-- Teleconference to Be Held Thursday, August 21, 2008 at 8:30 a.m.
EDT XI'AN, China, Aug. 20 /Xinhua-PRNewswire-FirstCall/ -- China
Recycling Energy Corp. (OTC:CREG) (BULLETIN BOARD: CREG) ("CREG" or
"the Company"), a leading industrial waste-to-energy solution
provider in China, today announced its second quarter 2008
financial results for the three months ended June 30, 2008.
Financial Results Overview During the second quarter of 2008, the
Company generated sales of US$2.6 million, all of which came from
leasing of energy-saving equipment in China. The Company had no
sales in the same period of 2007 due to changing of its business
type in the first quarter of 2007. Gross profit for the second
quarter of 2008 was US$783,807, compared with zero in the same
period of 2007. Gross margin was 30.0%, compared with zero in the
same period of 2007. Interest income from sales-type leases for
energy-saving equipment was US$574,775, compared with US$148,150 in
the same period of 2007. "The results of the second quarter prove
to us our sales-type leasing business model is working and our
revenue is expanding," said Mr. Guangyu Wu, CEO of CREG. "The two
new projects that came into operation in April and May have started
to generate rental income, albeit in small amounts as the second-
quarter results only reflect less than two months of their revenue
contribution. They are expected to join our three existing top-gas
recovery turbine ("TRT") projects in full contribution starting in
the third quarter. In addition, we expect to launch one more TRT
and two cement heat power generation projects by October this
year." Mr. Wu continued, "With the continued policy emphasis in
China on energy efficiency and environmental consciousness, we
reaffirm our 2008 and 2009 guidance." General and administrative
expenses were US$855,169 for the second quarter ended June 30,
2008, compared with US$86,501 in the same period of 2007. The
increase was mainly attributable to changing of business type and
accrued compensation expense of approximately $307,289 for stock
options to employees in the second quarter. Effective June 25,
2008, the Company cancelled all vested shares and accepted
Optionees' forfeiture of any unvested shares underlying the
currently outstanding options. Therefore, expenses related to stock
options will no longer be recorded after June 25, 2008. Operating
income was US$503,413 in the second quarter of 2008, compared with
US$61,649 in the same period of 2007. Total non-operating expenses
were US$503,469 in the second quarter of 2008, compared with
non-operating income of US$208,968 in the same period of 2007. This
increase was mainly due to accrued interest expense of US$589,041
on amortized beneficiary conversion feature for the convertible
note in the second quarter prior to the rescission date of June 26,
2008. This non-cash charge is one-time and will no longer occur in
the future. Net loss for the second quarter of 2008 was US$317,636,
or US$0.01 loss per diluted share, compared with net income of
US$219,181, or US$0.01 earnings per diluted share, in the same
period of 2007. The decrease in net income (loss) was mainly due to
income tax expenses of US$317,551, compared with US$51,436 in the
same period of 2007. Excluding the stock-based compensation expense
of US$307,289 and the amortization of beneficiary conversion
feature for the cancelled convertible note of US$ 589,041, pro
forma net income for the quarter was US$578,723. Balance Sheet The
Company's balance sheet at June 30, 2008 included cash and cash
equivalents of US$7.0 million, compared with US$1.6 million at
December 31, 2007. Total investments in sales-type leases were
US$9.1 million, compared to US$9.0 million at December 31, 2007.
Net working capital increased to US$12.8 million from US$7.0
million at December 31, 2007. Total shareholders' equity was
US$29.0 million, compared with US$17.3 million at December 31,
2007. Update on Recent Projects The Company is expecting to
complete by October 2008 the construction of a 1,080-cubic-meter
blast furnace for the third phase of Zhangzhi Steel Co., Ltd.'s
top-gas recovery turbine project in Shanxi Province. The total
contract value is approximately US$4.4 million. This project is
expected to produce 45-million KW/h annual energy output upon
completion. In addition, the Company is expecting to complete by
October 2008 the construction of two sets of 12MW pure
low-temperature power generator systems for Shaanxi Province-based
cement manufacturer Shenwei Group. The project will have an
estimated annual power generated capacity of 180-million KW/h once
the two systems are put into operation. The Company is using the
BOT (build, operate, transfer) model to build and operate the
systems. The operation period will be five years. During the
operation period, Shenwei Group will pay the Company monthly
electricity fee based on the actual power generated by the systems
at RMB 0.4116 per KW/h as agreed. As of August 15, 2008, the
Company had five waste-to-energy projects in operation servicing
Chinese steel and cement factories. Full Years 2008 and 2009
Guidance The Company expects revenues for the 2008 year to be in
the range of US$17 million to US$19 million and net income,
excluding non-cash items, in the range of US$4.5 million to US$5
million. The Company expects revenues for the 2009 year to be in
the range of US$33 million and US$36 million, with net income,
excluding non-cash items, of approximately US$10 million. These
targets are based on the Company's current views on the operating
and market conditions, which are subject to change. Conference Call
The Company will host a conference call on Thursday, August 21,
2008, at 8:30 a.m. Eastern Daylight Time / 8:30 p.m. Beijing Time.
