China Energy Recovery Files 2009 Form 10-K

Filing Contains Revised Results for Fiscal 2008

Nov 03, 2010, 15:48 ET from China Energy Recovery Inc.

SHANGHAI, Nov. 3, 2010 /PRNewswire-Asia/ -- China Energy Recovery Inc. (CGYV.PK) ("CER"), an international leader in the design, fabrication, installation and servicing of waste heat recovery systems, announced today that it filed its Form 10-K for fiscal year ended Dec. 31, 2009,  with the U.S. Securities and Exchange Commission (SEC).

Fiscal 2009 results

For fiscal 2009, CER recorded $22.2 million in total revenue compared to $24.9 million in total revenue in the prior fiscal year. The company posted a net loss for the year of ($886,480) or ($0.03) per basic share compared to a net profit of $1.4 million or $0.05 per basic share in the prior year. CER's net loss in 2009 was primarily a result of the global economic disruption, which compelled the company to reduce its sales margins in order to maintain its contract flow, prevent contract cancellation and win new orders. This had an adverse impact on the company's overall margins and net revenues.

As of Dec. 31, 2009, CER's balance sheet showed the company had $2.4 million in cash with $23.9 million in total current assets and $23.5 million in total current liabilities.

"We are gratified to have our 2009 annual report filing in place after unexpected delays due to extra work that came about during the transition from our prior audit firm to PricewaterhouseCoopers," Qinghuan Wu, CER Chairman and Chief Executive Officer, said. "With that matter settled, we are moving quickly to bring our remaining quarterly report filings up to date.

"CER's business continues to move ahead. We are booking orders and shipping systems to a growing list of customers," Mr. Wu said. "We also enjoy a growing reputation for the performance of our waste heat recovery technology. This recognition comes at a time when our customer base in China and abroad is more aware of the economic advantages that CER's heat recovery systems provide; both as retrofit solutions for existing industrial plants and as integral systems in new plants."

Restated 2008 results

The company's annual report on Form 10-K for fiscal 2009 restates results for fiscal 2008.  In the process of changing accountants and doing an internal audit of the 2008 financial results, the company found that it needed to change certain entries that were no longer supported by prior analysis and assumptions and that there were certain mistakes.  The company had stated in May of this year that it would be restating the 2008 financial results.

Among CER's restated results for fiscal 2008 was an increase in total current assets of $174,314 and a reduction in total current liabilities of $1.2 million on the company's balance sheet. On CER's Consolidated Statements of Income for fiscal 2008, the restatement adds $1.7 million to total revenues, reduces the total cost of revenues by almost $394,000 and adds $514,000 to the company's income from operations. Net income for fiscal 2008 was restated with an additional $264,239 for a total net income of approximately $1.4 million, which after adjustments for currency translation is equal to $0.05 per basic share based on 25.7 million shares outstanding.  For more detail on CER's restated 2008 financials, see the company's Form 10-K for fiscal 2009.

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 as much as two-thirds of that wasted energy and converting it into usable heat energy or electricity, dramatically lowering energy costs. Energy recovery systems are also capable of lowering heat pollution and 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 engineering and manufacturing company that specializes in the design, construction and installation of waste heat energy recovery systems that captures and converts industrial waste energy produced by heavy industrial processes such as petroleum and chemicals refining, paper manufacturing and refining into low-cost electrical power, which enables industrial manufacturers to reduce their energy costs, shrink their emissions footprint and generate salable emissions credits.  The company's primary focus is the Chinese market; however, CER's systems are operating in heavy industrial plants located in Egypt, Korea, Vietnam and Malaysia. CER is building China's first state-of-the-art, energy recovery system research and fabrication facility, which will allow CER to meet increased demand for its products and services. For more information on CER, please visit: http://www.chinaenergyrecovery.com/s/Home.asp. Information on CER's website does not comprise a part of this press release.

Forward-Looking Statement Disclaimer

This press release includes "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, included in the press release that address activities, events or developments that CER believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors that CER believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of CER and may not materialize, including, without limitation, the efficacy and market acceptance of CER's products and services, CER's ability to execute on its business plan and strategies and CER's ability to successfully complete orders and collect revenues therefrom. Investors are cautioned that any such statements are not guarantees of future performance. Actual results or developments may differ materially from those projected in the forward-looking statements as a result of many factors. Furthermore, CER does not intend (and is not obligated) to update publicly any forward-looking statements, except as required by law. The contents of this release should be considered in conjunction with the warnings and cautionary statements contained in CER's filings with the Securities and Exchange Commission.


