GlobeNewswire Inc | Aug 14, 2020 09:00AM EDT

August 14, 2020

XI'AN, China, Aug. 14, 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 June 30, 2020.

As of June 30, 2020, we maintained a healthy cash and cash equivalents balance of approximately $62.7 million, stated Mr. Guohua Ku, Chairman and CEO of the Company. "In addition, our company successfully collected approximately $2.8 million from overdue accounts receivable in the quarterly period ended June 30, 2020. Coupled with our continuing cost cutting efforts throughout our entire organization, our company has recognized net income of $993,940 in this quarter, or $0.43 per basic and diluted share. 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 believe our financial position and contingency plans will allow us to retain the financial flexibility to pursue 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 June 30, 2020

-- Cash and cash equivalents were approximately $62.7 million as of June 30, 2020, an increase of approximately $46.5 million as compared to approximately $16.2 million as of December 31, 2019. -- Net sales were nil as compared to $80,924 for the same period of 2019, due to the shutdown of our business during the COVID-19 pandemic. -- Income from operations was approximately $1.4 million, due to the reversal of bad debts allowance compared to approximately loss from operations of approximately $3.3 million. -- Net income for three months ended June 30, 2020 was $993,940 or $0.43 per fully diluted share compared to a net loss of approximately $5.3 million or $(0.33) per fully diluted share for the three months ended June 30, 2019, a decrease of net loss of approximately $6.5 million. This decrease in net loss was mainly due to the decrease in operating expenses resulting from a reversal of bad debts expense as described above.

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 Companys 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 SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

JUNE 30, DECEMBER 2020 31, (UNAUDITED) 2019 ASSETS CURRENT ASSETS Cash $ 62,666,385 $ 16,221,297 Accounts receivable, net 31,793,218 42,068,760 Interest receivable on sales type leases - 5,245,244 Prepaid expenses 51,078 52,760 Other receivables 44,653 1,031,143 Total current assets 94,555,334 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 21,655 54,078 Property and equipment, net 26,649,769 27,044,385 Construction in progress - 23,824,202 Total non-current assets 26,671,424 59,225,937 TOTAL ASSETS $ 121,226,758 $ 123,845,141 LIABILITIES AND STOCKHOLDERS? EQUITY CURRENT LIABILITIES Accounts payable $ 2,168,116 $ 2,200,220 Taxes payable 2,483,681 4,087,642 Accrued interest on notes 3,935 - Notes payable, net of unamortized OID 913,410 - Accrued liabilities and other payables 1,165,256 1,184,751 Operating lease liability 25,611 56,755 Due to related parties 28,720 41,174 Interest payable on entrusted loans 8,711,500 8,200,044 Entrusted loan payable 20,181,378 20,480,214 Total current liabilities 35,681,607 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 423,759 430,034 Entrusted loan payable 282,506 286,689 Refundable deposit from customers for - 544,709 systems leasing Total noncurrent liabilities 6,488,890 8,964,795 Total liabilities 42,170,497 45,215,595 CONTINGENCIES AND COMMITMENTS (NOTE 17 & 18) STOCKHOLDERS? EQUITY Common stock, $0.001 par value; 10,000,000shares authorized, 2,493,197shares and 2,032,721 shares issued and 2,493 2,033 outstanding as of June 30, 2020 andDecember 31, 2019, respectivelyAdditional paid in capital 117,995,829 116,682,374 Statutory reserve 14,666,206 14,525,712 Accumulated other comprehensive loss (7,415,203 ) (6,132,614 )Accumulated deficit (46,193,064 ) (46,447,959 ) Total Company stockholders? equity 79,056,262 78,629,546 TOTAL LIABILITIES AND EQUITY $ 121,226,758 $ 123,845,141

CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(UNAUDITED)

