UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________
to ________________
Commission file number: 000-12536
SMART POWERR CORP.
(Exact name of registrant as specified in its charter)
Nevada | | 90-0093373 |
(State or other jurisdiction of
incorporation or organization) | | (IRS Employer
Identification No.) |
4/F, Tower C
Rong Cheng Yun Gu Building Keji 3rd Road, Yanta
District
Xi An City, Shaan Xi Province
China 710075
(Address of principal executive offices)
(011) 86-29-8765-1098
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.001 par value | | CREG | | Nasdaq Capital Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
| | Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
As of May 14, 2024, there were 8,387,592 shares of the registrant’s common stock outstanding.
SMART POWERR CORP.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SMART POWERR CORP
CONSOLIDATED BALANCE SHEETS
| |
MARCH 31,
2024
(UNAUDITED) | | |
DECEMBER 31,
2023 | |
| |
| | |
| |
ASSETS | |
| | |
| |
| |
| | |
| |
CURRENT ASSETS | |
| | |
| |
Cash | |
$ | 68,577,267 | | |
$ | 32,370 | |
VAT receivable | |
| 170,398 | | |
| 170,694 | |
Advance to supplier | |
| 67,326,017 | | |
| 67,440,761 | |
Short term loan receivables | |
| - | | |
| 68,773,208 | |
Other receivables | |
| 53,569 | | |
| 48,519 | |
| |
| | | |
| | |
Total current assets | |
| 136,127,251 | | |
| 136,465,552 | |
| |
| | | |
| | |
NON-CURRENT ASSETS | |
| | | |
| | |
Operating lease right-of-use assets, net | |
| 168,156 | | |
| - | |
Plant and equipment, net | |
| 3,987 | | |
| 3,994 | |
| |
| | | |
| | |
Total non-current assets | |
| 172,143 | | |
| 3,994 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 136,299,394 | | |
$ | 136,469,546 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable | |
$ | 69,961 | | |
$ | 70,083 | |
Taxes payable | |
| 4,291,295 | | |
| 4,277,091 | |
Accrued interest on notes | |
| 3,305 | | |
| 2,290 | |
Notes payable | |
| 5,025,767 | | |
| 5,222,743 | |
Accrued liabilities and other payables | |
| 2,620,828 | | |
| 2,664,461 | |
Operating lease liability | |
| 30,898 | | |
| - | |
Payable for purchase of 10% equity interest of Zhonghong | |
| 422,833 | | |
| 423,567 | |
Interest payable on entrusted loans | |
| 340,868 | | |
| 341,459 | |
Entrusted loan payable | |
| 10,852,713 | | |
| 10,871,560 | |
| |
| | | |
| | |
Total current liabilities | |
| 23,658,468 | | |
| 23,873,254 | |
| |
| | | |
| | |
NONCURRENT LIABILITIES | |
| | | |
| | |
Income tax payable | |
| 3,350,625 | | |
| 3,350,625 | |
Operating lease liability | |
| 121,809 | | |
| - | |
| |
| | | |
| | |
Total noncurrent liabilities | |
| 3,472,434 | | |
| 3,350,625 | |
| |
| | | |
| | |
Total liabilities | |
| 27,130,902 | | |
| 27,223,879 | |
| |
| | | |
| | |
CONTINGENCIES AND COMMITMENTS | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Common stock, $0.001 par value; 100,000,000 shares authorized, 8,128,525 and 7,963,444 shares issued and outstanding | |
| 8,128 | | |
| 7,963 | |
| |
| | | |
| | |
Additional paid in capital | |
| 165,191,103 | | |
| 164,870,025 | |
Statutory reserve | |
| 15,191,676 | | |
| 15,191,645 | |
Accumulated other comprehensive loss | |
| (10,445,216 | ) | |
| (10,326,595 | ) |
Accumulated deficit | |
| (60,777,199 | ) | |
| (60,497,371 | ) |
| |
| | | |
| | |
Total Company stockholders’ equity | |
| 109,168,492 | | |
| 109,245,667 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND EQUITY | |
$ | 136,299,394 | | |
$ | 136,469,546 | |
The accompanying notes are an integral part of these consolidated financial
statements
SMART POWERR CORP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| |
THREE MONTHS ENDED
MARCH 31, | |
| |
2024 | | |
2023 | |
| |
| | |
| |
Revenue | |
| | |
| |
Contingent rental income | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Interest income on sales-type leases | |
| - | | |
| - | |
| |
| | | |
| | |
Total operating income | |
| - | | |
| - | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
General and administrative | |
| 208,430 | | |
| 84,828 | |
| |
| | | |
| | |
Total operating expenses | |
| 208,430 | | |
| 84,828 | |
| |
| | | |
| | |
Loss from operations | |
| (208,430 | ) | |
| (84,828 | ) |
| |
| | | |
| | |
Non-operating income (expenses) | |
| | | |
| | |
(Loss) gain on note conversion | |
| (21,243 | ) | |
| 10,482 | |
Interest income | |
| 39,984 | | |
| 88,195 | |
Interest expense | |
| (104,080 | ) | |
| (111,104 | ) |
Other income | |
| 28,152 | | |
| 12,285 | |
| |
| | | |
| | |
Total non-operating expenses, net | |
| (57,187 | ) | |
| (142 | ) |
| |
| | | |
| | |
Loss before income tax | |
| (265,617 | ) | |
| (84,970 | ) |
Income tax expense | |
| 14,180 | | |
| 4,534 | |
| |
| | | |
| | |
Net loss | |
| (279,797 | ) | |
| (89,504 | ) |
| |
| | | |
| | |
Other comprehensive items | |
| | | |
| | |
Foreign currency translation (loss) gain | |
| (118,621 | ) | |
| 1,681,720 | |
| |
| | | |
| | |
Comprehensive (loss) income | |
$ | (398,418 | ) | |
$ | 1,592,216 | |
| |
| | | |
| | |
Weighted average shares used for computing basic and diluted loss per share | |
| 8,115,826 | | |
| 7,565,183 | |
| |
| | | |
| | |
Basic and diluted net loss per share | |
$ | (0.03 | ) | |
$ | (0.01 | ) |
The accompanying notes are an integral part of these consolidated financial
statements
SMART POWERR CORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)
| |
Common Stock | | |
Paid in | | |
Statutory | | |
Other Comprehensive | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Capital | | |
Reserves | | |
Loss | | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of December 31, 2023 | |
| 7,963,444 | | |
$ | 7,963 | | |
$ | 164,870,025 | | |
$ | 15,191,645 | | |
$ | (10,326,595 | ) | |
$ | (60,497,371 | ) | |
$ | 109,245,667 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (279,797 | ) | |
| (279,797 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion of long-term notes into common shares | |
| 165,081 | | |
| 165 | | |
| 321,078 | | |
| - | | |
| - | | |
| - | | |
| 321,243 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Transfer to statutory reserves | |
| - | | |
| - | | |
| - | | |
| 31 | | |
| - | | |
| (31 | ) | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (118,621 | ) | |
| - | | |
| (118,621 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of March 31, 2024 | |
| 8,128,525 | | |
$ | 8,128 | | |
$ | 165,191,103 | | |
$ | 15,191,676 | | |
$ | (10,445,216 | ) | |
$ | (60,777,199 | ) | |
$ | 109,168,492 | |
| |
Common Stock | | |
Paid in | | |
Statutory | | |
Other
Comprehensive | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Capital | | |
Reserves | | |
Loss | | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of December 31, 2022 | |
| 7,391,996 | | |
| 7,392 | | |
| 163,663,305 | | |
| 15,168,003 | | |
| (8,318,564 | ) | |
| (59,726,943 | ) | |
| 110,793,193 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (89,504 | ) | |
| (89,504 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion of long-term notes into common shares | |
| 241,537 | | |
| 242 | | |
| 489,276 | | |
| - | | |
| - | | |
| - | | |
| 489,518 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Transfer to statutory reserves | |
| - | | |
| - | | |
| - | | |
| 2,590 | | |
| - | | |
| (2,590 | ) | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation gain | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,681,720 | | |
| - | | |
| 1,681,720 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of March 31, 2023 | |
| 7,633,533 | | |
$ | 7,634 | | |
$ | 164,152,581 | | |
$ | 15,170,593 | | |
$ | (6,636,844 | ) | |
$ | (59,819,037 | ) | |
$ | 112,874,927 | |
The accompanying notes are an integral part of these consolidated financial
statements
SMART POWERR CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
THREE MONTHS ENDED
MARCH 31, | |
| |
2024 | | |
2023 | |
| |
| | |
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
Net loss | |
$ | (279,797 | ) | |
$ | (89,504 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Amortization of OID and debt issuing costs of notes | |
| - | | |
| 31,250 | |
Operating lease expenses | |
| 15,432 | | |
| 16,007 | |
Loss (gain) on note conversion | |
| 21,243 | | |
| (10,482 | ) |
Changes in assets and liabilities: | |
| | | |
| | |
Advance to supplier | |
| (1,824 | ) | |
| (4,082 | ) |
Other receivables | |
| 13,149 | | |
| (2,225 | ) |
Taxes payable | |
| 14,224 | | |
| (7,629 | ) |
Payment of lease liability | |
| (30,864 | ) | |
| (32,014 | ) |
Accrued liabilities and other payables | |
| 64,918 | | |
| 28,396 | |
| |
| | | |
| | |
Net cash used in operating activities | |
| (183,519 | ) | |
| (70,283 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Short term loan receivable | |
| 68,564,217 | | |
| (141,070,591 | ) |
| |
| | | |
| | |
Net cash provided by (used in) investing activities | |
| 68,564,217 | | |
| (141,070,591 | ) |
| |
| | | |
| | |
EFFECT OF EXCHANGE RATE CHANGE ON CASH | |
| 164,199 | | |
| 2,366,607 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN CASH | |
| 68,544,897 | | |
| (138,774,267 | ) |
CASH, BEGINNING OF PERIOD | |
| 32,370 | | |
| 138,813,673 | |
| |
| | | |
| | |
CASH, END OF PERIOD | |
$ | 68,577,267 | | |
$ | 39,406 | |
| |
| | | |
| | |
Supplemental cash flow data: | |
| | | |
| | |
Income tax paid | |
$ | - | | |
$ | 12,163 | |
Interest paid | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
| |
| | | |
| | |
Supplemental disclosure of non-cash financing activities | |
| | | |
| | |
Right-of-use assets obtained in exchange for operating lease liabilities | |
$ | 183,250 | | |
$ | - | |
Conversion of notes into common shares | |
$ | 300,000 | | |
$ | 500,000 | |
The accompanying notes are an integral part of these consolidated financial
statements
SMART
POWERR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2024 (UNAUDITED)
AND DECEMBER 31, 2023
1. ORGANIZATION AND DESCRIPTION
OF BUSINESS
Smart Powerr
Corp. (the “Company” or “SPC”) was incorporated in Nevada, and was formerly known as China Recycling Entergy Corporation.
The Company, through its subsidiaries, provides energy saving solutions and services, including selling and leasing energy saving systems
and equipment to customers, and project investment in the Peoples Republic of China (“PRC”).
The Company’s
organizational chart as of March 31, 2024 is as follows:
Erdos
TCH – Joint Venture
On April
14, 2009, the Company formed a joint venture (the “JV”) with Erdos Metallurgy Co., Ltd. (“Erdos”) to recycle waste
heat from Erdos’ metal refining plants to generate power and steam to be sold back to Erdos. The name of the JV was Inner Mongolia
Erdos TCH Energy Saving Development Co., Ltd. (“Erdos TCH”) with a term of 20 years. Erdos contributed 7% of
the total investment of the project, and Xi’an TCH Energy Technology Co., Ltd. (“Xi’an TCH”) contributed 93%.
On June 15, 2013, Xi’an TCH and Erdos entered into a share transfer agreement, pursuant to which Erdos sold its 7% ownership
interest in the JV to Xi’an TCH for $1.29 million (RMB 8 million), plus certain accumulated profits. Xi’an
TCH paid the $1.29 million in July 2013 and, as a result, became the sole stockholder of the JV. Erdos TCH currently has two power
generation systems in Phase I with a total 18 MW power capacity, and three power generation systems in Phase II with a total 27 MW power
capacity. On April 28, 2016, Erdos TCH and Erdos entered into a supplemental agreement, effective May 1, 2016, whereby Erdos TCH cancelled
monthly minimum lease payments from Erdos, and started to charge Erdos based on actual electricity sold at RMB 0.30 / KWH. The
selling price of each KWH is determined annually based on prevailing market conditions. In May 2019, Erdos TCH ceased operations due to
renovations and furnace safety upgrades of Erdos, and the Company initially expected the resumption of operations in July 2020, but the
resumption of operations was further delayed due to the government’s mandate for Erdos to significantly lower its energy consumption
per unit of GDP by implementing a comprehensive technical upgrade of its ferrosilicon production line to meet the City’s energy-saving
targets. Erdos is currently researching the technical rectification scheme. Once the scheme is determined, Erdos TCH will carry
out technical transformation for its waste heat power station project. During this period, Erdos will compensate Erdos TCH RMB 1 million
($145,524) per month, until operations resume. The Company has not recognized any income due to the uncertainty of collection. In
addition, Erdos TCH has 30% ownership in DaTangShiDai (BinZhou) Energy Savings Technology Co., Ltd. (“BinZhou Energy Savings”), 30%
ownership in DaTangShiDai DaTong Recycling Energy Technology Co., Ltd. (“DaTong Recycling Energy”), and 40% ownership
in DaTang ShiDai TianYu XuZhou Recycling Energy Technology Co, Ltd. (“TianYu XuZhou Recycling Energy”). These companies were
incorporated in 2012 but had no operations since then nor has any registered capital contribution been made.
