SHANGHAI, Nov. 27 /PRNewswire-Asia/ -- China Energy Recovery, Inc. (OTC Bulletin Board: CGYV) ("CER"), an international leader in the design, fabrication, implementation and service of waste heat recovery systems, today announced its financial results for the three- and nine-months ended Sept. 30, 2009. All currency amounts are in U.S. dollars.
Net loss for the three months ended Sept. 30 was $117,006, or $0.00 per share, on revenues of $6,064,800, compared to a net income of $244,856, or $0.01 per share, on revenues of $6,123,704 in the same period a year ago. The net loss is due mainly as a result of increases in operating expenses and lower gross profit.
An increase in operating expenses from $1.2 million in the three months ended Sept. 30, 2008 to $2.3 million in the most recent three-month period is due mainly to costs associated with becoming a public company and an increase in the allowance for doubtful accounts.
Net loss for the nine months ended Sept. 30 was $746,108, or $0.02 per share, on revenues of $14,942,533, compared to a net income $809,088, or $0.03 per share, on revenues of $15,980,191 in the same period last year.
The company drew down all of a $5 million facility, which will partially fund the construction of a world-class, state-of-the-art production and manufacturing facility in Yangzhou. The new facility is part of the Company's business plan to expand its production capacity, lower its production costs and develop additional demand for its products within China and overseas. The company secured the land for the facility in August and completed some initial steps for its acquisition and development. Construction is expected to be completed in late 2010.
"Revenues decreased slightly this quarter but, with the recovery of the Chinese economy and the government's emphasis on energy efficiency and pollution reduction, we see the rate of new orders returning to normal and we anticipate growth in new orders going forward," said Mr. Qinqhuan Wu, China Energy Recovery's Chief Executive Officer."
"CER is among very few companies in China with the design and engineering capability to meet fast-growing demand for energy recovery systems, especially demand for larger systems," Mr. Wu said. We are increasing our facilities, expanding our internal research capabilities, developing engineering relationships and broadening our market approach in an effort to capture a greater share of this growing market inside China and overseas. Through these efforts, CER will be in a position to market its waste heat recovery technology and engineering expertise worldwide.
"A grant from the Chinese government in connection with the planned new production facility acknowledges the important role waste heat recovery systems play in improving energy efficiency and reducing pollution in China," Mr. Wu said. "It also represents an important vote of confidence in CER as a leader in the design and engineering of waste heat recovery systems and in its opportunity to build business worldwide."
What is Waste Heat Energy Recovery?
Industrial facilities release significant amounts of excess heat into the atmosphere in the form of hot exhaust gases or high-pressure steam. Energy recovery is the process of recovering wasted energy and converting it into usable heat energy, including electricity. Energy recovery systems also are capable of capturing harmful pollutants that would otherwise be released into the environment. It is estimated that if energy currently wasted by all the U.S. industrial facilities could be recovered, it could produce power equivalent to 20% of U.S. electricity generation capacity without burning any additional fossil fuel, and could help many industries to meet stringent environmental regulations.
About China Energy Recovery Inc.
CER is an international leader in designing, manufacturing and installing waste heat energy recovery systems which provide facilities with greater energy efficiency. CER's technology captures industrial waste energy to produce low-cost electrical power enabling industrial manufacturers to reduce their energy costs, to shrink their emissions footprint, and to generate sellable emissions credits. CER has deployed its systems throughout China and in such international markets as Egypt, Korea, Vietnam and Malaysia. CER focuses on numerous industries in which a rapid payback on invested capital is achieved by its customers, including: chemical, paper manufacturing and refining (including methanol refining). CER continues to invest in R&D and plans to build China's first state-of-the-art energy recovery system research and fabrication facility to allow it to meet the increased demand for its products and services. For more information on CER, please visit: http://www.chinaenergyrecovery.com/s/Home.asp .