SIX MONTHS ENDED THREE MONTHS JUNE 30, ENDED JUNE 30, 2020 2019 2020 2019 Revenue Contingent $ - $ 702,973 $ - $ 80,924 rental income Interestincome on - 173,360 - - sales-typeleases Totaloperating - 876,333 - 80,924 income Operating expensesBad debts (1,649,622 ) 2,824,903 (1,649,622 ) 2,716,507 (reversal)Loss ondisposal of - 1,264,256 - - systemsGeneral and 390,864 2,017,336 236,686 682,912 administrative Totaloperating (1,258,758 ) 6,106,495 (1,412,936 ) 3,399,419 (income)expenses Income (loss)from 1,258,758 (5,230,162 ) 1,412,936 (3,318,495 )operations Non-operatingincome (expenses)Loss on noteredemption / (198,330 ) (893,958 ) (95,163 ) - conversionInterest 72,617 82,610 45,611 41,498 incomeInterest (697,028 ) (3,793,920 ) (341,784 ) (1,861,815 )expenseOther income(expenses), (40,628 ) 344,003 (27,660 ) (19,450 )net Totalnon-operating (863,369 ) (4,261,265 ) (418,996 ) (1,839,767 )expenses, net Income (loss)before income 395,389 (9,491,427 ) 993,940 (5,158,262 )taxIncome tax(benefit) - (2,286,044 ) - 104,827 expense Net income(loss)attributableto China 395,389 (7,205,383 ) 993,940 (5,263,089 )RecyclingEnergyCorporation Othercomprehensive itemsForeigncurrency (1,282,589 ) (96,559 ) 58,688 (1,907,185 )translationgain (loss) Comprehensiveincome (loss)attributableto China $ (887,200 ) $ (7,301,942 ) $ 1,052,628 $ (7,170,274 )RecyclingEnergyCorporation Basic anddilutedweighted 2,226,282 13,914,784 2,317,223 15,743,533 average sharesoutstanding Basic anddiluted loss $ 0.18 $ (0.52 ) $ 0.43 $ (0.33 )per share

CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 395,389 $ (7,205,383 )Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Amortization of OID and debt issuing costs of 39,583 72,161 notesStock compensation expense 10,999 - Operating lease expenses 32,502 - Bad debts expense (reversal) (1,649,622 ) 2,824,901 Loss on disposal of 40% ownership of Fund - 47,267 Management CoLoss on transfer of Chengli Boxing system - 634,963 Loss on transfer of Xuzhou Huayu system - 403,922 Loss on transfer of Shenqiu Phase I & II - 211,975 systemsLoss on disposal of fixed assets - 293 Loss on notes redemption / conversion 198,330 893,958 Changes in deferred tax - (2,364,088 )Changes in assets and liabilities: Interest receivable on sales type leases - (173,360 )Collection of principal on sales type leases 13,879,575 - Accounts receivable 35,552,191 65,001 Prepaid expenses 919 - Other receivables (3,589 ) (1,074,031 )Accounts payable - (2,888,301 )Taxes payable (2,121,622 ) (1,283,246 )Payment of lease liability (31,174 ) - Interest payable on entrusted loan 635,375 3,720,566 Accrued liabilities and other payables 57,740 (371,026 )Refundable deposit for systems leasing - (486,668 ) Net cash provided by (used in) operating 46,996,596 (6,971,096 )activities CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of property & - 5,162 equipment Net cash provided by investing activities - 5,162 CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of notes payable - 2,000,000 Issuance of common stock - 3,309,475 Net cash provided by financing activities - 5,309,475 EFFECT OF EXCHANGE RATE CHANGE ON CASH (551,508 ) (80,341 ) NET INCREASE (DECREASE) IN CASH 46,445,088 (1,736,800 )CASH, BEGINNING OF PERIOD 16,221,297 53,223,142 CASH, END OF PERIOD $ 62,666,385 $ 51,486,342 Supplemental cash flow data: Income tax paid $ - $ 225,784 Interest paid $ - $ - Supplemental disclosure of non-cash operating activitiesTransfer of Tian?an project from construction $ 23,635,489 $ - in progress to accounts receivable Supplemental disclosure of non-cash financing activitiesTransfer of Xuzhou Huayu Project and Shenqiu $ - $ 35,938,441 Phase I & II projects to Mr. BaiConversion of convertible debt into common $ - $ 1,070,000 sharesConversion of long-term notes into common $ 1,104,586 $ - shares

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