Interested parties may participate in the conference call by
dialing +1-877-407-8035 (North America) or +1-201-689-8035
(International) 10 minutes before the call start time. A replay of
the call will be available through Thursday, August 28, 2008 at
11:59 p.m. Eastern Daylight Time. Interested parties may access the
replay by dialing +1-877-660-6853 (North America) or +
1-201-612-7415 (International) and entering account number: 286 and
conference ID number: 294872. About China Recycling Energy Corp.
China Recycling Energy Corp. (OTC:CREG) (BULLETIN BOARD: 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
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 China Recycling Energy Corp. 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 those discussed in the Company's 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. For
more information, please contact: In China: Mr. Leo Wu Investor
Relations China Recycling Energy Corp. Tel: +86-29-8765-1096 Email:
In the U.S.: Mr. Valentine Ding Investor Relations Grayling Global
Tel: +1-646-284-9412 Email: CHINA RECYCLING ENERGY CORPORATION AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF AS OF JUNE 30,
DECEMBER 31, 2008 2007 (UNAUDITED) (AUDITED) ASSETS CURRENT ASSETS
Cash & cash equivalents $7,001,594 $1,634,340 Accounts
receivable 867,473 -- Investment in sales type leases, net
1,247,448 1,081,981 Interest receivable -- 144,262 Prepaid
equipment rent 9,479,730 -- Other receivables 57,828 32,902
Inventory 10,497,157 9,870,315 Total current assets 29,151,230
12,763,800 NON-CURRENT ASSETS Investment in sales type leases, net
7,918,642 7,933,780 Advance for equipment 2,624,930 2,467,579
Property and equipment, net 83,133 -- Construction in progress
5,613,063 -- Intangible assets, net -- 6,169 Total non-current
assets 16,239,768 10,407,528 TOTAL ASSETS 45,390,998 23,171,328
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts
payable 6,963,837 2,298,201 Tax payable 855,615 534,522 Accrued
liabilities and other payables 3,521,508 2,565,726 Advance from
management -- 71,508 Convertible notes, net of discount due to
beneficial conversion feature 5,000,000 315,068 Total current
liabilities 16,340,960 5,785,025 ACCRUED INTEREST ON CONVERTIBLE
NOTES 42,466 63,014 CONTINGENCIES AND COMMITMENTS MINORITY INTEREST
16,095 15,080 STOCKHOLDERS' EQUITY Common stock, $0.001 par value;
100,000,000 shares authorized, 36,425,094 and 25,015,089 shares
issued and outstanding as of June 30, 2008 and December 31,
2007,respectively 36,425 25,015 Additional paid in capital
30,251,407 19,070,908 Statutory reserve 926,328 832,467 Accumulated
other comprehensive income 2,828,735 1,718,260 Accumulated deficit
(5,051,418) (4,338,441) Total stockholders' equity 28,991,477
17,308,209 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 45,390,998
23,171,328 CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX
MONTHS ENDED JUNE 30, 2008 2007 Revenue Sales of products $ -- $
4,781,163 Rental income 2,616,416 -- Total revenue 2,616,416
4,781,163 Cost of sales Cost of products -- 3,677,818 Rental
expense 1,832,609 -- Total cost of sales 1,832,609 3,677,818 Gross
profit 783,807 1,103,345 Interest income on sales-type leases
1,139,727 198,386 Total operating income 1,923,534 1,301,731
Operating expenses General and administrative expenses 1,503,779
343,543 Total operating expenses 1,503,779 343,543 Income from
operations 419,755 958,188 Non-operating income (expenses)
Investment income 1,604 -- Interest income 14,846 104 Interest
expense (1,191,781) -- Other income -- 208,909 Financial expense
(1,001) (95) Exchange loss (80,445) -- Total non-operating income
(expenses) (1,256,777) 208,918 Income (loss) before income tax
(837,022) 1,167,106 Income tax expense 368,498 211,593 Net income
(loss) from continuing operations (1,205,520) 955,513 Income from
operations of discontinued component -- 23,105 Less: minority
interest 56 -- Net income (loss) (1,205,576) 978,618 Other