Formation
of Zhongxun
On March
24, 2014, Xi’an TCH incorporated a subsidiary, Zhongxun Energy Investment (Beijing) Co., Ltd. (“Zhongxun”) with registered
capital of $5,695,502 (RMB 35,000,000), which must be contributed before October 1, 2028. Zhongxun is 100% owned by Xi’an
TCH and will be mainly engaged in project investment, investment management, economic information consulting, and technical services.
Zhongxun has not commenced operations nor has any capital contribution been made as of the date of this report.
Formation
of Yinghua
On February
11, 2015, the Company incorporated a subsidiary, Shanghai Yinghua Financial Leasing Co., Ltd. (“Yinghua”) with registered
capital of $30,000,000, to be paid within 10 years from the date the business license is issued. Yinghua is 100% owned
by the Company and will be mainly engaged in financial leasing, purchase of financial leasing assets, disposal and repair of financial
leasing assets, consulting and ensuring of financial leasing transactions, and related factoring business. Yinghua has not commenced operations
nor has any capital contribution been made as of the date of this report.
2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The accompanying
consolidated financial statements (“CFS”) are prepared in conformity with U.S. Generally Accepted Accounting Principles (“US
GAAP”). The functional currency of the Company’s operating entities is Chinese Renminbi (“RMB”). The accompanying
consolidated financial statements are translated from RMB and presented in U.S. dollars (“USD”).
Principle
of Consolidation
The CFS
include the accounts of SPC and its subsidiaries, Shanghai Yinghua Financial Leasing Co., Ltd. (“Yinghua”) and Sifang
Holdings; Sifang Holdings’ wholly owned subsidiaries, Huahong New Energy Technology Co., Ltd. (“Huahong”) and Shanghai
TCH Energy Tech Co., Ltd. (“Shanghai TCH”); Shanghai TCH’s wholly-owned subsidiary, Xi’an TCH Energy Tech Co.,
Ltd. (“Xi’an TCH”); and Xi’an TCH’s subsidiaries, 1) Erdos TCH Energy Saving Development Co., Ltd (“Erdos
TCH”), 100% owned by Xi’an TCH, 2) Zhonghong, 90% owned by Xi’an TCH and 10% owned by Shanghai TCH, and
3) Zhongxun, 100% owned by Xi’an TCH. Substantially all the Company’s revenues are derived from the operations of Shanghai
TCH and its subsidiaries, which represent substantially all the Company’s consolidated assets and liabilities as of March 31, 2024.
However, there was no revenue for the Company for the three months ended March 31, 2024 or 2023. All significant inter-company accounts
and transactions were eliminated in consolidation.
Uses
and Sources of Liquidity
For the
three months ended March 31, 2024 and 2023, the Company had a net loss of $279,797 and $89,504, respectively. The Company had an
accumulated deficit of $60.78 million as of March 31, 2024. The Company disposed all of its systems and currently holds five power
generating systems through Erdos TCH, the five power generating systems are currently not producing any electricity. The Company is in
the process of transforming and expanding into an energy storage integrated solution provider business. The Company plans to pursue disciplined
and targeted expansion strategies for market areas the Company currently does not serve. The Company actively seeks and explores opportunities
to apply energy storage technologies to new industries or segments with high growth potential, including industrial and commercial complexes,
large scale photovoltaic (PV) and wind power stations, remote islands without electricity, and smart energy cities with multi-energy
supplies. The Company’s cash flow forecast indicates it will have sufficient cash to fund its operations for the next 12 months
from the date of issuance of these CFS.
Use of
Estimates
In preparing
these CFS in accordance with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities
in the balance sheets as well as revenues and expenses during the period reported. Actual results may differ from these estimates. On
an on-going basis, management evaluates its estimates, including those allowances for bad debt, impairment loss on fixed assets and construction
in progress, income taxes, and contingencies and litigation. Management bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other resources.
Revenue
Recognition
A) Sales-type
Leasing and Related Revenue Recognition
The Company
follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842. The
Company’s sales type lease contracts for revenue recognition fall under ASC 842. During the three months ended March 31, 2024 and
2023, the Company did not sell any new power generating projects.
The Company
constructs and leases waste energy recycling power generating projects to its customers. The Company typically transfers legal ownership
of the waste energy recycling power generating projects to its customers at the end of the lease.
The Company
finances construction of waste energy recycling power generating projects. The sales and cost of sales are recognized at the inception
of the lease, which is when control is transferred to the lessee. The Company accounts for the transfer of control as a sales type lease
in accordance with ASC 842-10-25-2. The underlying asset is derecognized, and revenue is recorded when collection of payments is probable.
This is in accordance with the revenue recognition principle in ASC 606 - Revenue from contracts with customers. The investment in sales-type
leases consists of the sum of the minimum lease payments receivable less unearned interest income and estimated executory cost. Minimum
lease payments are part of the lease agreement between the Company (as the lessor) and the customer (as the lessee). The discount rate
implicit in the lease is used to calculate the present value of minimum lease payments. The minimum lease payments consist of the gross
lease payments net of executory costs and contingent rentals, if any. Unearned interest is amortized to income over the lease term to
produce a constant periodic rate of return on net investment in the lease. While revenue is recognized at the inception of the lease,
the cash flow from the sales-type lease occurs over the course of the lease, which results in interest income and reduction of receivables.
Revenue is recognized net of value-added tax.
B) Contingent
Rental Income
The Company
records income from actual electricity generated of each project in the period the income is earned, which is when the electricity is
generated. Contingent rent is not part of minimum lease payments.
Operating
Leases
The Company
determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present
value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit
in the lease is not readily determinable for an operating lease, the Company generally uses an incremental borrowing rate based on information
available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”)
assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent
the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount
of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term.
ROU assets are reviewed for impairment
when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC
360, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.
ROU assets
are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from
the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which
represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and
liabilities. The Company recognized no impairment of ROU assets as of March 31, 2024 and December 31, 2023.
Operating
leases are included in operating lease ROU and operating lease liabilities (current and non-current), on the consolidated balance sheets.
Cash
Cash includes
cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity
of three months or less as of the purchase date.
Accounts
Receivable
The Company’s
policy is to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes
in customer payment patterns to evaluate the adequacy of these reserves. As of March 31, 2024 and December 31, 2023, the Company had no accounts
receivable.
Value added tax (“VAT”)
The Company is subject to VAT and related surcharges on revenue generated from sales and services. The Company records revenue net of
VAT. This VAT may be offset by qualified input VAT paid by the Company to suppliers. Net VAT balance between input VAT and output VAT
is recorded in the line item of VAT receivable on the unaudited consolidated balance sheets.
The VAT rate is 13% for taxpayers selling consumer products and 6% for providing technology services. Entities that are VAT general taxpayers
are allowed to offset qualified input VAT, paid to suppliers against their output VAT liabilities. As of March 31, 2024 and December 31,
2023, the Company had $170,398 and $170,694 VAT receivable, respectively.
Advance
to suppliers
Advance
to suppliers consist of balances paid to suppliers for materials that have not been received. The Company reviews its advances to suppliers
on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies
to the Company or refund an advance.
Short
term loan receivables
The Company
provided loans to certain third parties for the purpose of making use of its cash.
The Company
monitors all loans receivable for delinquency and provides for estimated losses for specific receivables that are not likely to be collected.
Management periodically assesses the collectability of these loans receivable. Delinquent account balances are written-off against the
allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March 31, 2024,
the Company did not have any outstanding short term loan receivables; at December 31, 2023, the Company had $68.77 million short term
loan receivables and did not accrue allowance against short term loan receivables.
Concentration
of Credit Risk
Cash includes
cash on hand and demand deposits in accounts maintained within China. Balances at financial institutions and state-owned banks within the
PRC are covered by insurance up to RMB 500,000 ($71,792) per bank. Any balance over RMB 500,000 ($71,792) per bank
in PRC is not covered. The Company has not experienced any losses in such accounts.
Certain
other financial instruments, which subject the Company to concentration of credit risk, consist of accounts and other receivables. The
Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of its customers’
financial condition and customer payment practices to minimize collection risk on accounts receivable.
The operations
of the Company are in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced
by the political, economic and legal environments in the PRC.
Plant
and Equipment
Plant and equipment are stated
at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals and betterments
are capitalized. When plant and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included in operations. Depreciation of plant and equipment is provided using
the straight-line method over the estimated lives as follows:
Vehicles | |
| 2 – 5 years | |
Office and Other Equipment | |
| 2 – 5 years | |
Impairment
of Long-lived Assets
In accordance with FASB ASC Topic
360, “Plant, and Equipment,” the Company reviews its long-lived assets, including plant and equipment, for impairment
whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total
expected undiscounted future net cash flows are less than the carrying amount of the asset, a loss is recognized for the difference between
the fair value (“FV”) and carrying amount of the asset. The Company did not record any impairment for the three months
ended March 31, 2024 and 2023.
Accounts
and other payables
Accounts
and other payables represent liabilities for goods and services provided to the Company prior to the end of the financial year which are
unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the
business if longer). Otherwise, they are presented as non-current liabilities.
Accounts
and other payables are initially recognized as fair value, and subsequently carried at amortized cost using the effective interest method.
Borrowings
Borrowings
are presented as current liabilities unless the Company has an unconditional right to defer settlement for at least 12 months after the
financial year end date, in which case they are presented as non-current liabilities.
Borrowings
are initially recognized at fair value (net of transaction costs) and subsequently carried at amortized cost. Any difference between the
proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using an
effective interest method.
Borrowing
costs are recognized in profit or loss using the effective interest method.
Cost
of Sales
Cost of
sales consists primarily of the direct material of the power generating system and expenses incurred directly for project construction
for sales-type leasing and sales tax and additions for contingent rental income.
Income
Taxes
Income taxes
are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end
based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company
follows FASB ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and
liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated
with tax positions, accounting for income taxes in interim periods, and income tax disclosures.
Under FASB ASC
Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. The benefit of a tax position is recognized in the CFS in the period during which, based on all available evidence, management
believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement
with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured
as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated
interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits
is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income. At
March 31, 2024 and December 31, 2023, the Company did not take any uncertain positions that would necessitate recording a tax related
liability.
Statement
of Cash Flows
In accordance
with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated
based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not
necessarily agree with changes in the corresponding balances on the balance sheet.
Fair
Value of Financial Instruments
For certain
of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, other receivables,
accounts payable, accrued liabilities and short-term debts, the carrying amounts approximate their FVs due to their short maturities.
Receivables on sales-type leases are based on interest rates implicit in the lease.
FASB ASC
Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the FV of financial instruments
held by the Company. FASB ASC Topic 825, “Financial Instruments,” defines FV, and establishes a three-level
valuation hierarchy for disclosures of FV measurement that enhances disclosure requirements for FV measures. The carrying amounts reported
in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable
estimate of their FV because of the short period of time between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 inputs to the valuation
methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation
methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset
or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation
methodology are unobservable and significant to FV measurement. |
The
Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC 480, “Distinguishing
Liabilities from Equity,” and ASC 815, “Derivatives and Hedging.”
As of March
31, 2024 and December 31, 2023, the Company did not have any long-term debt; and the Company did not identify any assets or liabilities
that are required to be presented on the balance sheet at FV.
Stock-Based
Compensation
The Company
accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”,
which requires that share-based payment transactions with employees be measured based on the grant-date FV of the equity instrument issued
and recognized as compensation expense over the requisite service period.
The Company
accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based
Payments to Non-employees”. Share-based compensation associated with the issuance of equity instruments to non-employees is measured
at the FV of the equity instrument issued or committed to be issued, as this is more reliable than the FV of the services received. The
FV is measured at the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance
is complete.
The Company
follows ASU 2018-07, “Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,”
which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. An
entity should apply the requirements of ASC 718 to non-employee awards except for specific guidance on inputs to an option pricing model
and the attribution of cost. ASC 718 applies to all share-based payment transactions in which a grantor acquires goods or services to
be used or consumed in a grantor’s own operations by issuing share-based payment awards.
Basic
and Diluted Earnings per Share
The Company
presents net income (loss) per share (“EPS”) in accordance with FASB ASC Topic 260, “Earning Per Share.” Accordingly,
basic income (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of
shares outstanding, without consideration for common stock equivalents. Diluted EPS is computed by dividing the net income by the weighted-average
number of common shares outstanding as well as common share equivalents outstanding for the period determined using the treasury-stock
method for stock options and warrants and the if-converted method for convertible notes. The Company made an accounting policy election
to use the if-converted method for convertible securities that are eligible to receive common stock dividends, if declared. Diluted EPS
reflect the potential dilution that could occur based on the exercise of stock options or warrants or conversion of convertible securities
using the if-converted method.
For the
three months ended March 31, 2024 and 2023, the basic and diluted income (loss) per share were the same due to the anti-dilutive features
of the warrants and options. For the three months ended March 31, 2024 and 2023, 30,911 shares purchasable under warrants and
options were excluded from the EPS calculation as these were not dilutive due to the exercise price was more than the stock market price.
Foreign
Currency Translation and Comprehensive Income (Loss)
The Company’s
functional currency is the Renminbi (“RMB”). For financial reporting purposes, RMB were translated into U.S. Dollars (“USD”
or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet
date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments
arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated
other comprehensive income.” Gains and losses resulting from foreign currency transactions are included in income.
