,172,856 ) $ (6,586,962 ) $ (8,645,469 ) Recycling Energy Corporation - ----------- - ----------- - ---------- - ---------- Comprehensive loss attributable to $ - $ (237,874 ) $ - $ (63,317 ) noncontrolling interest - ----------- - ----------- - ---------- - ---------- Basic weighted average shares outstanding 14,671,142 8,310,198 16,159,194 8,310,198 Diluted weighted average shares outstanding 14,671,142 8,310,198 16,159,194 8,310,198 - ----------- - ----------- - ---------- - ---------- Basic loss per share $ (0.77 ) $ (0.49 ) $ (0.25 ) $ (0.31 ) - ----------- - ----------- - ---------- - ---------- Diluted loss per share* $ (0.77 ) $ (0.49 ) $ (0.25 ) $ (0.31 ) - ----------- - ----------- - ---------- - ----------

* 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, ------------------------------- 2019 2018 --------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Loss including noncontrolling interest $ (11,306,145 ) $ (4,355,391 ) Adjustments to reconcile loss including noncontrolling interest to net cash used in operating activities: Depreciation - 2,049 Amortization of OID and debt issuing costs of convertible note 84,661 7,767 Bad debt expense 5,508,377 3,262,588 Loss on disposal of 40% ownership of Fund Management Co 46,761 - Investment loss - 10,962 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 - Gain on note conversion 24,240 - Interest Expense - inducement on note conversion 893,958 Changes in deferred tax (3,044,371 ) (1,589,864 ) Changes in assets and liabilities: Interest receivable on sales type leases (171,506 ) 367,877 Collection of principal on sales type leases - 2,453,103 Accounts receivable 64,306 (1,020,973 ) Prepaid expenses (20,320 ) 699,076 Other receivables (132,920 ) (249,966 ) Notes receivable - 333,674 Construction in progress - (7,156,966 ) Accounts payable (2,857,402 ) 3,522,376 Taxes payable (1,323,919 ) 608,798 Interest payable on entrusted loan 5,551,651 5,851,446 Accrued liabilities and other payables (109,867 ) 647,733 Refundable deposit for systems leasing (481,462 ) - - ----------- - ---------- Net cash provide by (used in) operating activities (6,084,671 ) 3,394,289 - ----------- - ---------- 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: Convertible note payable - 1,000,000 Issuance of notes payable 2,000,000 - Issuance of common stock 3,309,475 - - ----------- - ---------- Net cash provided by financing activities 5,309,475 1,000,000 - ----------- - ---------- EFFECT OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS (1,607,514 ) (3,281,877 ) - ----------- - ---------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (2,377,604 ) 1,112,412 CASH AND EQUIVALENTS, BEGINNING OF PERIOD 53,223,142 49,830,243 - ----------- - ---------- CASH AND EQUIVALENTS, END OF PERIOD $ 50,845,538 $ 50,942,655 - ----------- - ---------- Supplemental cash flow data: Income tax paid $ 223,369 $ 1,160,017 - ----------- - ---------- Interest paid $ - $ - - ----------- - ---------- Supplemental disclosure of non-cash operating activities Transfer of Xuzhou Huayu Project and Shenqiu Phase I & II project to Mr. Bai $ 34,931,358 - ----------- - ---------- Supplemental disclosure of non-cash financing activities Conversion of notes into common shares $ 1,272,000 $ - - ----------- - ----------

Cathy LoosImpact IREmail: cathyloos@irimpact.com Phone: +1-347-334-4135