Safe Harbor - This Quarterly Report on Form 10-Q contains disclosures which are forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, such as, but not limited to, the discussion of economic conditions in market areas and their effect on revenue growth, the discussion of our growth strategy, the potential for and effect of future governmental regulation, fluctuation in global energy costs, the effectiveness of our management information systems, and the availability of financing and working capital to meet funding requirements, and can generally be identified by the use of words such as "may," "believe," "will," "expect," "project," "estimate," "anticipate," "plan" or "continue." These forward-looking statements are based on the current plans and expectations of our management and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. T
hese factors include, but are not limited to: the general economic conditions that may affect our customers desire or ability to invest in energy recovery systems; the cost of raw materials; the availability of environmental credits; the positive and adverse effect of governmental regulation affecting energy recovery systems; our reliance on customers in heavy industry, such as chemicals, paper, refining and steel production, and state owned or controlled enterprises; competition in the industry of heat and energy recovery systems; the availability of and costs associated with potential sources of financing; difficulties associated with managing future growth; our ability to increase manufacturing capacity to meet demand; fluctuations in currency exchange rates; restrictions on foreign investments in China; uncertainties associated with the Chinese legal system; the loss of key personnel; and our ability to attract and retain new qualified personnel. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CHINA ENERGY RECOVERY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
ASSETS
September 30, December 31,
2009 2008
(Unaudited)
CURRENT ASSETS:
Cash $1,203,041 $6,136,403
Restricted cash 5,491,663 597,949
Notes receivable 541,509 120,749
Accounts receivable, net of allowance
for doubtful accounts of $646,233 and
$151,094 as of September 30, 2009 and
December 31, 2008, respectively 4,209,612 5,941,202
Other receivables 507,714 98,271
Deferred expense 221,061 --
Inventories 5,729,334 7,774,775
Advances on inventory purchases 4,058,264 1,044,807
Deferred tax asset 221,757 --
Total current assets 22,183,955 21,714,156
EQUIPMENT, NET 871,787 850,888
OTHER ASSETS:
Inventories-non current 1,770,754 --
Long term accounts receivable, net of
allowance for doubtful accounts of
$231,808 and $0 as of September 30,
2009 and December 31, 2008,
respectively 1,571,238 377,368
Cost and estimated earnings in excess
of billings 3,588,446 --
Deferred finance costs 1,727,257 --
Total other assets 8,657,695 377,368
Total assets $31,713,437 $22,942,412
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $4,878,802 $3,352,521
Other payables 888,972 531,470
Customer deposits 7,784,224 7,044,234
Short term loans payable 880,200 381,420
Deferred revenue 2,181,974 1,726,701
Taxes payable 2,125,366 2,282,621
Total current liabilities 18,739,538 15,318,967
NON-CURRENT LIABILITIES:
Notes payable 5,000,000 --
Warrant liabilities 2,941,248 --
Total non-current liabilities 7,941,248 --
Total Liabilities 26,680,786 15,318,967
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Series A preferred stock, $0.001 par
value, 50,000,000 shares authorized,
662,963 and 714,963 issued and
outstanding as of September 30, 2009
and December 31, 2008, respectively 663 715
Series B preferred stock , $0.001 par
value, 100 shares authorized, Nil
issued and outstanding as of September
30, 2009 and December 31, 2008,
respectively -- --
Common stock, $0.001 par value,
100,000,000 shares authorized,
29,938,818 and 29,912,573 issued and
outstanding as of September 30, 2009
and December 31, 2008, respectively 29,939 29,913
Paid-in-capital 5,113,296 7,645,404
Accumulated deficit (459,644) (363,147)
Statutory reserves 408,403 408,403
Accumulated comprehensive loss (60,006) (97,843)
Total shareholders' equity 5,032,651 7,623,445
Total liabilities and
shareholders' equity $31,713,437 $ 22,942,412
CHINA ENERGY RECOVERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
REVENUE $6,064,800 $6,123,704 $14,942,533 $15,980,191
COST OF REVENUE 4,691,381 4,513,038 11,936,853 12,467,448
GROSS PROFIT 1,373,419 1,610,666 3,005,680 3,512,743
OPERATING EXPENSE
Selling expense 135,075 145,344 515,179 488,030
General and
administrative
expense 2,157,226 1,039,500 5,133,643 1,785,075
Total operating
expense 2,292,301 1,184,844 5,648,822 2,273,105
INCOME (LOSS) FROM
OPERATIONS (918,882) 425,822 (2,643,142) 1,239,638
OTHER INCOME (EXPENSE):
Gain on change in fair
value of warrants 941,277 -- 2,108,556 --
Finance expense (210,182) -- (326,409) --
Interest income
(expense), net (6,081) 14,823 (3,175) (49,954)
Other non-operating
(expense) income, net 33,144 8,645 (1,148) 31,043
Total other income
(expense), net 758,158 23,468 1,777,824 (18,911)
INCOME (LOSS) FROM
OPERATIONS BEFORE
PROVISION FOR
INCOME TAXES (160,724) 449,290 (865,318) 1,220,727
PROVISION (BENEFIT)
FOR INCOME TAXES
Current 24,933 204,434 102,377 411,639
Deferred (68,651) -- (221,587) --
Total provision
(benefit) for
income taxes (43,718) 204,434 (119,210) 411,639
NET INCOME (LOSS) (117,006) 244,856 (746,108) 809,088
OTHER COMPREHENSIVE
(LOSS) INCOME
Foreign currency
Translation
adjustment 8,784 469 37,837 (44,436)
COMPREHENSIVE INCOME
(LOSS) $(108,222) $245,325 $(708,271) $764,652
EARNINGS (LOSS) PER
COMMON SHARE:
Basic $(0.00) $0.01 $(0.02) $0.03
Diluted $(0.00) $0.01 $(0.02) $0.03
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 29,938,818 27,460,695 29,931,806 24,415,471
Diluted 29,938,818 30,171,968 29,931,806 26,044,405