CHINA ENERGY RECOVERY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2008 AND 2009

ASSETS




December 31


2008

December 31

Restated

2009

CURRENT ASSETS:



Cash

6,136,403

2,386,573

Restricted cash

597,949

-

Notes receivable

120,749

411,049

Accounts receivable, net of allowance for doubtful accounts

5,109,456

6,601,921

Accounts receivable - related party

1,006,060

-

Inventories

7,774,775

8,574,775

Other current assets and receivables

98,271

892,657

Deferred financial cost - current

-

674,748

Deferred tax assets - current

-

67,276

Advances on inventory purchases

1,044,807

4,271,054

Total current assets

21,888,470

23,880,053




EQUIPMENT, net

850,888

758,888




OTHER ASSETS:



Deferred tax assets

63,241

133,758

Intangible assets

-

2,439,022

Deferred financial cost

-

215,623

Long-term accounts receivable

102,690

6,830,615

Total other assets

165,931

9,619,018




Total assets

22,905,289

34,257,959




LIABILITIES AND SHAREHOLDERS' EQUITY






CURRENT LIABILITIES:



Accounts payable

3,426,926

4,188,205

Other payables

466,392

1,100,111

Other payables - related party

65,078

-

Accrued liabilities

21,228

644,971

Advances from customers

7,044,234

11,226,273

Taxes payable

2,692,613

2,956,476

Short-term bank loans

381,420

880,200

Derivative liability, current

-

435,500

Convertible note, current

-

2,023,720

Total current liabilities

14,097,891

23,455,456




NON-CURRENT LIABILITIES:



Warrant liability

-

1,372,947

Derivative liability

-

435,500

Convertible note

-

1,938,408

Total non-current liabilities

-

3,746,855

Total  Liabilities

14,097,891

27,202,311




Commitment and contingency

-

-




SHAREHOLDERS' EQUITY:



Preferred stock(US$0.001 par value; 50,000,000 shares authorized, 714,963 and 662,963 shares issued and outstanding as of December 31, 2008 and 2009, respectively)

715

626




Common stock(US$0.001 par value; 100,000,000  shares authorized, 29,912,573 and 30,638,720 shares issued and outstanding as of December 31, 2008 and 2009, respectively)

29,913

30,639

Additional Paid-in-capital

9,058,283

8,163,224

Accumulated deficit

-307,678

-1,194,158

Statutory reserves

132,802

132,802

Accumulated other comprehensive loss

-106,637

-77,485

Total shareholders' equity

8,807,398

7,055,648




Total liabilities and shareholders' equity

22,905,289

34,257,959




CHINA ENERGY RECOVERY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR YEARS ENDED DECEMBER 31, 2008 AND 2009


Year ended December 31,


2008

Restated


2009

REVENUES



Third parties

21,315,226

22,194,443

Related party

3,589,550

-

Total revenue

24,904,776

22,194,443




COST OF REVENUES



Third parties

(16,549,648)

(18,842,557)

Related party

(1,951,549)

-

Total cost of revenues

(18,501,197)

(18,842,557)




GROSS PROFIT

6,403,579

3,351,886




SELLING, GENERAL AND  ADMINISTRATIVE EXPENSES

(4,281,863)


(5,746,743)




INCOME/(LOSS) FROM  OPERATIONS

2,121,716

(2,394,857)




OTHER INCOME, NET:



 Change in fair value of warrant liability

-

1,539,233

Change in fair value of derivative liability

-

399,500

Non-operating income, net

149,377

80,692

Interest expenses

(80,276)

(868,388)

Total other income , net

69,101

1,151,037







INCOME/(LOSS) FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES

2,190,817

(1,243,820)




INCOME TAXES (EXPENSES)/BENEFITS

(815,915)

357,340




NET INCOME/(LOSS)

1,374,902

(886,480)




OTHER COMPREHENSIVE INCOME/(LOSS)



Foreign currency translation adjustment

(57,717)

29,152




COMPREHENSIVE INCOME/(LOSS)

1,317,185

(857,328)




Earnings/(loss) per share



Basic

0.05

(0.03)

Diluted

0.05

(0.03)

Weighted average ordinary shares outstanding



Basic

25,691,979

29,952,798

Diluted

26,302,263

29,952,798




Contact:  




Adam Friedman

Jessica Hu

Adam Friedman Associates

China Energy Recovery

+1 212.981.2529

+86-21-5556-0020 x503

adam@adam-friedman.com

Hudie@cerenergy.com




SOURCE China Energy Recovery Inc.



RELATED LINKS

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