-- 2008 Revenues Expected to be $17 Million to $19 Million with
$4.5 Million to $5 Million in Adjusted Net Income XI'AN, China, May
16 /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 2008 first quarter financial results for the
three months ended March 31, 2008. Financial Results Overview
During the first quarter of 2008, the Company generated revenues of
US$564,952. The revenues were mainly from interest income on
sales-type leases for energy-saving equipment. The Company changed
its line of business during the first quarter of 2007, as it
discontinued the mobile phone business and began solely selling,
assembling and installing energy-saving equipment during the
period. The income from discontinued operations was US$23,105 for
the quarter ended March 31, 2007. The Company now sells its
equipment through sales-type leasing. "We are very excited about
our new strategic move into China's alternative-energy space," said
Mr. Guangyu Wu, CEO of CREG. "Since 2006, we have already
established working relations with six steel, cement and chemical
manufacturers in China and so far implemented four waste-to-energy
projects for them with a combined total of about US$10 million in
annual estimated revenues. We are in the process of building three
additional projects with revenue generation to begin from May to
October this year with a combined total of about US$10 million in
annual estimated revenues." Mr. Wu continued, "As industrial firms
in China continue to fend off mounting utility bills and tightening
pollution regulations, we believe we are offering a very
cost-effective and environmentally conscious solution for these
fast-growing Chinese steel mills, cement factories and chemical
plants to save and rationalize their energy use." General and
administrative expenses were US$648,610 for the first quarter ended
March 31, 2008, an increase of 152% from US$257,042 for the three
months ended March 31, 2007. This increase was mainly due to option
compensation expense of US$325,155 to employees that was vested
during the quarter. The operating loss for the first quarter of
2008 amounted to US$83,658 compared with an operating profit of
US$896,539 for the same period in 2007. Net loss for the first
quarter of 2008 was US$887,940, or US$0.04 loss per diluted share,
as compared to a net income of US$759,437, or US$0.04 earnings per
diluted share, in the same period one year ago. This decrease in
net income (loss) was mainly due to non-operating expenses of
US$753,308 for the quarter, of which US$623,288 was related to the
amortized beneficial conversion feature for the convertible note,
and US$124,658 was accrued interest expense on the same convertible
note. Excluding total non-operating expense of US$753,308 as well
as the US$325,155 in stock compensation expense as noted above, net
income for the quarter amounted to US$190,523. Balance Sheet CREG's
balance sheet at March 31, 2008 included cash and cash equivalents
of US$797,601, investments in sales-type leases amounting to
US$1.09 million, working capital of US$8.39 million, and
shareholders' equity of US$17.45 million. Update on Recent Projects
In March 2008, the Company signed an agreement with Changzhi Steel
("Changzhi") for Changzhi to purchase the electricity generated by
our new TRT power generator project at 0.385 RMB per kilo watt hour
("KWH") for 13 years. The Company will invest US$3.6 million on
this new 6 million-watts-capacity TRT power generator project,
including design, model selection, equipment purchase and
installment, construction and, management, maintenance and
operation of the project after putting it into production. The
Company will use the Build-Operate-Transfer ("BOT") model to build
and operate the project. Under the BOT model, the company will
build and operate the facility during the contract term and charge
for fees and will transfer the facility to the lessee at the end of
the term. This system will be able to maintain 8,300 annual
operating hours once it is put into operation. In November 2007,
the Company signed a cooperative agreement with Shengwei Group for
a Cement Waste Heat Power Generator Project. The Company will build
two sets of 12 million watts pure, low-temperature cement waste
heat power generator systems for its two 2,500 tons per day cement
manufacturing lines in Jin Yang and its 5,000 tons per day cement
manufacturing line in Tong Chuan. The Company has finished the
selection of equipment and equipment bidding process, and commenced
construction during the first quarter of 2008. The Company's total
investment will be approximately US$13.7 million with estimated
annual power generated capacity of 120 million KWH once the two
systems are put into operation. The Company will use the BOT model
to build and operate the systems. The operating period for the
systems will be five years. During the operating period, Shengwei
Group will pay the Company the monthly electricity fee based on the
actual power generated by the systems at 0.4116 RMB per KWH as
agreed. As of May 15, 2008, the Company had four waste-to-energy
projects in operation servicing Chinese steel and cement factories,
with three more projects under construction. 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. About China
Recycling Energy Corp. China Recycling Energy Corp. (OTCBB:
CREG.OB) ("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 0.1% 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. For more
information about CREG, please visit http://www.creg-cn.com/ . 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. Zhigang 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 (unaudited in US$) As of
March 31, 2008 ASSETS CURRENT ASSETS Cash & cash equivalents
$797,601 Investment in sales type leases, net 1,093,493 Interest
receivable 239,165 Advances to suppliers 2,566,320 Prepaid expenses
227,086 Inventory 10,257,871 Total current assets 15,181,536
INVESTMENT IN SALES TYPE LEASES, NET 7,995,916 PROPERTY AND
EQUIPMENT, net 82,459 CONSTRUCTION IN PROGRESS 997,293 TOTAL ASSETS
$24,257,204 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES Accounts payable $2,317,275 Tax payable 426,938 Accrued
liabilities and other payables 2,669,459 Advance from shareholder
250,000 Interest payable 187,672 Convertible notes, net of discount
due to beneficial conversion feature 938,356 Total current
liabilities 6,789,700 CONTINGENCIES CONTINGENCIES AND COMMITMENTS
MINORITY INTEREST 15,699 STOCKHOLDERS' EQUITY Common stock, $0.001
par value; 100,000,000 shares authorized, 25,015,089 shares issued
and outstanding 25,015 Additional paid in capital 19,396,062
Statutory reserve 855,677 Accumulated other comprehensive income
1,792,986 Accumulated deficit (4,617,935) Total stockholders'
equity 17,451,805 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$24,257,204 China Recycling Energy Corporation and Subsidiaries
Consolidated Statement of Operations (unaudited in US$) FOR THE
THREE MONTHS ENDED MARCH 31, 2008 2007 (RESTATED) Net sales --
$4,781,163 Cost of sales -- (3,677,818) Gross profit -- 1,103,345
Interest income on sales-type leases 564,952 50,236 Total operating
income 564,952 1,153,581 Operating expenses General and
administrative expenses (648,610) (257,042) Total operating
expenses (648,610) (257,042) Income (loss) from operations (83,658)
896,539 Non-operating income (expenses) Other income 1,581 --
Interest (expense) income (743,278) 45 Financial expense (422) (95)
Exchange loss (11,189) -- Total non-operating expenses (753,308)
(50) Income (loss) before income tax (836,966) 896,489 Income tax
expense (50,947) (160,157) Net income (loss) from continuing
operations (887,913) 736,332 Income from operations of discontinued
component -- 23,105 Minority interest (27) -- Net income (loss)
(887,940) 759,437 Other comprehensive item Foreign currency
translation 74,725 (343,992) Comprehensive Income (loss) (813,215)
415,445 Basic weighted average shares outstanding 25,015,089
17,147,268 Diluted weighted average shares outstanding 30,508,410
17,147,268 Basic net earnings (loss) per share ($0.04) $0.04
Diluted net earnings (loss) per share ($0.04) $0.04 China Recycling
Energy Corporation and Subsidiaries Consolidated Statement of Cash
Flows (unaudited in US$) As of March 31, 2008 FOR THE THREE MONTHS
ENDED MARCH 31, 2008 2007 (RESTATED) CASH FLOWS FROM OPERATING
ACTIVITIES: Net (loss) income ($887,940) $759,437 Adjustments to
reconcile net (loss) income to net cash provided by (used in)
operating activities: Depreciation and amortization 17 --
Amortization of discount related to conversion feature of
convertible note 623,288 -- Stock option compensation expense
325,155 -- Minority interest 27 -- (Increase) decrease in current
assets: Advances to suppliers (192,463) 471,646 Interest receivable
(94,903) -- Other receivable 1,622 -- Inventory -- (1,301,848)
Increase (decrease) in current liabilities: Accounts payable
(69,737) 2,331,984 Unearned revenue -- 263,786 Advance from
customers -- (142,743) Tax payable (125,995) 184,952 Interest
payable 124,658 -- Accrued liabilities and other payables 17,227
1,794,773 Net cash (used in) provided by operating activities
(279,044) 4,361,987 CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in sales-type leases 282,188 (4,618,779) Acquisition of
property & equipment (80,823) -- Construction in progress
(977,299) (1,578) Net cash used in investing activities (775,934)
(4,620,357) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment to
management (72,826) -- Advance from shareholder 250,000 15,302 Net
cash provided by financing activities 177,174 15,302 EFFECT OF
EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS 41,065 2,007
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (877,804)
(243,068) CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD
1,634,340 252,125 CASH & CASH EQUIVALENTS, END OF PERIOD
797,601 11,064 Supplemental Cash flow data: Income tax paid 127,336
35,281 Interest paid -- -- Reconciliation of GAAP Financial
Information to Non-GAAP Financial Information 1Q08 Operating
Expenses GAAP $ (648,610) Items Excluded: Option Compensation
Expenses (325,155) Non-GAAP (323,455) Operating Income (Loss) GAAP
(83,658) Items Excluded: Option Compensation Expenses (325,155)
Non-GAAP 241,497 Net Income (Loss) GAAP (887,940) Items Excluded:
Option Compensation Expenses (325,155) Non-operating Expenses
(753,308) Non-GAAP 190,523 DATASOURCE: China Recycling Energy
Corporation CONTACT: In China, Mr. Zhigang Wu, Investor Relations
of China Recycling Energy Corp., +86-29-8765-1096, or ; or in the
U.S., Mr. Valentine Ding, Investor Relations of Grayling Global,
+1-646-284-9412, or Web Site: http://www.creg-cn.com/
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