SEC Company Response from Smart Powerr Corp. (CREG) (CIK 0000721693) (CREG) — Feb 22, 2019
Smart Powerr Corp. (CREG) (CIK 0000721693)
Date: Feb. 22, 2019 · CIK: 0000721693 · Accession: 0001213900-19-003006
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-12536
Letter
Via EDGAR United States Securities and Exchange Commission Division of Corporation Finance Office of Consumer Products Form 10-K for the Fiscal Year Ended December 31, 2017 Filed April 13, 2018 Response Dated October 9, 2018 File No. 1-34625
Dear Mr. Thompson:
China Recycling Energy Corporation (“CREG” or the “Company” and sometimes referred to as “we” or “our”) is filing a response to the SEC Comment Letter, dated December 4, 2018 (the “Comment Letter”), in connection with complying with the issues and outstanding disclosure items set forth therein. For convenience of reference, we have included in this response letter the same caption and paragraph numbers, as well as the text of the comments, set forth in the Comment Letter followed by our responses thereto.
Item 8. Financial Statements and Supplementary Data
1. Organization and Description of Business
Erdos TCH – Joint Venture, page F-6
1. We reviewed your response to comment 1. We object to your accounting for this modification. You elected to estimate variable lease payments and include them in your calculation of minimum lease payments, which directly contradicts the definition of minimum lease payments in ASC 840. Please revise your financial statements accordingly.
Response:
Attached please find our Form 10-Q/A for the quarter ended June 30, 2016, in which we reevaluate the leases for Erdos TCH as a result of a supplemental agreement effective on May 1, 2016, wherein Erdos TCH cancelled monthly minimum lease payments from Erdos, charged Erdos based on actual electricity sold at RMB 0.30 / Kwh, and concluded the lease payments that depend on a factor directly related to the future use of the leased property were contingent rentals and, accordingly, were excluded from minimum lease payments in their entirety. The Company therefore wrote off the net investment receivables of these leases and treated them as operating leases starting on May 1, 2016.
If you have any further comments or require any further information or if any questions should arise in connection with this submission, please call Mr. Jeffrey Li at (202) 298-1735 or Ms. Chelsea Anderson at (206) 816-1312 at Garvey Schubert Barer.
Very
truly yours,
/s/
Guohua Ku
Show Raw Text
CORRESP
1
filename1.htm
February
22, 2019
Via
EDGAR
United
States Securities and Exchange Commission
Division
of Corporation Finance
100 F Street, NE
Washington, D.C. 20549-0405
Attn: William H. Thompson,
Accounting Branch Chief
Office
of Consumer Products
Re:
China
Recycling Energy Corporation
Form
10-K for the Fiscal Year Ended December 31, 2017
Filed
April 13, 2018
Response
Dated October 9, 2018
File
No. 1-34625
Dear
Mr. Thompson:
China
Recycling Energy Corporation (“CREG” or the “Company” and sometimes referred to as “we” or
“our”) is filing a response to the SEC Comment Letter, dated December 4, 2018 (the “Comment Letter”),
in connection with complying with the issues and outstanding disclosure items set forth therein. For convenience of reference,
we have included in this response letter the same caption and paragraph numbers, as well as the text of the comments, set forth
in the Comment Letter followed by our responses thereto.
Item
8. Financial Statements and Supplementary Data
1.
Organization and Description of Business
Erdos
TCH – Joint Venture, page F-6
1.
We reviewed your response to comment 1. We object to your accounting for this modification. You elected to estimate variable lease
payments and include them in your calculation of minimum lease payments, which directly contradicts the definition of minimum
lease payments in ASC 840. Please revise your financial statements accordingly.
Response:
Attached
please find our Form 10-Q/A for the quarter ended June 30, 2016, in which we reevaluate the leases for Erdos TCH as a result of
a supplemental agreement effective on May 1, 2016, wherein Erdos TCH cancelled monthly minimum lease payments from Erdos, charged
Erdos based on actual electricity sold at RMB 0.30 / Kwh, and concluded the lease payments that depend on a factor directly related
to the future use of the leased property were contingent rentals and, accordingly, were excluded from minimum lease payments in
their entirety. The Company therefore wrote off the net investment receivables of these leases and treated them as
operating leases starting on May 1, 2016.
If
you have any further comments or require any further information or if any questions should arise in connection with this submission,
please call Mr. Jeffrey Li at (202) 298-1735 or Ms. Chelsea Anderson at (206) 816-1312 at Garvey Schubert Barer.