The Company
follows FASB ASC Topic 220, “Comprehensive Income.” Comprehensive income is comprised of net income and all
changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and
distributions to stockholders.
Segment
Reporting
FASB ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.
The management approach model is based on the way a company’s management organizes segments within the company for making operating
decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure,
or any other manner in which management disaggregates a company. FASB ASC Topic 280 has no effect on the Company’s CFS as substantially
all of the Company’s operations are conducted in one industry segment. All of the Company’s assets are located in the PRC.
New Accounting
Pronouncements
In November
2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”).
The amendments in ASU 2023-07 improve reportable segment disclosure requirements through enhanced disclosures about significant segment
expenses that are regularly provided to the chief operating decision maker (CODM). In addition, the amendments enhance interim disclosure
requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure
requirements for entities with a single reportable segment, and contain other disclosure requirements. ASU 2023-07 will be effective for
annual reporting periods beginning after December 15, 2023, and interim periods within annual reporting periods beginning after December
15, 2024. Early adoption is permitted. The adoption of ASU 2023-01 did not have a material impact on the Company’s consolidated
financial statement presentation or disclosures.
In December
2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which
requires disclosures of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid,
among other disclosure requirements. This ASU will be effective for annual reporting periods beginning after December 15, 2024. Early
adoption is permitted. ASU 2023-09 will be applied on a prospective basis with the option to apply the standard retrospectively. The Company’s
management does not believe that the adoption of ASU 2023-09 will have a material impact on the Company’s consolidated financial
statement presentation or disclosures.
The Company’s
management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, will
have a material impact on the Company’s financial statement presentation or disclosures.
3. SHORT-TERM
LOAN RECEIVABLE
As of March 31, 2024 and December
31, 2023, the Company had $0 and $68,773,208 (RMB 486.1 million) short term loan to Jinan Youkai Engineering Consulting
Co., Ltd (“Youkai”), respectively, an unrelated party of the Company. The short-term loan was for five days with a capital
utilization fee of $14,119 (RMB 100,000) per day for total of $70,595 (RMB 500,000). To ensure the safety of the funds,
before money was transferred to Youkai, Youkai handed over the official seal, financial seal and bank account UK to the Company for custody
and management until repayment of the loan. The Company received the repayment of $68.7 million in full plus capital utilization
fee in January 2024.
4. ADVANCE
TO SUPPLIERS
On June 19, 2023, the Company
entered a purchase agreement with Hubei Bangyu New Energy Technology Co., Ltd. (“Bangyu”). The total contract amount was $82.3 million
(RMB 595.0 million) for purchasing the energy storage battery systems. As of March 31, 2024 and December 31, 2023, the Company
made a prepayment to Bangyu of $67.3 million (RMB 476.0 million) and $67.4 million (RMB 476.0 million). The Company is
in the process of transforming and expanding into energy storage integrated solution provider business. The Company actively seeks and
explores opportunities to apply energy storage technologies to new industries or segments with high growth potential, including industrial
and commercial complexes, large scale photovoltaic (PV) and wind power stations, remote islands without electricity, and smart
energy cities with multi-energy supplies.
On August
2, 2021, the Company entered a Research and Development (“R&D”) Cooperation Agreement with a software development company
to design, establish, upgrade and maintenance of Smart Energy Management Cloud Platform for energy storage and remote-site monitoring;
upon completion, the Company will provide such platform to its customers at a fee. Total contracted R&D cost is $1,000,000, as of
December 31, 2022, the Company paid $200,000 as R&D expense, and was committed to pay remaining $800,000 after trial operation.
During the year ended December 31, 2022, the Company expensed $200,000 in R&D.
On August
23, 2021, the Company entered a Market Research and Project Development Service Agreement with a consulting company in Xi’an
for a service period of 12 months. The consulting company will perform market research for new energy industry including photovoltaic
and energy storage, develop potential new customers and due diligence check, assisting the Company for business cooperation negotiation
and relevant agreements preparation. Total contract amount is $1,150,000, and the Company paid $650,000 at commencement of the service
and recorded as R&D expense during the year ended December 31, 2022; the Company prepaid $200,000 during the year 2023 and as
of March 31, 2024 and December 31, 2023, the Company will pay the remaining of $300,000 upon completion all the services.
5. ACCRUED
LIABILITIES AND OTHER PAYABLES
Accrued
liabilities and other payables consisted of the following as of March 31, 2024 and December 31, 2023:
| |
2024 | | |
2023 | |
Education and union fund and social insurance payable | |
$ | 87,187 | | |
$ | 181,394 | |
Accrued payroll and welfare | |
| 252,038 | | |
| 263,472 | |
Accrued litigation | |
| 2,120,405 | | |
| 2,124,087 | |
Other | |
| 161,198 | | |
| 95,508 | |
Total | |
$ | 2,620,828 | | |
$ | 2,664,461 | |
Accrued
litigation was mainly for court enforcement fee, fee to lawyer, penalty and other fees (see Note 14).
6. TAXES
PAYABLE
Taxes payable
consisted of the following as of March 31, 2024 and December 31, 2023:
| |
2024 | | |
2023 | |
Income tax | |
$ | 7,641,690 | | |
$ | 7,627,529 | |
Other | |
| 230 | | |
| 187 | |
Total | |
| 7,641,920 | | |
| 7,627,716 | |
Current | |
| 4,291,295 | | |
| 4,277,091 | |
Noncurrent | |
$ | 3,350,625 | | |
$ | 3,350,625 | |
As of March
31, 2024, income tax payable included $7.61 million from recording the estimated one-time transition tax on post-1986 foreign
unremitted earnings under the Tax Cut and Jobs Act signed on December 22, 2017 ($4.28 million included in current tax payable and
$3.35 million noncurrent). An election was available for the U.S. shareholders of a foreign company to pay the tax liability
in installments over a period of eight years (until year 2026) with 8% of net tax liability in each of the first five years, 15% in the
sixth year, 20% in the seventh year, and 25% in the eighth year. The Company made such an election.
7. DEFERRED
TAX, NET
Deferred
tax assets resulted from asset impairment loss which was temporarily non-tax deductible for tax purposes but expensed in accordance with
US GAAP; interest income in sales-type leases which was recognized as income for tax purposes but not for book purpose as it did not meet
revenue recognition in accordance with US GAAP; accrued employee social insurance that can be deducted for tax purposes in the future,
and the difference between tax and accounting basis of cost of fixed assets which was capitalized for tax purposes and expensed as part
of cost of systems in accordance with US GAAP. Deferred tax liability arose from the difference between tax and accounting basis of net
investment in sales-type leases.
As of March
31, 2024 and December 31, 2023, deferred tax assets consisted of the following:
| |
2024 | | |
2023 | |
Accrued expenses | |
$ | 614,269 | | |
$ | 615,336 | |
Write-off Erdos TCH net investment in sales-type leases * | |
| 4,056,219 | | |
| 4,063,263 | |
Impairment loss of Xi’an TCH’s investment into the HYREF fund | |
| 2,642,706 | | |
| 2,647,296 | |
US NOL | |
| 1,086,706 | | |
| 1,086,706 | |
PRC NOL | |
| 290,493 | | |
| 8,355,472 | |
Total deferred tax assets | |
| 8,690,393 | | |
| 16,768,073 | |
Less: valuation allowance for deferred tax assets | |
| (8,690,393 | ) | |
| (16,768,073 | ) |
Deferred tax assets, net | |
$ | - | | |
$ | - | |
8. ENTRUSTED
LOAN PAYABLE
Entrusted
Loan Payable (HYREF Loan)
The HYREF
Fund was established in July 2013 with a total fund of RMB 460 million ($77 million) invested in Xi’an Zhonghong
for Zhonghong’s three new CDQ WHPG projects. The HYREF Fund invested RMB 3 million ($0.5 million) as an equity
investment and RMB 457 million ($74.5 million) as a debt investment in Xi’an Zhonghong; in return for such investments,
the HYREF Fund was to receive interest from Zhonghong for the HYREF Fund’s debt investment. The loan was collateralized by the accounts
receivable and the fixed assets of Shenqiu Phase I and II power generation systems; the accounts receivable and fixed assets of Zhonghong’s
three CDQ WHPG systems; and a 27 million RMB ($4.39 million) capital contribution made by Xi’an TCH in Zhonghong.
Repayment of the loan (principal and interest) was also jointly and severally guaranteed by Xi’an TCH and the Chairman and CEO of
the Company. In the fourth quarter of 2015, three power stations of Erdos TCH were pledged to Industrial Bank as an additional guarantee
for the loan to Zhonghong’s three CDQ WHPG systems. In 2016, two additional power stations of Erdos TCH and Pucheng Phase I and
II systems were pledged to Industrial Bank as an additional guarantee along with Xi’an TCH’s equity in Zhonghong.
The term
of this loan was for 60 months from July 31, 2013 to July 30, 2018, with interest of 12.5%. The Company paid RMB 50 million
($7.54 million) of the RMB 280 million ($42.22 million), and on August 5, 2016, the Company entered into a supplemental agreement with
the lender to extend the due date of the remaining RMB 230 million ($34.68 million) of the original RMB 280 million ($45.54 million) to
August 6, 2017. During the year ended December 31, 2017, the Company negotiated with the lender again to further extend the remaining
loan balance of RMB 230 million ($34.68 million), RMB 100 million ($16.27 million), and RMB 77 million ($12.08 million). The lender had
tentatively agreed to extend the remaining loan balance until August 2019 with interest of 9%, subject to the final approval from its
headquarters. The headquarters did not approve the extension proposal with interest of 9%; however, on December 29, 2018, the Company
and the lender agreed to an alternative repayment proposal as described below.
Repayment
of HYREF loan
1. Transfer
of Chengli project as partial repayment
On December
29, 2018, Xi’an Zhonghong, Xi’an TCH, HYREF, Guohua Ku, and Chonggong Bai entered into a CDQ WHPG Station Fixed Assets Transfer
Agreement, pursuant to which Xi’an Zhonghong transferred Chengli CDQ WHPG station as the repayment for the loan of RMB 188,639,400 ($27.54 million)
to HYREF, the transfer of which was completed on January 22, 2019.
Xi’an
TCH is a secondary limited partner of HYREF. The FV of the CDQ WHPG station applied in the transfer was determined by the parties based
upon the appraisal report issued by Zhonglian Assets Appraisal Group (Shaanxi) Co., Ltd. as of August 15, 2018. However, per the discussion
below, Xi’an Zhonghong, Xi’an TCH, Guohua Ku and Chonggong Bai (the “Buyers”) entered into a Buy Back Agreement,
also agreed to buy back the Station when conditions under the Buy Back Agreement are met. Due to the Buy Back agreement, the loan was
not deemed repaid, and therefore the Company recognized Chengli project as assets subject to buyback and kept the loan payable remained
recognized under ASC 405-20-40-1 as of December 31, 2020. The Buy Back agreement was terminated in April 2021.
2. Buy
Back Agreement
On December
29, 2018, Xi’an TCH, Xi’an Zhonghong, HYREF, Guohua Ku, Chonggong Bai and Xi’an Hanneng Enterprises Management Consulting
Co. Ltd. (“Xi’an Hanneng”) entered into a Buy Back Agreement.
Pursuant
to the Buy Back Agreement, the Buyers jointly and severally agreed to buy back all outstanding capital equity of Xi’an Hanneng which
was transferred to HYREF by Chonggong Bai (see 3 below), and a CDQ WHPG station in Boxing County which was transferred to HYREF by Xi’an
Zhonghong. The buy-back price for the Xi’an Hanneng’s equity was based on the higher of (i) the market price of the equity
shares at the time of buy-back; or (ii) the original transfer price of the equity shares plus bank interest. The buy-back price for the
Station was based on the higher of (i) the FV of the Station on the date transferred; or (ii) the loan balance at the date of the transfer
plus interest accrued through that date. HYREF could request that the Buyers buy back the equity shares of Xi’an Hanneng and/or
the CDQ WHPG station if one of the following conditions is met: (i) HYREF holds the equity shares of Xi’an Hanneng until December
31, 2021; (ii) Xi’an Huaxin New Energy Co., Ltd., is delisted from The National Equities Exchange And Quotations Co., Ltd., a Chinese
over-the-counter trading system (the “NEEQ”); (iii) Xi’an Huaxin New Energy, or any of the Buyers or its affiliates
has a credit problem, including not being able to issue an auditor report or standard auditor report or any control person or executive
of the Buyers is involved in crimes and is under prosecution or has other material credit problems, to HYREF’s reasonable belief;
(iv) if Xi’an Zhonghong fails to timely make repayment on principal or interest of the loan agreement, its supplemental agreement
or extension agreement; (v) the Buyers or any party to the Debt Repayment Agreement materially breaches the Debt Repayment Agreement or
its related transaction documents, including but not limited to the Share Transfer Agreement, the Pledged Assets Transfer Agreement, the
Entrusted Loan Agreement and their guarantee agreements and supplemental agreements. Due to halted trading of Huaxin stock by NEEQ
for not filing its 2018 annual report, on December 19, 2019, Xi’an TCH, Xi’an Zhonghong, Guohua Ku and Chonggong Bai jointly
and severally agreed to buy back all outstanding capital equity of Xi’an Hanneng which was transferred to HYREF by Chonggong Bai
earlier. The total buy back price was RMB 261,727,506 ($37.52 million) including accrued interest of RMB 14,661,506 ($2.10 million),
and was paid in full by Xi’an TCH on December 20, 2019.