comprehensive item Foreign currency translation 1,110,475 (303,894)
Comprehensive Income (loss) (95,101) 674,724 Basic weighted average
shares outstanding 27,718,959 17,147,268 Diluted weighted average
shares outstanding 32,639,681 17,147,268 Basic net earnings (loss)
per share (0.04) 0.06 Diluted net earnings (loss) per share (0.04)
0.06 CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE
MONTHS ENDED JUNE 30 2008 2007 Revenue Sales of products $ -- $ --
Rental income 2,616,416 -- Total revenue 2,616,416 -- Cost of sales
Cost of products -- -- Rental expense 1,832,609 -- Total cost of
sales 1,832,609 -- Gross profit 783,807 -- Interest income on
sales-type leases 574,775 148,150 Total operating income 1,358,582
148,150 Operating expenses General and administrative expenses
855,169 86,501 Total operating expenses 855,169 86,501 Income from
operations 503,413 61,649 Non-operating income (expenses)
Investment income 1,604 -- Interest income 758,124 59 Interest
expense (1,191,781) -- Other income (1,581) 208,909 Financial
expense (579) -- Exchange loss (69,256) -- Total non-operating
income (expenses) (503,469) 208,968 Income (loss) before income tax
(56) 270,617 Income tax expense 317,551 51,436 Net income (loss)
from continuing operations (317,607) 219,181 Income from operations
of discontinued component -- -- Less: minority interest 29 -- Net
income (loss) (317,636) 219,181 Other comprehensive item Foreign
currency translation 1,035,750 40,098 Comprehensive Income (loss)
718,114 259,279 Basic weighted average shares outstanding
30,422,829 17,147,268 Diluted weighted average shares outstanding
34,602,018 17,147,268 Basic net earnings (loss) per share (0.01)
0.01 Diluted net earnings (loss) per share (0.01) 0.01 CHINA
RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE
30, 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss)
income $(1,205,576) $978,618 Adjustments to reconcile net (loss)
income to net cash provided by (used in) operating activities:
Depreciation and amortization 5,000 -- Amortization of discount
related to conversion feature of convertible note 1,212,329 --
Stock option compensation expense 632,444 -- Accrued interest on
convertible notes (20,548) -- Minority interest 56 -- (Increase)
decrease in current assets: Account receivable (843,015) 6,361
Gross investment on sales type leases 559,436 -- Advances to
suppliers -- 688,311 Prepaid equipment rent (9,213,073) Other
receivables (22,193) -- Inventory -- (1,309,002) Increase
(decrease) in current liabilities: Accounts payable 4,392,250
2,278,701 Unearned revenue -- (7,776) Advance from customers --
(143,527) Tax payable 267,704 254,109 Accrued liabilities and other
payables 1,041,821 1,432,657 Net cash (used in) provided by
operating activities (3,193,365) 4,178,452 CASH FLOWS FROM
INVESTING ACTIVITIES: Investment in sales-type leases --
(4,471,351) Acquisition of property & equipment (85,789)
(3,751) Construction in progress (5,613,063) -- Net cash used in
investing activities (5,698,852) (4,475,102) CASH FLOWS FROM
FINANCING ACTIVITIES: Issuance of common stock 9,032,258 --
Convertible notes 5,000,000 -- Repayment to management (73,906) --
Advance from shareholder -- 36,137 Net cash provided by financing
activities 13,958,352 36,137 EFFECT OF EXCHANGE RATE CHANGE ON CASH
& CASH EQUIVALENTS 301,119 11,981 NET INCREASE (DECREASE) IN
CASH & CASH EQUIVALENTS 5,367,254 (248,532) CASH & CASH
EQUIVALENTS, BEGINNING OF PERIOD 1,634,340 252,125 CASH & CASH
EQUIVALENTS, END OF PERIOD 7,001,594 3,593 Supplemental Cash flow
data: Income tax paid 105,433 35,281 Interest paid -- --
DATASOURCE: China Recycling Energy Corp. CONTACT: In China: Mr. Leo
Wu, Investor Relations, China Recycling Energy Corp. at
+86-29-8765-1096 or ; Or, In the U.S.: Mr. Valentine Ding, Investor
Relations, Grayling Global at +1-646-284-9412 or Web site:
http://www.creg-cn.com/
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