Very
truly yours,
/s/
Guohua Ku
Guohua
Ku
Chief
Executive Officer
China
Recycle Energy Corporation
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2016
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 No. 000-12536
China
Recycling Energy Corporation
(Exact
Name of Registrant as Specified in Its Charter)
Nevada
90-0093373
(State
or other jurisdiction of
incorporation
or organization)
(I.R.S.
Employer
Identification
No.)
12/F,
Tower A
Chang
An International Building
No.
88 Nan Guan Zheng Jie
Xi’an
City, Shaanxi Province, China
(Address
of Principal Executive Offices, Zip Code)
Registrant’s
Telephone Number, Including Area Code: + 86-29-8765-1097
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging
growth company. See 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
The number of shares outstanding of the registrant’s Common
Stock, as of August 10, 2016 was 8,310,198.
EXPLANATORY NOTE
In response to
a comment letter received from the Securities and Exchange Commission (the “SEC”), dated December 4, 2018, China Recycling
Energy Corporation (the “Company,” “we,” “us” or “our”) is filing this Amendment
No. 1 on Form 10-Q/A to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, originally filed with the
SEC on August 15, 2016 (the “Original Form 10-Q”) for the following purposes: reevaluate the leases for Erdos TCH
as a result of a supplemental agreement effective on May 1, 2016, wherein Erdos TCH cancelled monthly minimum lease payments from
Erdos, charged Erdos based on actual electricity sold at RMB 0.30 / Kwh, and concluded the lease payments that depend on a factor
directly related to the future use of the leased property were contingent rentals and, accordingly, were excluded from minimum
lease payments in their entirety. The Company therefore wrote off the net investment receivables of these leases and treated them
as operating leases starting on May 1, 2016.
This Form 10-Q/A
should be read in conjunction with the Company’s periodic filings made with the SEC subsequent to the filing date of the
Original Form 10-Q, including any amendments to those filings, as well as any Current Reports, filed on Form 8-K subsequent to
the date of the Original Form 10-Q. In addition, in accordance with applicable rules and regulations promulgated by the SEC, the
Company’s Chief Executive Officer and Chief Financial Officer are providing currently dated certifications in connection
with this Form 10-Q/A. The certifications are filed as Exhibits 31.3, 31.4, 32.3 and 32.4. Because this Form 10-Q/A sets forth
the Original Form 10-Q in its entirety, it includes both items that have been changed as a result of the amended disclosures and
items that are unchanged from the Original Form 10-Q. Other than the revision of the disclosures as discussed above, this Form
10-Q/A speaks as of the original filing date of the Original Form 10-Q and has not been updated to reflect other events occurring
subsequent to the original filing date. This includes forward-looking statements and all other sections of this Form 10-Q/A that
were not directly impacted by this amendment, which should be read in their historical context.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
1
Item 1.
Consolidated Financial Statements
1
Consolidated Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015
1
Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited) – Three and Six Months Ended June 30, 2016 and June 30, 2015
2
Consolidated Statements of Cash Flows (Unaudited) – Three and Six Months Ended June 30, 2016 and June 30, 2015
3
Notes to Consolidated Financial Statements (Unaudited)
4
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
47
Item 4.
Controls and Procedures
47
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings
48
Item 1A.
Risk Factors
48
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
48
Item 3.
Defaults Upon Senior Securities
48
Item 4.
Mine Safety Disclosures
48
Item 5.
Other Information
48
Item 6.
Exhibits
49
PART
I – FINANCIAL INFORMATION
Item 1.