On April
9, 2021, Xi’an TCH, Xi’an Zhonghong, Guohua Ku, Chonggong Bai and HYREF entered a Termination of Fulfillment Agreement (termination
agreement). Under the termination agreement, the original buyback agreement entered on December 19, 2019 was terminated upon signing of
the termination agreement. HYREF will not execute the buy-back option and will not ask for any additional payment from the buyers other
than keeping the CDQ WHPG station from Chengli project. The Company recorded a gain of approximately $3.1 million from transferring
the CDP WHPG station to HYREF as partial repayment of the entrusted loan and accrued interest of RMB 188,639,400 ($27.54 million)
to HYREF resulting from the termination of the buy-back agreement.
3. Transfer
of Xuzhou Huayu Project and Shenqiu Phase I & II project to Mr. Bai for partial repayment of HYREF loan
On January
4, 2019, Xi’an Zhonghong, Xi’an TCH, and Mr. Chonggong Bai entered into a Projects Transfer Agreement, pursuant to which Xi’an
Zhonghong transferred a CDQ WHPG station (under construction) located in Xuzhou City for Xuzhou Huayu Coking Co., Ltd. (“Xuzhou
Huayu Project”) to Mr. Bai for RMB 120,000,000 ($17.52 million) and Xi’an TCH transferred two Biomass Power
Generation Projects in Shenqiu (“Shenqiu Phase I and II Projects”) to Mr. Bai for RMB 127,066,000 ($18.55 million).
Mr. Bai agreed to transfer all the equity shares of his wholly owned company, Xi’an Hanneng, to HYREF as repayment for the RMB 247,066,000 ($36.07 million)
loan made by Xi’an Zhonghong to HYREF as consideration for the transfer of the Xuzhou Huayu Project and Shenqiu Phase I and II Projects.
On February
15, 2019, Xi’an Zhonghong completed the transfer of the Xuzhou Huayu Project and Xi’an TCH completed the transfer of Shenqiu
Phase I and II Projects to Mr. Bai, and on January 10, 2019, Mr. Bai transferred all the equity shares of his wholly owned company, Xi’an
Hanneng, to HYREF as repayment of Xi’an Zhonghong’s loan to HYREF as consideration for the transfer of the Xuzhou Huayu Project
and Shenqiu Phase I and II Projects.
Xi’an
Hanneng is a holding company and was supposed to own 47,150,000 shares of Xi’an Huaxin New Energy Co., Ltd. (“Huaxin”),
so that HYREF will indirectly receive and own such shares of Xi’an Huaxin as the repayment for the loan of Zhonghong. Xi’an
Hanneng already owned 29,948,000 shares of Huaxin; however, Xi’an Hanneng was not able to obtain the remaining 17,202,000 shares
due to halted trading of Huaxin stock by NEEQ for not filing its 2018 annual report.
On December
19, 2019, Xi’an TCH, Xi’an Zhonghong, Guohua Ku and Chonggong Bai jointly and severally agreed to buy back all outstanding
capital equity of Xi’an Hanneng which was transferred to HYREF by Chonggong Bai earlier. The total buy back price was RMB 261,727,506 ($37.52 million)
including accrued interest of RMB 14,661,506 ($2.10 million), and was paid in full by Xi’an TCH on December 20, 2019. On
December 20, 2019, Mr. Bai, Xi’an TCH and Xi’an Zhonghong agreed to have Mr. Bai repay the Company in cash for the transfer
price of Xuzhou Huayu and Shenqiu in five installment payments. The 1st payment of RMB 50 million ($7.17 million)
was due January 5, 2020, the 2nd payment of RMB 50 million ($7.17 million) was due February 5, 2020, the
3rd payment of RMB 50 million ($7.17 million) was due April 5, 2020, the 4th payment of
RMB 50 million ($7.17 million) was due on June 30, 2020, and the final payment of RMB 47,066,000 ($6.75 million)
was due September 30, 2020. As of December 31, 2020, the Company received the full payment of RMB 247 million ($36.28 million)
from Mr. Bai.
4. The lender
agreed to extend the repayment of RMB 77.00 million ($11.06 million) to July 8, 2023. However, per court’s judgement
on June 28, 2021, the Company should repay principal $11.06 million and accrued interest of RMB 2,418,229 ($0.35 million)
within 10 days from the judgment date to Beijing Hongyuan Recycling Energy Investment Center (Limited Partnership). In the end of 2022,
Beijing No.4 Intermediate People’s Court of Beijing entered into the judgment enforcement procedure, which, in addition to the loan
principal with interest amount, Xi’an Zhonghong Technology Co., Ltd. was to pay judgment enforcement fee, late fee and other fees
of RMB 80,288,184 ($11.53 million) in total, the Company recorded these additional fees in 2022. The Company has not paid
it yet as of this report date.
Xi’an
TCH had investment RMB 75.00 million ($11.63 million) into the HYREF fund as a secondary limited partner, and the Company
recorded an impairment loss of $11.63 million for such investment during the year ended December 31, 2021 due to uncertainty of the
collection of the investment. This was impaired as Hongyuan does not have the ability to pay back (see Note 14 – Litigation).
9. NOTE
PAYABLE, NET
Promissory
Notes in April 2021
On April
2, 2021, the Company entered into a Note Purchase Agreement with an institutional investor, pursuant to which the Company issued to the
Purchaser a Promissory Note of $5,250,000. The Purchaser purchased the Note with an OID of $250,000, which was recognized as a debt discount
is amortized using the interest method over the life of the note. The Note bears interest at 8% and has a term of 24 months.
All outstanding principal and accrued interest on the Note was due and payable on April 1, 2023. However, as of this report date, the
Company did not repay the loan, and no any further action from the lender. The Company’s obligations under the Note may be prepaid
at any time, provided that in such circumstance the Company would pay 125% of any amounts outstanding under the Note and being prepaid.
Beginning on the date that is six months from the issue date of the Note, Purchaser shall have the right to redeem any amount
of this Note up to $825,000 per calendar month by providing written notice to the Company. Upon receipt of the redemption notice
from the lender, the Company shall pay the applicable redemption amount in cash to lender within three trading days of receipt of such
redemption notice; if the Company fails to pay, then the outstanding balance will automatically be increased by 25%. On October 28,
2021, the lender made an adjustment of $1,370,897 to increase the outstanding principal of the notes as a result of the Company’s
failure to pay the redemption amount in cash to lender on time, the Company recorded $1,370,897 principal adjustment as interest
expense in 2021. The lender made an adjustment of $229,015 to increase the outstanding principal of the notes based on a forbearance
agreement entered on September 14, 2022 resulting from the Company’s default event of being delinquent on SEC filings, the Company
recorded the $229,015 principal adjustment as interest expense. During the three months ended March 31, 2024, the Company amortized
OID of $0 and recorded $104,039 interest expense on this Note; and the Company and Lender exchanged these Partitioned Notes of $300,000 in
total for the delivery of 259,067 shares of the Company’s common stock which was issued in April 2024. The Company
recorded $21,243 loss on conversion of these notes in 2024. During the three months ended March 31, 2023, the Company amortized OID of
$31,250 and recorded $111,064 interest expense on this Note; and the Company and Lender exchanged these Partitioned Notes of $500,000
for the delivery of 241,537 shares of the Company’s common stock. The Company recorded $10,482 gain on conversion of these notes
in 2023. As of March 31, 2024, the outstanding principal balance of this note was $5,025,767 with accrued interest of $3,305.
The Note was classified as a current liability in accordance with ASC 470-10-45 Other Presentation Matters – General Due on Demand
Loan Arrangements.
10. STOCKHOLDERS’
EQUITY
Warrants
Following
is a summary of the activities of warrants that were issued from equity financing for the three months ended March 31, 2024:
| |
Number of Warrants | | |
Average Exercise Price | | |
Weighted Average Remaining Contractual Term in Years | |
Outstanding as of January 1, 2024 | |
| 16,515 | | |
$ | 10.0 | | |
| 0.54 | |
Exercisable as of January 1, 2024 | |
| 16,515 | | |
$ | 10.0 | | |
| 0.54 | |
Granted | |
| - | | |
| - | | |
| - | |
Exchanged | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Expired | |
| - | | |
| - | | |
| - | |
Outstanding as of March 31, 2024 | |
| 16,515 | | |
$ | 10.0 | | |
| 0.29 | |
Exercisable as of March 31, 2024 | |
| 16,515 | | |
$ | 10.0 | | |
| 0.29 | |
11. STOCK-BASED
COMPENSATION PLAN
Options
to Employees and Directors
On June
19, 2015, the stockholders of the Company approved the China Recycling Energy Corporation Omnibus Equity Plan (the “Plan”)
at its annual meeting. The total shares of Common Stock authorized for issuance during the term of the Plan is 124,626. The Plan
was effective immediately upon its adoption by the Board of Directors on April 24, 2015, subject to stockholder approval, and will terminate
on the earliest to occur of (i) the 10th anniversary of the Plan’s effective date, or (ii) the date on which all shares available
for issuance under the Plan shall have been issued as fully-vested shares. The stockholders approved the Plan at their annual meeting
on June 19, 2015.
The following
table summarizes option activity with respect to employees and independent directors for the three months ended March 31, 2024:
| |
Number of Shares | | |
Average Exercise Price per Share | | |
Weighted Average Remaining Contractual Term in Years | |
Outstanding as of January 1, 2024 | |
| 500 | | |
$ | 16.1 | | |
| 3.32 | |
Exercisable as of January 1, 2024 | |
| 500 | | |
$ | 16.1 | | |
| 3.32 | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Outstanding as of March 31, 2024 | |
| 500 | | |
$ | 16.1 | | |
| 3.07 | |
Exercisable as of March 31, 2024 | |
| 500 | | |
$ | 16.1 | | |
| 3.07 | |
12. INCOME
TAX
The Company’s
Chinese subsidiaries are governed by the Income Tax Law of the PRC concerning privately-run enterprises, which are generally subject to
tax at 25% on income reported in the statutory financial statements after appropriate tax adjustments. Under Chinese tax law, the
tax treatment of finance and sales-type leases is similar to US GAAP. However, the local tax bureau continues to treat the Company’s
sales-type leases as operating leases. Accordingly, the Company recorded deferred income taxes.
The Company’s
subsidiaries generate all of their income from their PRC operations. All of the Company’s Chinese subsidiaries’ effective
income tax rate for 2023 and 2022 was 25%. Yinghua, Shanghai TCH, Xi’an TCH, Huahong, Zhonghong and Erdos TCH file separate
income tax returns.
There is
no income tax for companies domiciled in the Cayman Islands. Accordingly, the Company’s CFS do not present any income tax provisions
related to Cayman Islands tax jurisdiction, where Sifang Holding is domiciled.
The US parent company,
SPC is taxed in the US and, as of March 31, 2024, had net operating loss (“NOL”) carry forwards for income taxes of $5.43 million;
for federal income tax purposes, the NOL arising in tax years beginning after 2017 may only reduce 80% of a taxpayer’s taxable
income, and may be carried forward indefinitely. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”)
issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily
repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. Management believes the realization of benefits from these
losses uncertain due to the US parent company’s continuing operating losses. Accordingly, a 100% deferred tax asset valuation
allowance was provided.
As of March
31, 2024, the Company’s PRC subsidiaries had $1.16 million NOL that can be carried forward to offset future taxable income
for five years from the year the loss is incurred. The NOL was mostly from Erdos TCH and Zhonghong. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization
of the deferred tax assets due to the recurring losses from operations of these entities, accordingly, the Company recorded a 100%
deferred tax valuation allowance for the PRC NOL.
The following
table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended March 31, 2024 and 2023:
| |
2024 | | |
2023 | |
U.S. statutory rates benefit | |
| (21.0 | )% | |
| (21.0 | )% |
Tax rate difference – current provision | |
| 0.2 | % | |
| 3.4 | % |
Permanent differences | |
| 1.7 | % | |
| 5.1 | % |
Change in valuation allowance | |
| 24.4 | % | |
| 17.8 | % |
Tax expense per financial statements | |
| 5.3 | % | |
| 5.3 | % |
The provision
for income tax expense (benefit) for the three months ended March 31, 2024 and 2023 consisted of the following:
| |
2024 | | |
2023 | |
Income tax expense – current | |
$ | 14,180 | | |
$ | 4,534 | |
Total income tax expense | |
$ | 14,180 | | |
$ | 4,534 | |
13. STATUTORY
RESERVES
Pursuant
to the corporate law of the PRC effective January 1, 2006, the Company is only required to maintain one statutory reserve by appropriating
from its after-tax profit before declaration or payment of dividends. The statutory reserve represents restricted retained earnings.
Surplus
Reserve Fund
The Company’s
Chinese subsidiaries are required to transfer 10% of their net income, as determined under PRC accounting rules and regulations,
to a statutory surplus reserve fund until such reserve balance reaches 50% of the Company’s registered capital.
The surplus
reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may
be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their
shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such
issue is not less than 25% of the registered capital.
