CREG
$0.30
China Recycling Ener
$.06
25.00%
Earnings Details
Quarter September 2019
Friday, November 15, 2019 5:30:00 PM
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Summary

China Recycling Ener (CREG) Recent Earnings

China Recycling Ener (CREG) reported a Quarter September 2019 loss of $0.25 per share on revenue of $0.0 million..

Results
Reported Earnings
($0.25)
Earnings Whisper
-
Consensus Estimate
Reported Revenue
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

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

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 SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018
   

  SEPTEMBER 30,
2019
  DECEMBER 31,
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 and December 31, 2018, respectively  16,510   10,295 
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 SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
  

  NINE MONTHS ENDED
SEPTEMBER 30,
  THREE MONTHS ENDED
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 conversion  893,958   -   -   - 
                 
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 interest  -   (273,235)  -   (86,052)
                 
Net loss attributable to China Recycling Energy Corporation  (11,306,145)  (4,082,156)  (4,100,762)  (2,535,238)
                 
Other comprehensive items                
Foreign currency translation loss attributable to China Recycling Energy Corporation  (2,582,759)  (8,090,700)  (2,486,200)  (6,110,231)
Foreign currency translation gain attributable to noncontrolling interest  -   35,361   -   22,735 
                 
Comprehensive loss attributable to China Recycling Energy Corporation $(13,888,904) $(12,172,856) $(6,586,962) $(8,645,469)
                 
Comprehensive loss attributable to noncontrolling interest $-  $(237,874) $-  $(63,317)
                 
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 Loos
Impact IR
Email:  cathyloos@irimpact.com
Phone:  +1-347-334-4135

Source: China Recycling Energy Corporation