Financial Statements
CHINA
RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
AS
OF JUNE 30, 2016 (UNAUDITED) AND DECEMBER 31, 2015
2016
(Restated)
2015
ASSETS
CURRENT ASSETS
Cash
and equivalents
$ 42,736,716
$ 41,749,388
Restricted
cash
542,888
1,130,344
Accounts
receivable
35,289,808
15,399,778
Current
portion of investment in sales-type leases, net
5,690,343
6,679,019
Interest
receivable on sales type leases
1,258,536
555,451
Prepaid
expenses
373,355
1,179,778
Other
receivables
238,833
553,886
Total
current assets
86,130,479
67,247,644
NON-CURRENT ASSETS
Investment
in sales-type leases, net
54,213,910
133,079,634
Long
term investment
1,035,110
950,470
Long
term deposit
55,850
57,033
Property
and equipment, net
35,159,888
17,724
Construction
in progress
88,629,529
115,522,068
Total
non-current assets
179,094,287
249,626,929
TOTAL
ASSETS
$ 265,224,766
$ 316,874,573
LIABILITIES
AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts
payable
$ 797,368
$ 427,732
Notes
payable - bank acceptances
995,295
1,130,344
Taxes
payable
1,163,427
1,058,417
Accrued
liabilities and other payables
2,596,722
3,199,395
Due
to related parties
44,328
44,059
Deferred
tax liability, net
1,071,441
1,538,105
Loans
payable - current
1,432,622
6,159,911
Interest
payable on entrusted loans
239,294
268,801
Current
portion of entrusted loan payable
42,224,635
43,119,379
Total
current liabilities
50,565,132
56,946,143
NONCURRENT LIABILITIES
Deferred
tax liability, net
3,018,445
10,771,348
Refundable
deposit from customers for systems leasing
1,070,696
1,555,378
Loans
payable
-
18,187,138
Entrusted
loan payable
15,381,831
15,707,773
Total
noncurrent liabilities
19,470,972
46,221,637
Total
liabilities
70,036,104
103,167,780
CONTINGENCIES AND
COMMITMENTS
STOCKHOLDERS' EQUITY
Common
stock, $0.001 par value; 100,000,000 shares authorized, 8,310,159 shares issued and outstanding as of June 30, 2016 and December
31, 2015, respectively
8,310
8,310
Additional
paid in capital
111,789,166
111,789,166
Statutory
reserve
14,059,945
13,823,789
Accumulated
other comprehensive income
(1,036,618 )
3,210,315
Retained
earnings
70,279,897
84,661,602
Total
Company stockholders' equity
195,100,700
213,493,182
Noncontrolling
interest
87,962
213,611
Total
equity
195,188,662
213,706,793
TOTAL
LIABILITIES AND EQUITY
$ 265,224,766
$ 316,874,573
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
1
CHINA
RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
SIX
MONTHS ENDED
JUNE 30,
THREE
MONTHS ENDED
JUNE 30,
2016
(Restated)
2015
2016
(Restated)
2015
Revenue
Sales
of systems
$ -
$ 24,474,612
$ -
$ 24,474,612
Contingent
rental income
1,107,721
275,427
1,100,962
101,089
Total revenue
1,107,721
24,750,039
1,100,962
24,575,701
Cost of sales
Cost
of systems and contingent rental income
921
21,476,876
-
21,464,596
Total
cost of sales
921
21,476,876
-
21,464,596
Gross profit
1,106,800
3,273,163
1,100,962
3,111,105
Interest income on
sales-type leases
8,197,534
12,821,625
3,316,004
6,329,343
Total
operating income
9,304,334
16,094,788
4,416,966
9,440,448
Operating expenses
General
and administrative
2,050,526
1,256,900
1,553,909
552,339
Total
operating expenses
2,050,526
1,256,900
1,553,909
552,339
Income from operations
7,253,808
14,837,888
2,863,057
8,888,109
Non-operating income
(expenses)
Interest
income
63,502
53,816
31,814
21,529
Interest
expense
(3,381,989 )
(1,802,684 )
(2,032,419 )
(1,308,979 )
Loss
on sale of construction in progress of Xuzhou Zhongtai
(2,822,679 )
-
-
-
Loss
on systems repurchase from Yida
(417,952 )
-
(417,952 )
-
Gain
on systems repurchase from Jitie
-
4,594,922
-
4,594,922
Impairment
loss of net investment receivable
(22,245,147 )
-
(22,245,147 )
-
Other
income
76,418
14,319
74,091
377,268
Total
non-operating income (expenses), net
(28,727,847 )
2,860,373
(24,589,613 )
3,684,740
Income (loss) before
income tax
(21,474,039 )
17,698,261
(21,726,556 )
12,572,849
Income
tax expense (benefit)
(7,181,285 )
2,299,463
(7,392,056 )
1,301,511
Income (loss) before
noncontrolling interest
(14,292,754 )
15,398,798
(14,334,500 )
11,271,338
Less:
loss attributable to noncontrolling interest
(147,205 )
(16,117 )
(95,925 )
(7,779 )
Net income (loss) attributable
to China Recycling Energy Corporation
(14,145,549 )
15,414,915
(14,238,575 )
11,279,117
Other comprehensive
items
Foreign
currency translation gain (loss) attributable to China Recycling Energy Corporation
(4,246,933 )
219,035
(5,316,590 )
1,012,750
Foreign
currency translation gain attributable to noncontrolling interest
21,556
187
21,021
1,151
Comprehensive
income (loss) attributable to China Recycling Energy Corporation
$ (18,392,482 )