The maximum
statutory reserve amount has not been reached for any subsidiary. The table below discloses the statutory reserve amount in the currency
type registered for each Chinese subsidiary as of March 31, 2024 and December 31, 2023:
Name of Chinese Subsidiaries | | Registered
Capital | | | Maximum Statutory
Reserve Amount | | | Statutory
reserve at
March 31,
2024 | | | Statutory
reserve at
December 31,
2023 | |
Shanghai TCH | | $ | 29,800,000 | | | $ | 14,900,000 | | | ¥ | 6,564,303 ($1,003,859 | ) | | ¥ | 6,564,303 ($1,003,859 | ) |
| | | | | | | | | | | | | | | | |
Xi’an TCH | | ¥ | 202,000,000 | | | ¥ | 101,000,000 | | | ¥ | 73,947,819 ($11,272,948 | ) | | ¥ | 73,947,603 ($11,272,917 | ) |
| | | | | | | | | | | | | | | | |
Erdos TCH | | ¥ | 120,000,000 | | | ¥ | 60,000,000 | | | ¥ | 19,035,814 ($2,914,869 | ) | | ¥ | 19,035,814 ($2,914,869 | ) |
| | | | | | | | | | | | | | | | |
Xi’an Zhonghong | | ¥ | 30,000,000 | | | ¥ | 15,000,000 | | | | Did not accrue yet due to accumulated deficit | | | | Did not accrue yet due to accumulated deficit | |
| | | | | | | | | | | | | | | | |
Shaanxi Huahong | | $ | 2,500,300 | | | $ | 1,250,150 | | | | Did not accrue yet due to accumulated deficit | | | | Did not accrue yet due to accumulated deficit | |
| | | | | | | | | | | | | | | | |
Zhongxun | | ¥ | 35,000,000 | | | ¥ | 17,500,000 | | | | Did not accrue yet due to accumulated deficit | | | | Did not accrue yet due to accumulated deficit | |
Common
Welfare Fund
The common
welfare fund is a voluntary fund to which the Company can transfer 5% to 10% of its net income. This fund can only be utilized
for capital items for the collective benefit of the Company’s employees, such as construction of dormitories, cafeteria facilities,
and other staff welfare facilities. This fund is non-distributable other than upon liquidation. The Company does not participate in this
fund.
14. CONTINGENCIES
China maintains
a “closed” capital account, meaning companies, banks, and individuals cannot move money in or out of the country except in
accordance with strict rules. The People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) regulate the
flow of foreign exchange in and out of the country. For inward or outward foreign currency transactions, the Company needs to make a timely
declaration to the bank with sufficient supporting documents to declare the nature of the business transaction. The Company’s sales,
purchases and expense transactions are denominated in RMB and all of the Company’s assets and liabilities are also denominated in
RMB. The RMB is not freely convertible into foreign currencies under the current law. Remittances in currencies other than RMB may require
certain supporting documentation in order to make the remittance.
The Company’s
operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America
and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency
exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Litigation
1) In November
2019, Beijing Hongyuan Recycling Energy Investment Center (“BIPC”), or Hongyuan, filed a lawsuit with the Beijing Intermediate
People’s Court against Xi’an TCH to compel Xi’an TCH to repurchase certain stock pursuant to a stock repurchase option
agreement. On April 9, 2021, the court rendered a judgment in favor of Hongyuan. Xi’an TCH filed a motion for retrial to High People’s
Court of Beijing on April 13, 2022, because Xi’an TCH paid RMB 261 million ($37.58 million) principal and interest
to Hongyuan as an out-of-court settlement. On April 11, 2022, Xi’an Zhonghong New Energy Technology Co. Ltd., filed an application
for retrial and provided relevant evidence to the Beijing High People’s Court on the Civil Judgment No. 264, awaiting trial. On
August 10, 2022, Beijing No. 1 Intermediate People’s Court of Beijing issued a Certificate of Active Performance, proving that Xi’an
Zhonghong New Energy Technology Co., Ltd. had fulfilled its buyback obligations as disclosed in Note 9 that, on April 9, 2021, Xi’an
TCH, Xi’an Zhonghong, Guohua Ku, Chonggong Bai and HYREF entered a Termination of Fulfillment Agreement (termination agreement).
Under the termination agreement, the original buyback agreement entered on December 19, 2019 was terminated upon signing of the termination
agreement. HYREF will not execute the buy-back option and will not ask for any additional payment from the buyers other than keeping the
CDQ WHPG station.
As of this
report date, Xi’an Zhonghong is waiting for Court’s decision on retrial petition that was submitted in April 2022. During
this waiting period, BIPC entered the execution procedure, and there is a balance of RMB 14,204,317 ($2.20 million) between
the amount executed by the court and the liability recognized by Xi ‘an TCH, which was mainly the enforcement fee, legal and penalty
fee for the original judgement, and was automatically generated by the toll collection system of the People’s court. The Company
accrued $2.10 million litigation expense as of March 31, 2024.
2) On June
28, 2021, Beijing No.4 Intermediate People’s Court of Beijing entered into a judgement that Xi’an Zhonghong Technology Co.,
Ltd. should pay the loan principal of RMB 77 million ($11.06 million) with loan interest of RMB 2,418,449 ($0.35 million)
to Beijing Hongyuan Recycling Energy Investment Center (Limited Partnership). In the end of 2022, Beijing No.4 Intermediate People’s
Court of Beijing entered into the judgment enforcement procedure, which, in addition to the loan principal with interest amount, Xi’an
Zhonghong Technology Co., Ltd. was to pay judgment enforcement fee, late fee and other fees of RMB 80,288,184 ($11.53 million)
in total, the Company recorded these additional fees in 2022. There was no update for this case as of this report date.
15. COMMITMENTS
Lease
Commitment
On November
20, 2017, Xi’an TCH entered into a lease for its office from December 1, 2017 through November 30, 2020. The monthly rent was
RMB 36,536 ($5,600) with quarterly payment in advance. This lease expired in November 2020. The Company entered a
new lease for the same location from January 1, 2021 through December 31, 2023 with monthly rent of RMB 36,536 ($5,600),
to be paid every half year in advance. Upon expiration of the lease, the Company entered a new lease agreement for the same location from
January 1, 2024 through December 31, 2026 with monthly rent of RMB 36,536 ($5,600), to be paid every half year in advance.
The components
of lease costs, lease term and discount rate with respect of the office lease with an initial term of more than 12 months are as follows:
| |
Three Months Ended | |
| |
March 31, 2024 | |
Operating lease cost – amortization of operating lease right-of-use
asset | |
$ | 15,072 | |
Operating lease cost – interest expense on lease liability | |
$ | 360 | |
Weighted Average Remaining Lease Term - Operating leases | |
| 2.75 | |
Weighted Average Discount Rate - Operating leases | |
| 5 | % |
| |
Three Months Ended | |
| |
March 31, 2023 | |
Operating lease cost – amortization of operating lease right-of-use
asset | |
$ | 15,618 | |
Operating lease cost – interest expense on lease liability | |
$ | 389 | |
The following
is a schedule, by years, of maturities of the office lease liabilities as of March 31, 2024:
For the year ended March 31, 2025, | |
$ | 61,795 | |
For the year ended March 31, 2026 | |
| 61,795 | |
For the year ended March 31, 2027 | |
| 30,898 | |
Total undiscounted cash flows | |
| 154,488 | |
Less: imputed interest | |
| (1,781 | ) |
Present value of lease liabilities | |
$ | 152,707 | |
Employment
Agreement
On May 8,
2020, the Company entered an employment agreement with Yongjiang Shi, the Company’s CFO for 24 months. The monthly salary was RMB 16,000 ($2,200).
The Company will grant the CFO no less than 5,000 shares of the Company’s common stock annually; however, as of this report
date, the Board of Directors and Compensation Committee have not approved the number of shares to be given to the CFO, nor any stock reward
agreement has been signed.
On May 6,
2022, the Company entered another employment agreement with Mr. Shi for 24 months with monthly salary of RMB 18,000 ($2,500).
The Company will grant the CFO no less than 5,000 shares of the Company’s common stock annually; however, as of this report
date, the Board of Directors and Compensation Committee have not approved the number of shares to be given to the CFO, nor any stock reward
agreement has been signed.
16. SUBSEQUENT
EVENTS
The Company
follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date
the unaudited financial statements were issued and determined the Company had no major subsequent event need to be disclosed.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report on Form
10-Q and other reports filed by the Company from time to time with the SEC (collectively the “Filings”) contain or may contain
forward-looking statements and information that are based upon beliefs of, and information currently available to, Company’s management
as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking
statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “may”, “will”,
“should”, “would”, “anticipate”, “believe”, “estimate”, “expect”,
“future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate
to Company or Company’s management identify forward-looking statements. Such statements reflect the current view of Company with
respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the statements in the section
“results of operations” below), and any businesses that Company may acquire. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed,
estimated, expected, intended, or planned.
Although the Company
believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, the Company cannot guarantee
future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws
of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual
results. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of annual report, which
attempts to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations,
and prospects.
Our financial statements
are prepared in US Dollars and in accordance with accounting principles generally accepted in the United States. See “Foreign Currency
Translation and Comprehensive Income (Loss)” below for information concerning the exchange rates at which Renminbi (“RMB”)
were translated into US Dollars (“USD”) at various pertinent dates and for pertinent periods.
OVERVIEW
The Company was incorporated
on May 8, 1980 as Boulder Brewing Company under the laws of the State of Colorado. On September 6, 2001, the Company changed its state
of incorporation to the State of Nevada. In 2004, the Company changed its name from Boulder Brewing Company to China Digital Wireless,
Inc. and on March 8, 2007, again changed its name from China Digital Wireless, Inc. to its current name, China Recycling Energy Corporation.
On March 3, 2022, the Company changed its name to Smart Powerr Corp. The Company, through its subsidiaries, provides energy saving solutions
and services, including selling and leasing energy saving systems and equipment to customers, project investment, investment management,
economic information consulting, technical services, financial leasing, purchase of financial leasing assets, disposal and repair of financial
leasing assets, consulting and ensuring of financial leasing transactions in the Peoples Republic of China (“PRC”).
The Company is in the
process of transforming and expanding into an energy storage integrated solution provider business. We plan to pursue disciplined and
targeted expansion strategies for market areas we currently do not serve. We actively seek and explore opportunities to apply energy storage
technologies to new industries or segments with high growth potential, including industrial and commercial complexes, large scale photovoltaic
(“PV”) and wind power stations, remote islands without electricity, and cities with multi-energy supplies.
For the three months
ended March 31, 2024 and 2023, the Company had a net loss of $279,797 and $89,504, respectively. The Company had an accumulated deficit
of $60.78 million as of March 31, 2024. The Company disposed all of its systems and currently holds five power generating systems
through Erdos TCH, the five power generating systems are currently not producing any electricity. The Company is in the process of transforming
and expanding into an energy storage integrated solution provider business. The Company plans to pursue disciplined and targeted expansion
strategies for market areas the Company currently does not serve. The Company actively seeks and explores opportunities to apply energy
storage technologies to new industries or segments with high growth potential, including industrial and commercial complexes, large scale
photovoltaic (PV) and wind power stations, remote islands without electricity, and smart energy cities with multi-energy supplies.
The Company’s cash flow forecast indicates it will have sufficient cash to fund its operations for the next 12 months from the date
of issuance of these CFS.
Management also intends
to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others. While the Company believes
in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions,
there can be no assurances to that effect. The ability of the Company to continue as a going concern depends upon the Company’s
ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public
or private offering, or debt financing including bank loans.
Our Subsidiaries and
Projects
Our business is primarily
conducted through our wholly-owned subsidiaries, Yinghua and Sifang, Sifang’s wholly-owned subsidiaries, Huahong and Shanghai TCH,
Shanghai TCH’s wholly-owned subsidiaries, Xi’an TCH, Xi’an TCH’s wholly-owned subsidiary Erdos TCH and Xi’an
TCH’s 90% owned and Shanghai TCH’s 10% owned subsidiary Xi’an Zhonghong New Energy Technology Co., Ltd., and Zhongxun.
Shanghai TCH was established as a foreign investment enterprise in Shanghai under the laws of the PRC on May 25, 2004, and currently has
registered capital of $29.80 million. Xi’an TCH was incorporated in Xi’an, Shaanxi Province under the laws of the PRC in November
2007. Erdos TCH was incorporated in April 2009. Huahong was incorporated in February 2009. Xi’an Zhonghong New Energy Technology
Co., Ltd. was incorporated in July 2013. Xi’an TCH owns 90% and Shanghai TCH owns 10% of Zhonghong. Zhonghong provides energy saving
solutions and services, including constructing, selling and leasing energy saving systems and equipment to customers.
Zhongxun was incorporated
in March 2014 and is a wholly owned subsidiary of Xi’an TCH. Zhongxun will be mainly engaged in project investment, investment
management, economic information consulting, and technical services. Zhongxun has not yet commenced operations nor has any capital contribution
been made as of the date of this report.
Yinghua was incorporated
on February 11, 2015 by the U.S. parent company. Yinghua will be mainly engaged in financial leasing, purchase of financial leasing assets,
disposal and repair of financial leasing assets, consulting and ensuring of financial leasing transactions, and related factoring business.
Yinghua has not yet commenced operations nor has any capital contribution been made as of the date of this report.
The Company’s organizational
chart as of March 31, 2024 is as follows:
Erdos TCH –
Joint Venture
On April 14, 2009, the
Company formed a joint venture (the “JV”) with Erdos Metallurgy Co., Ltd. (“Erdos”) to recycle waste heat from
Erdos’ metal refining plants to generate power and steam to be sold back to Erdos. The name of the JV was Inner Mongolia Erdos TCH
Energy Saving Development Co., Ltd. (“Erdos TCH”) with a term of 20 years. Erdos contributed 7% of the total
investment of the project, and Xi’an TCH Energy Technology Co., Ltd. (“Xi’an TCH”) contributed 93%. On June
15, 2013, Xi’an TCH and Erdos entered into a share transfer agreement, pursuant to which Erdos sold its 7% ownership interest
in the JV to Xi’an TCH for $1.29 million (RMB 8 million), plus certain accumulated profits. Xi’an TCH paid
$1.29 million in July 2013 and, as a result, became the sole stockholder of the JV. Erdos TCH currently has two power generation
systems in Phase I with a total of 18 MW power capacity, and three power generation systems in Phase II with a total of 27 MW power capacity.
On April 28, 2016, Erdos TCH and Erdos entered into a supplemental agreement, effective May 1, 2016, whereby Erdos TCH cancelled monthly
minimum lease payments from Erdos, and started to charge Erdos based on actual electricity sold at RMB 0.30 / KWH. The selling price of
each KWH is determined annually based on prevailing market conditions. In May 2019, Erdos TCH ceased its operations due to renovations
and furnace safety upgrades of Erdos, and the Company initially expected the resumption of operations in July 2020, but the resumption
of operations was further delayed due to government’s mandate for Erdos to significantly lower its energy consumption per unit of
GDP by implementing a comprehensive technical upgrade of its ferrosilicon production line to meet the City’s energy-saving targets. Erdos
is currently researching the technical rectification scheme. Once the scheme is determined, Erdos TCH will carry out supporting technical
transformation for its waste heat power station project. During this period, Erdos will compensate Erdos TCH RMB 1 million ($145,460)
per month, until operations resume. The Company has not recognized any income due to the uncertainty of collection.
In addition, Erdos TCH
has 30% ownership in DaTangShiDai (BinZhou) Energy Savings Technology Co., Ltd. (“BinZhou Energy Savings”), 30%
ownership in DaTangShiDai DaTong Recycling Energy Technology Co., Ltd. (“DaTong Recycling Energy”), and 40% ownership
in DaTang ShiDai TianYu XuZhou Recycling Energy Technology Co, Ltd. (“TianYu XuZhou Recycling Energy”). These companies were
incorporated in 2012 but have not had any operations since then nor has any registered capital contribution been made.
CRITICAL ACCOUNTING
POLICIES AND ESTIMATES
Our management’s
discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements (“CFS”),
which were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
The preparation of these CFS requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and
expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical
experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
While our significant
accounting policies are more fully described in Note 2 to our CFS, we believe the following accounting policies are the most critical
to assist you in fully understanding and evaluating this management discussion and analysis.
Basis of Presentation
These accompanying CFS
were prepared in accordance with US GAAP and pursuant to the rules and regulations of the SEC for financial statements.
Principle of Consolidation
The CFS include the accounts
of CREG and, its subsidiary, Sifang Holdings and Yinghua; Sifang Holdings’ wholly-owned subsidiaries, Huahong and Shanghai TCH;
Shanghai TCH’s wholly-owned subsidiary Xi’an TCH; and Xi’an TCH’s subsidiaries, Erdos TCH, Zhonghong, and Zhongxun.
Substantially all of the Company’s revenues are derived from the operations of Shanghai TCH and its subsidiaries, which represent
substantially all of the Company’s consolidated assets and liabilities as of March 31, 2024. All significant inter-company accounts
and transactions were eliminated in consolidation.
Use of Estimates
In preparing the CFS,
management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets as well as
revenues and expenses during the year reported. Actual results may differ from these estimates.
Concentration of Credit
Risk
Cash includes cash on
hand and demand deposits in accounts maintained within China. Balances at financial institutions within China are not covered by insurance.
The Company has not experienced any losses in such accounts.
Certain other financial
instruments, which subject the Company to concentration of credit risk, consist of accounts and other receivables. The Company does not
require collateral or other security to support these receivables. The Company conducts periodic reviews of its customers’ financial
condition and customer payment practices to minimize collection risk on accounts receivable.
The operations of the
Company are located in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced
by the political, economic and legal environments in the PRC.
Revenue Recognition
Sales-type Leasing
and Related Revenue Recognition
The Company follows Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842 (See Operating lease below
as relates to the Company as a lessee). The Company’s sales type lease contracts for revenue recognition fall under ASC 842.
The Company constructs
and leases waste energy recycling power generating projects to its customers. The Company typically transfers ownership of the waste energy
recycling power generating projects to its customers at the end of the lease.
The Company finances
construction of waste energy recycling power generating projects. The sales and cost of sales are recognized at the inception of the lease,
which is when the control is transferred to the lessee. The Company accounts for the transfer of control as a sales type lease in accordance
with ASC 842-10-25-2. The underlying asset is derecognized, and revenue is recorded when collection of payments is probable. This is in
accordance with the revenue recognition principle in ASC 606 -Revenue from contracts with customers. The investment in sales-type leases
consists of the sum of the minimum lease payments receivable less unearned interest income and estimated executory cost. Minimum lease
payments are part of the lease agreement between the Company (as the lessor) and the customer (as the lessee). The discount rate implicit
in the lease is used to calculate the present value of minimum lease payments. The minimum lease payments consist of the gross lease payments
net of executory costs and contingent rentals, if any. Unearned interest is amortized to income over the lease term to produce a constant
periodic rate of return on net investment in the lease. While revenue is recognized at the inception of the lease, the cash flow from
the sales-type lease occurs over the course of the lease, which results in interest income and reduction of receivables. Revenue is recognized
net of value-added tax.
Contingent Rental
Income
The Company records income
from actual electricity generated of each project in the period the income is earned, which is when the electricity is generated. Contingent
rent is not part of minimum lease payments.
Foreign Currency Translation
and Comprehensive Income (Loss)
The Company’s functional
currency is RMB. For financial reporting purposes, RMB figures were translated into USD as the reporting currency. Assets and liabilities
are translated at the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average rate of exchange
prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period
are included as a component of stockholders’ equity as “Accumulated other comprehensive income.” Gains and losses from
foreign currency transactions are included in income. There has been no significant fluctuation in exchange rate for the conversion of
RMB to USD after the balance sheet date.
The Company uses “Reporting
Comprehensive Income” (codified in FASB ASC Topic 220). Comprehensive income is comprised of net income and all changes to the statements
of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders.
RESULTS OF OPERATIONS
Comparison of Results
of Operations for the three months ended March 31, 2024 and 2023
The following table sets
forth the results of our operations for the periods indicated as a percentage of net sales. Certain columns may not add due to rounding.
| |
2024 | | |
% of Sales | | |
2023 | | |
% of Sales | |
Sales | |
$ | - | | |
| - | % | |
$ | - | | |
| - | % |
Cost of sales | |
| - | | |
| - | % | |
| - | | |
| - | % |
Gross profit | |
| - | | |
| - | % | |
| - | | |
| - | % |
Interest income on sales-type leases | |
| - | | |
| - | % | |
| - | | |
| - | % |
Total operating expenses | |
| 208,430 | | |
| - | % | |
| 84,828 | | |
| - | % |
Loss from operations | |
| (208,430 | ) | |
| - | % | |
| (84,828 | ) | |
| - | % |
Total non-operating income (expenses), net | |
| (57,187 | ) | |
| - | % | |
| (142 | ) | |
| - | % |
Loss before income tax | |
| (265,617 | ) | |
| - | % | |
| (84,970 | ) | |
| - | % |
Income tax expense | |
| 14,180 | | |
| - | % | |
| 4,534 | | |
| - | % |
Net loss | |
$ | (279,797 | ) | |
| - | % | |
$ | (89,504 | ) | |
| - | % |
SALES. Total
sales for the three months ended March 31, 2024 and 2023 were $0.
COST OF SALES. Cost
of sales (“COS”) for the three months ended March 31, 2024 and 2023 were $0.
GROSS PROFIT.
Gross profit for the three months ended March 31, 2024 and 2023 were $0 with gross margin of 0%.
OPERATING EXPENSES. Operating
expenses consisted of general and administrative expenses (“G&A”) totaling $208,430 for the three months ended March 31,
2024, compared to $84,828 for the three months ended March 31, 2023, an increase of $123,602 or 145.7%. The increase in operating expenses
was mainly due to increased audit expense by approximately $44,500, increased professional fee by approximately $15,700 and increased
legal expense by approximately $22,000.
NET NON-OPERATING
INCOME (EXPENSES). Net non-operating expenses consisted of gain or loss on note conversion, interest income, interest expenses,
and miscellaneous expenses. For the three months ended March 31, 2024, net non-operating expense was $57,187 compared to non-operating
expenses of $142 for the three months ended March 31, 2023. For the three months ended March 31, 2024, we had $39,984 interest income,
and other income of $28,152, which was partly offset by $104,080 interest expense on note payable and loss on note conversion of $21,243.
For the three months ended March 31, 2023, we had $88,195 interest income, gain on note conversion of $10,482 and other income of $12,285,
which was partly offset by $111,104 interest expense on note payable.
INCOME TAX EXPENSE. Income
tax expense was $14,180 for the three months ended March 31, 2024, compared with $4,534 for the three months ended March 31, 2023. The
consolidated effective income tax rate for the three months ended March 31, 2024 and 2023 were 5.3% and 5.3%, respectively.
NET LOSS. Net loss for
the three months ended March 31, 2024 was $279,797 compared to $89,504 for the three months ended March 31, 2023, an increase of net loss
of $190,293. This increase in net loss was mainly due to increased operating expenses by $123,602, increased loss on note conversion by
$31,725 and decreased interest income by $48,211, which was partly offset by decreased interest expense by $7,024 and increased other
income by $15,867 as described above.
LIQUIDITY AND CAPITAL
RESOURCES
Comparison of Three
Months Ended March 31, 2024 and 2023
As of March 31, 2024,
the Company had cash and equivalents of $68.58 million, other current assets (excluding cash and equivalents) of $67.55 million, current
liabilities of $23.66 million, working capital of $112.49 million, a current ratio of 5.75:1 and a liability-to-equity ratio of 0.25:1.
The following is a summary
of cash provided by or used in each of the indicated types of activities during the three months ended March 31, 2024 and 2023:
| |
2024 | | |
2023 | |
Cash provided by (used in): | |
| | |
| |
Operating Activities | |
$ | (183,519 | ) | |
$ | (70,283 | ) |
Investing activities | |
| 68,564,217 | | |
| (141,070,591 | ) |
Net cash used in operating
activities was $183,519 during the three months ended March 31, 2024, compared to $70,283 for the three months ended March 31, 2023. The
increase in net cash outflow for the three months ended March 31, 2024 was mainly due to increased net loss by $190,293, which partly
offset by decreased cash outflow on advance to suppliers by $2,258, decreased cash outflow on other receivable by $15,374, decreased cash
outflow on taxes payable by $21,853, decreased payment of lease liability by $1,150, and increased cash inflow on accrued liabilities
and other payables by $36,522.
On
June 19, 2023, the Company entered a purchase agreement with Hubei Bangyu New Energy Technology Co., Ltd. (“Bangyu”). The
total contract amount was $82.3 million (RMB 595.0 million) for purchasing the energy storage battery systems. As of March 31, 2024, the
Company made a prepayment to Bangyu of $67.1 million (RMB 476.0 million). The Company is in the process of transforming and expanding
into energy storage integrated solution provider business. The Company actively seeks and explores opportunities to apply energy storage
technologies to new industries or segments with high growth potential, including industrial and commercial complexes, large scale photovoltaic
(PV) and wind power stations, remote islands without electricity, and smart energy cities with multi-energy supplies.
Net cash provided by
investing activities was $68,564,217 for the three months ended March 31, 2024, compare with net cash used in investing activities of
$141,070,591 for the three months ended March 31, 2023, respectively. For the three months ended March 31, 2024, investing activities
mainly consisted of repayment of short-term loan receivable of $68,564,217. For the three months ended March 31, 2023, investing activities
mainly consisted of issuance of short-term loan receivable of $141,070,591.
On
March 31, 2023, the Company had $140,576,568 (RMB 966.0 million) short term loan to Jinan Youkai Engineering Consulting
Co., Ltd (“Youkai”), an unrelated party of the Company. The short-term loan was for five days with a capital utilization fee
of $43,657 (RMB 300,000) per day for total of $218,287 (RMB 1.5 million). To ensure the safety of the funds,
before money was transferred to Youkai, Youkai handed over the official seal, financial seal and bank account UK to the Company for custody
and management until repayment of the loan. The Company received the repayment of $140.6 million in full plus capital utilization
fee on April 3, 2023.
On
June 30, 2023, the Company loaned $67,120,596 (RMB 485.0 million) to Youkai again, an unrelated party of the Company. The
short-term loan was for five days with a capital utilization fee of $13,839 (RMB 100,000) per day for total of $69,196 (RMB 500,000).
To ensure the safety of the funds, before money was transferred to Youkai, Youkai handed over the official seal, financial seal and bank
account UK to the Company for custody and management until repayment of the loan. The Company received the repayment of $67.2 million
in full plus capital utilization fee on July 3, 2023.
As
of December 31, 2023, the Company had $68,730,851 (RMB 486.1 million) short term loan to Jinan Youkai Engineering Consulting
Co., Ltd (“Youkai”), an unrelated party of the Company. The short-term loan was for five days with a capital utilization fee
of $14,119 (RMB 100,000) per day for total of $70,595 (RMB 500,000). To ensure the safety of the funds, before money
was transferred to Youkai, Youkai handed over the official seal, financial seal and bank account UK to the Company for custody and management
until repayment of the loan. The Company received the repayment of $68.7 million in full plus capital utilization fee in January
2024.
There was no cash provided
by or use in financing activities during the three months ended March 31, 2024 and 2023.
We do not believe inflation
has had or will have a significant negative impact on our results of operations in 2023.
Transfers of Cash
to and from Our Subsidiaries
The PRC has currency
and capital transfer regulations that require us to comply with certain requirements for the movement of capital. The Company is able
to transfer cash (USD) to its PRC subsidiaries through: (i) an investment (by increasing the Company’s registered capital in a PRC
subsidiary), or (ii) a stockholder loan. The Company’s subsidiaries in the PRC have not transferred any earnings or cash to the
Company to date. The Company’s business is primarily conducted through its subsidiaries. The Company is a holding company and its
material assets consist solely of the ownership interests held in its PRC subsidiaries. The Company relies on dividends paid by its subsidiaries
for its working capital and cash needs, including the funds necessary: (i) to pay dividends or cash distributions to its stockholders,
(ii) to service any debt obligations and (iii) to pay operating expenses. As a result of PRC laws and regulations (noted below) that require
annual appropriations of 10% of after-tax income to be set aside in a general reserve fund prior to payment of dividends, the Company’s
PRC subsidiaries are restricted in that respect, as well as in others respects noted below, in their ability to transfer a portion of
their net assets to the Company as a dividend.
With respect to transferring
cash from the Company to its subsidiaries, increasing the Company’s registered capital in a PRC subsidiary requires the filing of
the local commerce department, while a stockholder loan requires a filing with the state administration of foreign exchange or its local
bureau.
With respect to the payment
of dividends, we note the following:
| 1. | PRC regulations currently permit
the payment of dividends only out of accumulated profits, as determined in accordance with accounting standards and PRC regulations (an
in-depth description of the PRC regulations is set forth below); |
| 2. | Our PRC subsidiaries are required
to set aside, at a minimum, 10% of their net income after taxes, based on PRC accounting standards, each year as statutory surplus reserves
until the cumulative amount of such reserves reaches 50% of their registered capital; |
| 3. | Such reserves may not be distributed
as cash dividends; |
|
4. |
Our PRC subsidiaries may also allocate a portion of their after-tax profits to fund their staff welfare and bonus funds; except in the event of a liquidation, these funds may also not be distributed to stockholders; the Company does not participate in a Common Welfare Fund; |
|
|
|
|
5. |
The incurrence of debt, specifically the instruments governing such debt, may restrict a subsidiary’s ability to pay stockholder dividends or make other cash distributions; and |
|
|
|
|
6. |
The Company is subject to covenants and consent requirements. |
If, for the reasons noted
above, our subsidiaries are unable to pay stockholder dividends and/or make other cash payments to the Company when needed, the Company’s
ability to conduct operations, make investments, engage in acquisitions, or undertake other activities requiring working capital may be
materially and adversely affected. However, our operations and business, including investment and/or acquisitions by our subsidiaries
within China, will not be affected as long as the capital is not transferred in or out of the PRC.
PRC Regulations
In accordance with PRC
regulations on Enterprises with Foreign Investment and their articles of association, a foreign-invested enterprise (“FIE”)
established in the PRC is required to provide statutory reserves, which are appropriated from net profit, as reported in the FIE’s
PRC statutory accounts. A FIE is required to allocate at least 10% of its annual after-tax profit to the surplus reserve until such reserve
has reached 50% of its respective registered capital (based on the FIE’s PRC statutory accounts). The aforementioned reserves may
only be used for specific purposes and may not be distributed as cash dividends. Until such contribution of capital is satisfied, the
FIE is not allowed to repatriate profits to its stockholders, unless approved by the State Administration of Foreign Exchange. After satisfaction
of this requirement, the remaining funds may be appropriated at the discretion of the FIE’s board of directors. Our subsidiary,
Shanghai TCH, qualifies as a FIE and is therefore subject to the above-mandated regulations on distributable profits.
Additionally, in accordance
with PRC corporate law, a domestic enterprise is required to maintain a surplus reserve of at least 10% of its annual after-tax profit
until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. The aforementioned
reserves can only be used for specific purposes and may not be distributed as cash dividends. Xi’an TCH, Huahong, Zhonghong and
Erdos TCH were established as domestic enterprises; therefore, each is subject to the above-mentioned restrictions on distributable profits.
As a result of PRC laws
and regulations that require annual appropriations of 10% of after-tax income to be set aside, prior to payment of dividends, in a general
reserve fund, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company
as a dividend or otherwise.
Chart of the Company’s
Statutory Reserve
Pursuant to PRC corporate
law, effective January 1, 2006, the Company is required to maintain a statutory reserve by appropriating from its after-tax profit before
declaration or payment of dividends. The statutory reserve is restricted retained earnings. Our restricted and unrestricted retained earnings
under US GAAP are set forth below:
| |
As of | |
| |
March 31, 2024 | | |
December 31, 2023 | |
Unrestricted accumulated deficit | |
$ | (60,777,199 | ) | |
$ | (60,497,371 | ) |
Restricted retained earnings (surplus reserve fund) | |
| 15,191,676 | | |
| 15,191,645 | |
Total accumulated deficit | |
$ | (45,585,523 | ) | |
$ | (45,305,726 | ) |
OFF-BALANCE SHEET
ARRANGEMENTS
We have not entered into
any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our
CFS. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
CONTRACTUAL OBLIGATIONS
The Company’s contractual
obligations as of March 31, 2024 are as follows:
| |
1 year | | |
More than | | |
See Note | |
Contractual Obligation | |
or less | | |
1 year | | |
(for details) | |
Notes payable including accrued interest of $3,305 | |
$ | 5,029,072 | | |
$ | - | | |
| 9 | |
Entrusted loan including interest payable of $340,868 | |
$ | 11,193,581 | | |
$ | - | | |
| 8 | |
Total | |
$ | 16,222,653 | | |
$ | - | | |
| | |
The Company believes
it has sufficient cash as of March 31, 2024, and a sufficient channel to commercial institutions to obtain any loans that may be necessary
to meet its working capital needs. Historically, we have been able to obtain loans or otherwise achieve our financing objectives due to
the Chinese government’s support for energy-saving businesses with stable cash inflows, good credit ratings and history.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Exchange Rate Risk
Our operations are conducted mainly in the PRC.
As such, our earnings are subject to movements in foreign currency exchange rates when transactions are denominated in RMB, which is our
functional currency. Accordingly, our operating results are affected by changes in the exchange rate between the U.S. dollar and those
currencies.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Company maintains disclosure controls and
procedures which are designed to provide reasonable assurance that information required to be disclosed in the Company’s periodic
SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and
that such information is accumulated and communicated to its principal executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the Company’s
Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rules 13a - 15(e) and 15d - 15(e) of the Securities Exchange
Act of 1934 (“Exchange Act”) at the end of the period covered by the report. Based upon that evaluation, our CEO and CFO concluded
that, as of March 31, 2024, the Company’s disclosure controls and procedures were effective.
Changes in Internal Control Over Financial
Reporting
With the participation of the Company’s
management, including its CEO and CFO, the Company also conducted an evaluation of the Company’s internal control over financial
reporting to determine whether any changes occurred during the Company’s fiscal quarter ended as of March 31, 2024, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on such
evaluation, management concluded that, as of the end of the period covered by this report, there have not been any changes in the Company’s
internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including the CEO and CFO, does
not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances
of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls
may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to legal
proceedings and claims in the ordinary course of business. We are not currently a party to any material legal proceedings, and to our
knowledge none is threatened. There can be no assurance that future legal proceedings arising in the ordinary course of business or otherwise
will not have a material adverse effect on our financial position, results of operations or cash flows.
In November
2019, Beijing Hongyuan Recycling Energy Investment Center (“BIPC”), or Hongyuan, filed a lawsuit with the Beijing Intermediate
People’s Court against Xi’an TCH to compel Xi’an TCH to repurchase certain stock pursuant to a stock repurchase option
agreement. On April 9, 2021, the court rendered a judgment in favor of Hongyuan. Xi’an TCH filed a motion for retrial to High People’s
Court of Beijing on April 13, 2022, because Xi’an TCH paid RMB 261 million ($37.58 million) principal and interest
to Hongyuan as an out-of-court settlement. On April 11, 2022, Xi’an Zhonghong New Energy Technology Co. Ltd., filed an application
for retrial and provided relevant evidence to the Beijing High People’s Court on the Civil Judgment No. 264, awaiting trial. On
August 10, 2022, Beijing No. 1 Intermediate People’s Court of Beijing issued a Certificate of Active Performance, proving that Xi’an
Zhonghong New Energy Technology Co., Ltd. had fulfilled its buyback obligations as disclosed in Note 9 that, on April 9, 2021, Xi’an
TCH, Xi’an Zhonghong, Guohua Ku, Chonggong Bai and HYREF entered a Termination of Fulfillment Agreement (termination agreement).
Under the termination agreement, the original buyback agreement entered on December 19, 2019 was terminated upon signing of the termination
agreement. HYREF will not execute the buy-back option and will not ask for any additional payment from the buyers other than keeping the
CDQ WHPG station.
As of the
date of this report, Xi’an Zhonghong is waiting for Court’s decision on retrial petition that was submitted in April 2022.
During this waiting period, BIPC entered the execution procedure, and there is a balance of RMB 14,204,317 ($2.20 million)
between the amount executed by the court and the liability recognized by Xi ‘an TCH, which was mainly the enforcement fee, legal
and penalty fee for the original judgement, and was automatically generated by the toll collection system of the People’s court.
The Company accrued $2.10 million litigation expense as of March 31, 2024.
On June
28, 2021, Beijing No.4 Intermediate People’s Court of Beijing entered into a judgement that Xi’an Zhonghong Technology Co.,
Ltd. should pay the loan principal of RMB 77 million ($11.06 million) with loan interest of RMB 2,418,449 ($0.35 million)
to Beijing Hongyuan Recycling Energy Investment Center (Limited Partnership). In the end of 2022, Beijing No.4 Intermediate People’s
Court of Beijing entered into the judgment enforcement procedure, which, in addition to the loan principal with interest amount, Xi’an
Zhonghong Technology Co., Ltd. was to pay judgment enforcement fee, late fee and other fees of RMB 80,288,184 ($11.53 million)
in total, the Company recorded these additional fees in 2022. There was no update for this case as of the date of this report.
Item 1A. Risk Factors
There have been no material changes in our risk
factors from those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K as of and for the year ended December 31, 2023. An
investment in our common stock involves various risks. When considering an investment in our company, you should consider carefully all
of the risk factors described in our most recent Form 10-K and the registration statement as referenced above. If any of those risks,
incorporated by reference in this Form 10-Q, occur, the market price of our shares of common stock could decline and investors could lose
all or part of their investment. These risks and uncertainties are not the only ones facing us and there may be additional matters that
we are unaware of or that we currently consider immaterial. All of these could adversely affect our business, financial condition, results
of operations and cash flows and, thus, the value of an investment in our company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information
Nome.
ITEM 6. EXHIBITS
Exhibit No. |
|
Description |
3.1 |
|
Articles of Incorporation (filed as Exhibit 3.05 to the Company’s Form 10-KSB for the fiscal year ended December 31, 2001). |
|
|
|
3.2 |
|
Fifth Amended and Restated Bylaws (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K dated March 9, 2022). |
|
|
|
3.3 |
|
Certificate of Change (filed as Exhibit 3.6 to the Company’s Current Report on Form 8-K dated May 24, 2016). |
|
|
|
3.4 |
|
Certificate of Amendment (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated March 9, 2022). |
|
|
|
4.1 |
|
Common Stock Specimen (filed as Exhibit 4.1 to the Company’s Registration Statement on Form SB-2 dated November 12, 2004; 1934 Act File No. 333-120431). |
|
|
|
10.1 |
|
Supplementary Agreement by and between Inner Mongolia Erdos TCH Energy Saving Development Co., Ltd. and Inner Mongolia Erdos Metallurgy Co., Ltd., dated December 1, 2009 (filed as Exhibit 10.27 to the Company’s Form 10-K for the year ended December 31, 2009). |
|
|
|
10.2 |
|
Joint Operation Agreement by and between Xi’an TCH Energy Technology Co., Ltd., a wholly owned subsidiary of the Company, and Inner Mongolia Erdos Metallurgy Co., Ltd., dated January 20, 2009 (filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended June 30, 2009). |
|
|
|
10.3 |
|
Form of Independent Director Agreement. (filed as Exhibit 10.28 on the Company’s Registration Statement on Form 10, filed on February 5, 2010). |
|
|
|
10.4 |
|
English Translation of Employment Agreement between the Company and Guohua Ku, dated December 10, 2020 (filed as Exhibit 10.4 to the Company’s Current Report on Form 10-K dated December 31, 2021). |
|
|
|
10.5 |
|
English Translation of Employment Agreement between the Company and Yongjiang Shi, dated December 16, 2021 (filed as Exhibit 10.5 to the Company’s Current Report on Form 10-K dated December 31, 2021). |
|
|
|
10.6 |
|
Biomass Power Generation Asset Transfer Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 16, 2013). |
|
|
|
10.7 |
|
Biomass Power Generation Project Lease Agreement (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 16, 2013). |
|
|
|
10.8 |
|
Partnership Agreement of Beijing Hongyuan Recycling Energy Investment Center, LLP, dated July 18, 2013 (filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended September 30, 2013). |
|
|
|
10.9 |
|
EPC Contract for Boxing CDQ Waste Heat Power Generation Project, dated July 22, 2013, by and between Xi’an Zhonghong New Energy Technology Co., Ltd and Xi’an Huaxin New Energy Co., Ltd (filed as Exhibit 10.3 to the Company’s Form 10-Q for the quarterly period ended September 30, 2013). |
10.10 |
|
EPC Contract for CDQ Power Generation Project of Xuzhou Tianyu Group, dated July 22, 2013, by and between Xi’an Zhonghong New Energy Technology Co., Ltd and Xi’an H201uaxin New Energy Co., Ltd. (filed as Exhibit 10.4 to the Company’s Form 10-Q for the quarterly period ended September 30, 2013). |
|
|
|
10.11 |
|
Cooperation Agreement, dated July 22, 2013, by and between Xi’an Zhonghong New Energy Technology Co., Ltd. and Jiangsu Tianyu Energy and Chemical Group Co., Ltd (filed as Exhibit 10.5 to the Company’s Form 10-Q for the quarterly period ended September 30, 2013). |
|
|
|
10.12 |
|
Waste Heat Power Generation Energy Management Cooperative Agreement with Zhongtai (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 6, 2013). |
|
|
|
10.13 |
|
CDQ Power Generation Energy Management Cooperative Agreement with Rongfeng (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 17, 2013). |
|
|
|
10.14 |
|
China Recycling Energy Corporation Omnibus Equity Plan (Incorporated by reference from Appendix A to the Company’s Definitive Schedule 14A filed on April 30, 2015). |
|
|
|
10.15 |
|
Transfer Agreement of CDQ & Waste Heat Power Generation, dated November 16, 2015, by and between Xi’an TCH Energy Technology Co., Ltd and Tangshan Rongfeng Iron & Steel Co., Ltd. and Xi’an Huaxin New Energy Co., Ltd. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 20, 2015). |
|
|
|
10.16 |
|
Xuzhou Zhongtai CDQ and Waste Heat Power Generation System Transfer Agreement, dated March 14, 2016, by Xi’an TCH Energy Technology Co., Ltd, Xuzhou Zhongtai Energy Technology Co., Ltd. and Xi’an Huaxin New Energy Co., Ltd. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 18, 2016). |
|
|
|
10.17 |
|
Repurchase Agreement for Coking Coal Gas Power Generation Project, dated June 22, 2016, by and between Xi’an TCH Energy Technology Co., Ltd., and Qitaihe City Boli Yida Coal Selection Co., Ltd. (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q dated August 15, 2016). |
|
|
|
10.18 |
|
Securities Purchase Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P., dated July 11, 2018 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 17, 2018). |
|
|
|
10.19 |
|
Convertible Promissory Note, issued by China Recycling Energy Corporation to Iliad Research and Trading, L.P., dated July 11, 2018 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated July 17, 2018). |
|
|
|
10.20 |
|
Equity Purchase Agreement by and between Shanghai TCH Energy Technology Co., Ltd. and Jinhua Wang, dated September 30, 2018 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 30, 2018). |
|
|
|
10.21 |
|
Agreement of Supplementary and Amendment by and between Shanghai TCH Energy Technology Co., Ltd. and Jinhua Wang, dated November 21, 2018 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 26, 2018). |
|
|
|
10.22 |
|
CDQ WHPG Station Fixed Assets Transfer Agreement, dated December 29, 2018, by and among Xi’an Zhonghong, Xi’an TCH, the HYREF, Guohua Ku and Chonggong Bai (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K dated for the year ended December 31, 2018 filed on April 16, 2019). |
|
|
|
10.23 |
|
Buy-Back Agreement, dated December 29, 2018, by and among HYREF, Xi’an Zhonghong, Xi’an TCH, Guohua Ku, Chonggong Bai and Xi’an Hanneng (filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K dated for the year ended December 31, 2018 filed on April 16, 2019). |
10.24 |
|
Equity Transfer Agreement, dated December 29, 2018, by and between Xi’an TCH and Hongyuan Huifu. (filed as Exhibit 10.23 to the Company’s Annual Report on Form 10-K dated for the year ended December 31, 2018 filed on April 16, 2019) |
|
|
|
10.25 |
|
Equity Transfer Agreement, dated December 29, 2018, by and between Shanghai TCH and HYREF. (filed as Exhibit 10.24 to the Company’s Annual Report on Form 10-K dated for the year ended December 31, 2018 filed on April 16, 2019) |
|
|
|
10.26 |
|
Supplementary Agreement of Equity Transfer Agreement, dated December 29, 2018, by and among Xi’an TCH, Hongyuan Huifu, and the Fund Management Company. (filed as Exhibit 10.25 to the Company’s Annual Report on Form 10-K dated for the year ended December 31, 2018 filed on April 16, 2019) |
|
|
|
10.27 |
|
Projects Transfer Agreement by and among Xi’an Zhonghong, Xi’an TCH, and Mr. Chonggong Bai, dated January 4, 2019 (filed as Exhibit 10.26 to the Company’s Annual Report on Form 10-K dated for the year ended December 31, 2018 filed on April 16, 2019). |
|
|
|
10.28 |
|
Securities Purchase Agreement by and between China Recycling Energy Corporation and Great Essential Investment, Ltd, dated February 13, 2019 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 19, 2019). |
|
|
|
10.29 |
|
Termination of Equity Purchase Agreement and Supplementary Amendment Agreement by and between Shanghai TCH and Mr. Jihua Wang, dated March 29, 2019 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 29, 2019). |
|
|
|
10.30 |
|
Forebearance Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P. dated September 11, 2019 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 11, 2019). |
|
|
|
10.31 |
|
Exchange Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P. dated September 19, 2019 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 19, 2019). |
|
|
|
10.32 |
|
Termination Agreement of Lease Agreement of Biomass Power Generation Project by and between Xi’an TCH Energy Technology Co., Ltd. and Pucheng Xin Heng Yuan Biomass Power Generation Co., Ltd. dated September 29, 2019 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 29, 2019). |
|
|
|
10.33 |
|
Exchange Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P. dated October 16, 2019 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 16, 2019). |
|
|
|
10.34 |
|
Exchange Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P. dated October 16, 2019 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated October 16, 2019). |
|
|
|
10.35 |
|
Amendment to Forebearance Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P. dated December 16, 2019 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 16, 2019). |
|
|
|
10.36 |
|
Exchange Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P. dated January 3, 2020 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 3, 2020). |
|
|
|
10.37 |
|
Exchange Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P. dated January 13, 2020 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 13, 2020). |
|
|
|
10.38 |
|
Exchange Agreement by and between China Recycling Energy Corporation and Iliad Research and Trading, L.P. dated May 4, 2020 (filed as Exhibit 10.30 to the Company’s Current Report on Form 8-K, dated May 4, 2020). |
10.39 |
|
Employment Agreement by and between China Recycling Energy Corporation and Yongjiang (Jackie) Shi, dated May 8, 2020 (as Exhibit 10.38 to the Company’s Annual Report on Form 10-K dated for the year ended December 31, 2020 filed on April 15, 2021). |
|
|
|
10.40 |
|
Exchange Agreement dated as of May 15, 2020 by and between China Recycling Energy Corporation and Lliad Research and Trading, L.P. (filed as Exhibit 10.39 to the Company’s Current Report on Form 8-K, dated May 21, 2020). |
|
|
|
10.41 |
|
Forbearance Agreement dated as of May 15, 2020 by and between China Recycling Energy Corporation and Lliad Research and Trading, L.P. (filed as Exhibit 10.40 to the Company’s Current Report on Form 8-K, dated May 21, 2020). |
|
|
|
10.42 |
|
Exchange Agreement dated as of May 29, 2020 by and between China Recycling Energy Corporation and Lliad Research and Trading, L.P. (filed as Exhibit 10.41 to the Company’s Current Report on Form 8-K, dated June 4, 2020). |
|
|
|
10.43 |
|
Equity Acquisition Agreement dated as of December 22, 2020 by and between China Recycling Energy Corporation and Shanghai TCH Energy Technology Co., Ltd., Zheng Feng, Yinhua Zhang, Weidong Xu and Xi’an Taiying Energy Saving Technology Co., Ltd. (filed as Exhibit 10.43 to the Company’s Current Report on Form 8-K, dated December 29, 2020). |
|
|
|
10.44 |
|
Promissory Note dated as of December 4, 2020 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit 10.43 to the Company’s Form S-1/A dated October 6, 2021) |
|
|
|
10.45 |
|
Exchange Agreements dated as of August 24, 2021 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit 10.44 to the Company’s Form S-1/A dated October 6, 2021) |
|
|
|
10.46 |
|
Exchange Agreements dated as of August 31, 2021 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit 10.45 to the Company’s Form S-1/A dated October 6, 2021) |
|
|
|
10.47 |
|
Exchange Agreements dated as of September 1, 2021 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit 10.1 to the Company’s quarterly report on Form 10-Q dated November 12, 2021) |
|
|
|
10.48 |
|
Exchange Agreements dated as of October 8, 2021 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit 10.2 to the Company’s quarterly report on Form 10-Q dated November 12, 2021) |
|
|
|
10.49 |
|
Exchange Agreements dated as of October 21, 2021 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit 10.3 to the Company’s quarterly report on Form 10-Q dated November 12, 2021) |
|
|
|
10.50 |
|
Exchange Agreements dated as of October 25, 2021 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit 10.4 to the Company’s quarterly report on Form 10-Q dated November 12, 2021) |
|
|
|
10.51 |
|
Exchange Agreements dated as of November 9, 2021 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit 10.5 to the Company’s quarterly report on Form 10-Q dated November 12, 2021) |
|
|
|
10.52 |
|
Exchange Agreements dated as of November 30, 2021 by and between China Recycling Energy Corporation and Streeterville Capital, LLC. (filed as Exhibit to the Company’s Amendment to Registration Statement on Form S1/A dated December 3, 2021) |
|
|
|
10.53 |
|
Exchange Agreements dated as of November 7, 2022 by and between China Recycling Energy Corporation and Bucktown Capital, LLC. (filed as Exhibit 10.53 to the Company’s Form 10-K for the year ended December 31, 2022). |
10.54 |
|
Exchange
Agreements dated as of January 6, 2023 by and between China Recycling Energy Corporation and Bucktown Capital, LLC. (filed as Exhibit
10.54 to the Company’s Form 10-K for the year ended December 31, 2022). |
|
|
|
10.55 |
|
Exchange
Agreements dated as of January 18, 2023 by and between China Recycling Energy Corporation and Bucktown Capital, LLC. (filed as Exhibit
10.55 to the Company’s Form 10-K for the year ended December 31, 2022). |
|
|
|
10.56 |
|
Exchange
Agreements dated as of February 13, 2023 by and between China Recycling Energy Corporation and Bucktown Capital, LLC.(filed as Exhibit
10.56 to the Company’s Form 10-K for the year ended December 31, 2022). |
|
|
|
10.57 |
|
Exchange
Agreements dated as of May 11, 2023 by and between China Recycling Energy Corporation and Bucktown Capital, LLC. (filed as Exhibit
10.57 to the Company’s quarterly report on Form 10-Q dated June 21, 2023). |
|
|
|
10.58 |
|
Exchange Agreements dated as of August 11, 2023 by and between China Recycling Energy Corporation and Bucktown Capital, LLC. (filed as Exhibit 10.58 to the Company’s quarterly report on Form 10-Q dated November 13, 2023). |
|
|
|
10.59 |
|
Exchange Agreements dated as of December 29, 2023 by and between China Recycling Energy Corporation and Bucktown Capital, LLC. (filed as Exhibit 10.57 to the Company’s Form 10-K for the year ended December 31, 2023). |
|
|
|
14.1 |
|
Code
of Ethics (filed as Exhibit 14.1 to the Company’s Current Report on Form 8-K dated December 2, 2009). |
|
|
|
19.1 |
|
Insider
Trading Policy, dated November 25, 2009. (filed as Exhibit 19.1 to the Company’s annual report on Form 10-K dated May, 8, 2023) |
|
|
|
21.1 |
|
Subsidiaries
(filed as Exhibit 21.1 to the Company’s Annual Report on Form 10-K dated May 14, 2020). |
|
|
|
31.1* |
|
Rule
13a-14(a)/15d-14(a) certification of the Chief Executive Officer. |
|
|
|
31.2* |
|
Rule
13a-14(a)/15d-14(a) certification of the Chief Financial Officer. |
|
|
|
32.1* |
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
|
|
|
32.2* |
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
|
|
|
97 |
|
Compensation Recovery Policy (filed as Exhibit 97 to the Company’s Form 10-K for the year ended December 31, 2023). |
|
|
|
101.INS* |
|
Inline XBRL Instance Document |
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension
Calculation Linkbase Document |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension
Schema Document. |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension
Definition Linkbase Document |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension
Labels Linkbase Document |
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension
Presentation Linkbase Document |
|
|
|
104* |
|
Cover Page Interactive
Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
SMART POWERR CORP. |
|
|
|
Date: May 14, 2024 |
By: |
/s/ Guohua Ku |
|
|
Guohua Ku |
|
|
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer) |
|
|
|
Date: May 14, 2024 |
By: |
/s/ Yongjiang Shi |
|
|
Yongjiang Shi |
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
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I, Guohua Ku, Chief Executive Officer of Smart Powerr Corp. (the “Company”),
certify that:
I, Yongjiang Shi, Chief Financial Officer of Smart Powerr Corp. (the
“Company”), certify that:
I, Guohua Ku, Chief Executive Officer of Smart
Powerr Corp. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
I, Yongjiang Shi, Chief Financial Officer of Smart
Powerr Corp. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge: