CREG 10-K & 10-Q changes, risk factors and insider trading
Smart Powerr Corp. · OTC · Services-Business Services, Nec · CIK 721693 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “If we fail to meet all applicable Nasdaq requirements and the Nasdaq Stock Market LLC determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock, impair the value of our common stock and harm our business.”
Removed heading “The market price of our common stock has recently declined significantly, and our common stock could be delisted from Nasdaq or trading could be suspended.”
Removed heading “We may be unable to maintain compliance with Nasdaq Marketplace Rules which could cause our common stock to be delisted from the Nasdaq Capital Market. This could result in the lack of a market for our common stock, cause a decrease in the value of our common stock, and adversely affect our business, financial condition and results of operations.”
Largest changes
“If we fail to meet all applicable Nasdaq requirements and the Nasdaq Stock Market LLC determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock, impair the value of our common stock and harm our business.”see in full comparison
“Our common stock will continue to be listed and traded on the Nasdaq Capital Market, subject to our compliance with the other listing requirements of the Nasdaq Capital Market. We cannot assure you that we will not receive other deficiency notifications from Nasdaq in the future. A decline in the closing price of our common stock could result in a breach of the requirements for listing on the Nasdaq Capital Market. If we do not maintain compliance, Nasdaq could commence suspension or delisting procedures in respect of our common stock. …”see in full comparison
“We may be unable to maintain compliance with Nasdaq Marketplace Rules which could cause our common stock to be delisted from the Nasdaq Capital Market. This could result in the lack of a market for our common stock, cause a decrease in the value of our common stock, and adversely affect our business, financial condition and results of operations.”see in full comparison
“The market price of our common stock has recently declined significantly, and our common stock could be delisted from Nasdaq or trading could be suspended.”see in full comparison
“Under the Nasdaq Marketplace Rules our common stock must maintain a minimum price of $1.00 per share for continued inclusion on the Nasdaq Capital Market. The per share price of our common stock has fluctuated significantly. We cannot guarantee that our stock price will remain at or above $1.00 per share and if the price again drops below $1.00 per share, the stock could become subject to delisting. If our common stock is delisted, trading of the stock will most likely take place on an over-the-counter market established for unlisted securities. …”see in full comparison
“COVID-19 is adversely affecting, and is expected to continue to adversely affect, certain elements of our business, including as a result of impacts associated with preventive and precautionary measures that we, other businesses, our communities and governments are taking. From April 2020 to the end of 2021, there were some new COVID-19 cases discovered in a few provinces of China, however, the number of new cases are not significant due to PRC government’s strict control. …”see in full comparison
Full comparison: every changed paragraph (17)
While we recognize a large portion of the revenue from each project when it goes on-line, all of the cash flow from the project is received in even monthly payments across the term of the lease. Although our revenues may be high, the initial cash outlay required for each project is substantial and even with the recovery of this cost in the early years of each lease, we may need to raise additional capital resulting in a dilution in your holdings. This discrepancy between revenue recognition and cash flow could also contribute to volatility in our stock price. We now do not have such business in 2025 and 2024.
In addition, our business could be affected by public health epidemics, such as the outbreak of avian influenza, severe acute respiratory syndrome, or SARS, Zika virus, Ebola virus, COVID-19 or other disease. Should there be such a health epidemic in the future, our business, results of operations, financial condition and prospects could be materially adversely affected to the extent that such health epidemics weaken the Chinese and global economy in general.
In recent months, the continued, global spread
of COVID-19 has led to disruption and volatility in the global capital markets, which has increased the cost of, and adversely impacted
access to, capital (including the commercial paper markets) and increased economic uncertainty. It is likely that the pandemic will cause
an economic slowdown of potentially extended duration, and it is possible that it could cause a global recession. To reduce the spread
of the COVID-19, the Chinese government has employed measures including city lockdowns, quarantines, travel restrictions, suspension of
business activities and school closures. The COVID-19 pandemic has resulted in, among other things, quarantines, travel restrictions,
and the temporary closure of office buildings and facilities in China, Hong Kong and in the U.S.
COVID-19 is adversely affecting, and is expected
to continue to adversely affect, certain elements of our business, including as a result of impacts associated with preventive and precautionary
measures that we, other businesses, our communities and governments are taking. From April 2020 to the end of 2021, there were some new
COVID-19 cases discovered in a few provinces of China, however, the number of new cases are not significant due to PRC government’s
strict control. From January 2022 to date, COVID-19 case fluctuated and increased again in many cities of China including Xi’an
Province where the Company is located, As a result of such increases, there have been periodic short-term lockdowns and restrictions on
travel in Xi’an Province and other areas of China, the Company’s operations have been adversely impacted by the travel and
work restrictions imposed on a temporary basis in China to limit the spread of COVID-19. Due to these impacts and measures, we have experienced
and expect to continue to experience delays in our internal product development and unpredictable reductions in demand for certain of
our products and services. Our employees have been required to work from home or not go into their offices. Such restrictions are slowly
being lifted. If the pandemic continues and conditions worsen, we expect to experience additional adverse impacts on our operational and
commercial activities and customer orders, which adverse impacts may be material, and it remains uncertain what impact these adverse impacts
would have on future sales and customer orders even if conditions begin to improve. In addition to existing travel restrictions, jurisdictions
may continue to close borders, impose prolonged quarantines and further restrict travel and business activity, which could significantly
impact our ability to support our operations and customers. Further, such travel restrictions and slowed-down business activities may
affect the operation of our customer and result in decrease of our products and services, which could adversely affect our financial results.
Due to the speed with which the COVID-19 situation is developing, the global breadth of its spread and the range of governmental and community
reactions thereto, there is uncertainty around its duration and ultimate impact; therefore, any negative impact on our overall financial
and operating results (including without limitation our liquidity) cannot be reasonably estimated at this time, but the pandemic could
lead to extended disruption of economic activity and the impact on our financial and operating results could be material.
On December 16, 2021, SEC announced the PCAOB
designated China and Hong Kong as the jurisdictions where the PCAOB was not allowed to conduct full and complete audit inspections as
mandated under the HFCAA. The Company’s auditor, Kreit & Chiu, is based in New York, New York, and therefore is not affected
by this mandate by the PCAOB.
KreitEnrome &LLP, Chiu, theour independent registered public
accounting firm that issued the audit report for the fiscal year ended December 31, 2022 included elsewhere in this annual report. As
an auditor of companies traded publicly in the U.S. and a firm registered with the PCAOB, is subject to laws in the U.S. pursuant to which
the PCAOB conducts regular inspections to assess such auditor’s compliance with the applicable professional standards. Kreit &
Chiu is headquartered in New York, New York, and is subject to inspection by the PCAOB on a regular basis. Enrome LLP, our independent
registered public accounting firm for the fiscal years ended December 31, 20232024 and 2024,2025, is based in Singapore and is registered with
PCAOB and subject
to PCAOB inspection. Therefore, we believe neither Kreit & Chiu, our previous auditor, nor Enrome LLP, our current
auditorLLP is subject to the determinations as to the inability to inspect or investigate registered
firms announced by the PCAOB on December
16, 2021.
However, recent developments with respect to audits
of China-based companies create uncertainty about the ability of Kreit & Chiu or Enrome LLP to fully cooperate with the PCAOB’s
request for audit
workpapers without the approval of the Chinese authorities. We cannot assure you whether Nasdaq or regulatory authorities
would apply
additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and
quality control
procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates
to the audit
of our financial statements. In the event it is later determined that the PCAOB is unable to inspect or investigate completely
the Company’s
auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could
cause trading in the
Company’s securities to be prohibited under the HFCAA ultimately result in a determination by a securities
exchange to delist the
Company’s securities. It remains unclear what the SEC’s implementation process related to the above
rules will entail or what
further actions the SEC, the PCAOB or Nasdaq will take to address these issues and what impact those actions
will have on U.S. companies
that have significant operations in the PRC and have securities listed on a U.S. stock exchange. In addition,
the above amendments and
any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access
to audit information
could create some uncertainty for investors, the market price of our common stock could be adversely affected, and
we could be delisted
if we and our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit
firm, which would require
significant expense and management time.
If we fail to meet all applicable Nasdaq requirements and the Nasdaq Stock Market LLC determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock, impair the value of our common stock and harm our business.
The market price of our common stock has
recently declined significantly, and our common stock could be delisted from Nasdaq or trading could be suspended.
The listing of our common stock on the Nasdaq
Capital Market is contingent on our compliance with the Nasdaq Capital Market’s conditions for continued listing. On September 24,
2024, the Company received a written notification from Nasdaq, notifying the Company that it is not in compliance with the minimum bid
price requirement set forth in Nasdaq Listing Rules for continued listing on the Nasdaq. Nasdaq Listing Rule 5550(a)(2) requires listed
securities to maintain a minimum bid price of US$1.00 per share (the “Minimum Bid Price Requirement”), and Nasdaq Listing
Rule 5810(c)(3)(A) provides that a failure to meet the Minimum Bid Price Requirement exists if the deficiency continues for a period of
30 consecutive business days. Based on the closing bid price of our common stock for the 37 consecutive business days, the Company no
longer meets the Minimum Bid Price Requirement. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided 180 calendar
days, or until March 24, 2025, to regain compliance with the Minimum Bid Price Requirement. In the event the Company does not regain compliance
by March 24, 2025, the Company may be eligible for an additional 180 calendar day grace period. ToOn qualify,August 1, 2025, the Company willreceived
a beletter required
to meetfrom the continuedStaff listingnotifying requirementthe forCompany marketthat valuethe ofStaff publiclyhad helddetermined shares and all other initial listing standardsthat for the Nasdaqlast 10 consecutive business days, from July
Capital18, Market,2025 withto July 31, 2025, the exception of theclosing bid price requirement, and will need to provide written notice of its intention to cure the
deficiency duringfor the secondCompany’s compliance period, including by effecting a reversecommon stock split,was ifat necessary.least If$1.00 per share, and, accordingly,
the Company chooses to
implement a reverse stock split, it must complete the split no later than ten (10) business days prior to the expiration of the second
compliance period if granted. As of the date of this annual report, Company has providedregained writtencompliance noticewith toListing NasdaqRule of its intention
to cure5550(a)(2)and the deficiencymatter duringis thenow second compliance period by effecting a reverse stock split, if necessary. If the Company does not qualify
for the second compliance period or fails to regain compliance during the second 180-day period, then Nasdaq will notify the Company of
its determination to delist the Company.closed.
There can be no assurance that we will continue to maintain compliance with the requirements for listing our common stock on Nasdaq. Any potential delisting of our common stock from the Nasdaq Capital Market would likely result in decreased liquidity and increased volatility for our common stock and would adversely affect our ability to raise additional capital or to enter into strategic transactions. Any potential delisting of our common stock from the Nasdaq Capital Market would also make it more difficult for our stockholders to sell our common stock in the public market.
Additionally, the market price of our common stock may decline further and stockholders may lose some or all of their investment.
Our common stock will continue to be listed and
traded on the Nasdaq Capital Market, subject to our compliance with the other listing requirements of the Nasdaq Capital Market. We cannot
assure you that we will not receive other deficiency notifications from Nasdaq in the future. A decline in the closing price of our common
stock could result in a breach of the requirements for listing on the Nasdaq Capital Market. If we do not maintain compliance, Nasdaq
could commence suspension or delisting procedures in respect of our common stock. The commencement of suspension or delisting procedures
by an exchange remains at the discretion of such exchange and would be publicly announced by the exchange. If a suspension or delisting
were to occur, there would be significantly less liquidity in the suspended or delisted securities. In addition, our ability to raise
additional necessary capital through equity or debt financing would be greatly impaired. Furthermore, with respect to any suspended or
delisted common stock, we would expect decreases in institutional and other investor demand, analyst coverage, market making activity
and information available concerning trading prices and volume, and fewer broker-dealers would be willing to execute trades with respect
to such common stock. A suspension or delisting would likely decrease the attractiveness of our common stock to investors and cause the
trading volume of our common stock to decline, which could result in a further decline in the market price of our common stock.
We may be unable to maintain compliance
with Nasdaq Marketplace Rules which could cause our common stock to be delisted from the Nasdaq Capital Market. This could result in the
lack of a market for our common stock, cause a decrease in the value of our common stock, and adversely affect our business, financial
condition and results of operations.
Under the Nasdaq Marketplace Rules our common
stock must maintain a minimum price of $1.00 per share for continued inclusion on the Nasdaq Capital Market. The per share price of our
common stock has fluctuated significantly. We cannot guarantee that our stock price will remain at or above $1.00 per share and if the
price again drops below $1.00 per share, the stock could become subject to delisting. If our common stock is delisted, trading of the
stock will most likely take place on an over-the-counter market established for unlisted securities. An investor is likely to find it
less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many
investors may not buy or sell our common stock due to difficulty in accessing over-the-counter markets, or due to policies preventing
them from trading in securities not listed on a national exchange or other reasons. For these reasons and others, delisting would adversely
affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an
adverse effect on our business, financial condition and results of operations by limiting our ability to attract and retain qualified
executives and employees and limiting our ability to raise capital.
Previously, we received letters from the Listing
Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, because the Company has not yet filed
its Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Quarterly Reports on Form 10-Qs for the periods ended March
31, 2022 and June 30, 2022, the Company does not comply with Nasdaq Listing Rule 5250(c)(1) for continued listing. The Company had until
October 12, 2022 to file all delinquent filings and regain compliance. On October 12, 2022, the Company received a notice of delinquency
compliance from Nasdaq indicating that, based on the filings of its Form 10-Qs for the periods ended March 31, 2022 and June 30, 2022
on October 11, 2022, Nasdaq determined the Company complied with the Rule.
On May 23, 2023, we received a letter from the
Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, because
the Company has not yet filed its Quarterly Report on Form 10-Q for the period ended March 31, 2023 (the “Form 10-Q”), the
Company does not comply with Nasdaq Listing Rule 5250(c)(1) for continued listing. The Company had until July
24, 2023 to cure the deficiency or to submit a plan to regain compliance. On June 21, 2023, the Company filed its quarterly report
on Form 10-Q for the period ended March 31, 2023. Accordingly, Nasdaq determined the Company complies with the Listing Rule and closed
the matter.
Management's Discussion & Analysis (MD&A)
New heading “OPERATING EXPENSES.”
New heading “NET NON-OPERATING INCOME (EXPENSES).”
New heading “INCOME TAX EXPENSE.”
Removed heading “Our Subsidiaries and Projects”
Removed heading “Erdos TCH – Joint Venture”
Removed heading “CRITICAL ACCOUNTING POLICIES AND ESTIMATES”
Removed heading “Basis of Presentation”
Removed heading “Principle of Consolidation”
Removed heading “Use of Estimates”
Removed heading “Concentration of Credit Risk”
Removed heading “Revenue Recognition”
Removed heading “Sales-type Leasing and Related Revenue Recognition”
Removed heading “Contingent Rental Income”
Removed heading “Foreign Currency Translation and Comprehensive Income (Loss)”
Largest changes
“The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute its business strategy and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.”see in full comparison
“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.”see in full comparison
“The Company’s financial statements are prepared assuming that the Company will continue as a going concern.”see in full comparison
Full comparison: every changed paragraph (71)
This report on Form
10-KReport and other
reports filed by the Company from time to time with the SEC (collectively the “Filingsfilings”) contain or may contain forward-looking
forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management
as well
as estimates and assumptions made by the 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 the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the
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 the 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 annualthis report,Report, which
attempts to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations,
and prospects.
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 years ended December 31, 2024 and 2023,
the Company had a net loss of $ 1,559,012 and $746,786, respectively. The Company had an accumulated deficit of $62,056,383 as of December
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.
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 December 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 December 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.
Comparison of Operating
Results
of Operations for the years ended December 31, 20242025 and 20232024
The following table sets
forth theour operating results of our operations for the periodsdesignated indicatedperiods, expressed as a percentage of net sales. Certain columns may not add due to rounding.
SALES.
Total sales for the year ended December 31, 2025, amounted to $262,509. The company signed an Operation and Maintenance Contract for power stations. The contract has total amount RMB3.0 million (US$0.4 million) per annum, starting from 2025 to 2035 for 10 years with third parties. The Company recognized the revenue based on the time period.
COST OF SALES.
SALES.Cost Total
of sales for the years
year ended December 31, 20242025, andwas 2023 were $0.$145,895.
GROSS PROFIT.
COST OF SALES. Cost
of sales (“COS”) for the years ended December 31, 2024 and 2023 were $0.
GROSS PROFIT.
Gross profit forFor the yearsyear ended December
31, 20242025, and 2023 were $0 withthe gross margin ofwas 0%.44%.
OPERATING EXPENSES.
OPERATINGOperating EXPENSES. Operating
expenses consisted of general and administrative
expenses (“G&A”) totaling $ 3,132,219 for the year ended December 31, 2025,
compared to $1,093,468 for the year ended December 31,
2024, compared2024. toThis $798,473 for the year ended December 31, 2023,represented an increase
of $294,995$2,038,751 oryear-over-year. 36.9%.The Itincrease was mainly attributable to thean increase in financing costs of $948,648 and share-based compensation
of stock$831,520, compensationpreviously indeductible $139,066input VAT from prior years is now confirmed as non-deductible and legalrecorded serviceas feesan in $133,025, partially offset by the decreaseexpense of service expenses in $34,896.$168,204.
NET NON-OPERATING INCOME (EXPENSES).
NET NON-OPERATING
INCOME (EXPENSES). Net non-operating income (expenses )
consisted of gain or loss onfrom note conversion, interest income, interest expenses,
and other miscellaneous expenses. For the year ended
December 31, 2024,2025, net non-operating expensesincome waswere $451,547$156,100 compared to non-operating incomeexpenses
of $148,387$451,547 for the year ended December 31, 2023,2024. mainlyThe dueprimary reason was the provision of
financial support to other companies, which generated interest income of $264,346, coupled with the badreversal debtof a $200,000 provision infor
$200,000impaired for the prepayment made in fiscal 2024 for the market and project service.prepayments.
INCOME TAX EXPENSE.
INCOMEIncome TAX EXPENSE. Income
tax expense was $13,997$40,536 for the year ended
December 31, 2024,2025, compared with income tax expense $96,700of $13,997 for the year endedDecember
31, December 31,
2023.2024. The consolidated effective income tax rate for the year ended December 31, 2025,
and 2024 were 2.4% and 2023 were 0% and 1.6%,1.5%, respectively. In
2024， 2025, Management believesconcluded that the realizationrealizability of related tax benefits from these losses
was uncertain due to the continuing operating losses at the US parent company’s continuing
operating losses.company. Accordingly, a 100% deferred tax asset valuation allowance was provided.provided
against the deferred tax asset.
NET LOSS.
NET LOSS. Net loss for the year ended December
31, 20242025, was $ 1,559,012$2,900,041 compared to $746,786loss of $1,559,012 for the year ended December 31,
2024, 2023,representing an increase ofin net loss of $812,226.$1,341,029. ThisThe increase
in net loss was mainly duedriven toby increasedrising operating expenses and
the reversal of impairment provision of advance to supplier,provision, as discussedpreviously previously.discussed.
As of December
31, 2024,
2025, the Company hadmaintained cash and equivalents of $25,341,$40,156, other current assets (excluding cash and equivalents) of $121.09 $156.78
million, current liabilities
of $13.10$11.14 million, and working capital of $108.02$145.68 million, with a current ratio of 9.25:114.09 and a liability-to-equity
debt-to-equity ratio of 0.160.09:1.
The following is a summary
of cash flows provided by or used in each of the indicated types of activitiesactivities, duringfor the years ended December
31, 20242025, and 20232024:
Net cash generated from operating activities was $66.9 million for the year ended December 31, 2025, compared to $10.8 million net cash used for the year ended December 31, 2024. The increase in net cash inflow for the year ended December 31, 2025, was mainly driven by the collection of $68.1 million in advance payments to suppliers, which generated cash inflows.
Net cash used in investing activities was $99.5 million and net cash provided by investing activities was $11.0 million respectively for the year ended December 31, 2025, and 2024. For the year ended December 31, 2025, the Company had new short-term loan receivable of $156.8 million, and collected back $58.0 million.
Net cash provided by financing activities was $32.1 million during the year ended December 31, 2025, primarily attributable to proceeds from equity issuance.
We believe that inflation did not have or is not expected to have a significant adverse impact on our operating results in 2025.
What changed in the latest 10-Q
Risk Factors
New heading “Risks Related to Owning Our Common Stock”
New heading “We have received a notice of delisting or failure to satisfy a continued listing rule from Nasdaq. If we are unable to regain or maintain compliance, our common stock could be delisted, which could adversely affect our stock price, liquidity, and ability to raise capital.”
Largest changes
“We have received a notice of delisting or failure to satisfy a continued listing rule from Nasdaq. If we are unable to regain or maintain compliance, our common stock could be delisted, which could adversely affect our stock price, liquidity, and ability to raise capital.”see in full comparison
“Delisting from the Nasdaq Capital Market or any Nasdaq market could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. In addition, without a Nasdaq market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our common stock, the sale or purchase of our common stock would likely be made more difficult and the trading volume and liquidity of our common stock could decline. Delisting from Nasdaq could also make it more difficult for us to raise additional capital. …”see in full comparison
“The Company requested an appeal of such determination to Nasdaq’s Hearings Panel on May 7, 2026. The hearing request will automatically stay any suspension or delisting action pending the hearing and the expiration of any additional extension period if granted by the Panel following the hearing. In the event that the Company regains compliance with the Bid Price Rule prior to any scheduled hearing date, then a hearing may not be necessary, as the Company may be mooted out of the hearings process. …”see in full comparison
“On May 1, 2026, we received a notice of delisting from the Nasdaq Stock Market, LLC. The notice stated that we had fallen below compliance with respect to the continued listing standard set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules because the closing bid price of our common stock over the previous 30 consecutive trading-day period had fallen below $1.00 per share. …”see in full comparison
We are a smaller reporting company and accordingly we are not required to provide information required by this Item.see in full comparisonMoreover, there have been no material changes in ourOur risk factorsfrom thoseare disclosed in Part I, Item1A,1A of our Annual Report on Form10-K10-K. The risk factors set forth below supplement those disclosures and should be read together with the risk factors in our Annual Report. Except asofsetandforthforbelow, there have been no material changes to theyearrisk factors previously disclosed in our Annual Report during the three months endedDecemberMarch 31,2024.2026. 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.
Full comparison: every changed paragraph (6)
We are a smaller reporting company and accordingly
we are not required to provide information required by this Item. Moreover, there have been no material changes in ourOur risk factors from
thoseare disclosed in Part I, Item 1A,1A of our Annual Report on Form 10-K10-K. The risk factors set forth below supplement those
disclosures and should be read together with the risk factors in our Annual Report. Except as ofset andforth forbelow, there have been no material
changes to the yearrisk factors previously disclosed in our Annual Report during the three months ended DecemberMarch 31, 2024.2026. 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.
Risks Related to Owning Our Common Stock
We have received a notice of delisting or failure to satisfy a continued listing rule from Nasdaq. If we are unable to regain or maintain compliance, our common stock could be delisted, which could adversely affect our stock price, liquidity, and ability to raise capital.
On May 1, 2026, we received a notice of delisting from the Nasdaq Stock Market, LLC. The notice stated that we had fallen below compliance with respect to the continued listing standard set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules because the closing bid price of our common stock over the previous 30 consecutive trading-day period had fallen below $1.00 per share. Pursuant to Listing Rule 5810(c)(3)(A)(iv), the Company was not eligible for any compliance period specified in Rule 5810(c)(3)(A) due to the fact that the Company has effected a reverse stock split over the prior one-year period.
The Company requested an appeal of such determination to Nasdaq’s Hearings Panel on May 7, 2026. The hearing request will automatically stay any suspension or delisting action pending the hearing and the expiration of any additional extension period if granted by the Panel following the hearing. In the event that the Company regains compliance with the Bid Price Rule prior to any scheduled hearing date, then a hearing may not be necessary, as the Company may be mooted out of the hearings process. The Company intends to take all reasonable measures available to regain compliance under the Bid Price Rule and remain listed on Nasdaq, including such actions as effecting a reverse stock split. There can be no assurance that the Panel will grant the Company’s request for continued listing or that the Company will be able to regain compliance and thereafter maintain its listing on Nasdaq.
Delisting from the Nasdaq Capital Market or any Nasdaq market could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. In addition, without a Nasdaq market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our common stock, the sale or purchase of our common stock would likely be made more difficult and the trading volume and liquidity of our common stock could decline. Delisting from Nasdaq could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter quotation system, such as the OTC market, where an investor may find it more difficult to sell our common stock or obtain accurate quotations as to the market value of our common stock. We cannot assure that our common stock, if delisted from Nasdaq, will be listed on another national securities exchange or quoted on an over-the counter quotation system.
Management's Discussion & Analysis (MD&A)
Removed heading “Comparison of Results of Operations for the three months ended September 30, 2025 and 2024”
Largest changes
“On May 1, 2026, we received written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing price for the Company’s common stock had fallen below $1.00 per share for 30 consecutive trading days, the Company was no longer in compliance with the requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). …”see in full comparison
“The Company’s ability to continue as a going concern is dependent upon the successful execution of its business strategy to eventually achieve profitable operations. The accompanying financial statements do not include any adjustments that would be necessary if the Company is unable to continue as a going concern.”see in full comparison
“Comparison of Results of Operations for the three months ended September 30, 2025 and 2024”see in full comparison
“The Company’s financial statements are prepared assuming that the Company will continue as a going concern.”see in full comparison
Net loss for thesee in full comparisonninethree months endedSeptember 30,March2025,31, 2026, was$2,429,650$547,410 compared to loss of$952,285$884,460 for theninethree months endedSeptember 30,March2024,31, 2025, representinganaincreasedecrease in net loss of$1,477,365$337,050. Theincreasedecrease in net loss was mainly driven byrisingcontrol on the operating expenses andthereversalrevenueofrecognizedimpairmentdueprovision,toasnewpreviouslycontractdiscussed.obtained.
“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”).”see in full comparison
Full comparison: every changed paragraph (36)
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”).
Our business is primarily conducted through our wholly-owned subsidiaries, Yinghua and Sifeng, Sifeng’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.
The Company is transforming and expanding into an energy storage integrated solution provider business and has produced revenue since 2025. 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 smart energy cities with multi-energy supplies.
On May 1, 2026, we received written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing price for the Company’s common stock had fallen below $1.00 per share for 30 consecutive trading days, the Company was no longer in compliance with the requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). Further, the Notice stated that, pursuant to Listing Rule 5810(c)(3)(A)(iv), the Company was not eligible for any compliance period specified in Rule 5810(c)(3)(A) due to the fact that the Company has effected a reverse stock split over the prior one-year period. The Company requested an appeal of such determination to Nasdaq’s Hearings Panel (the “Panel”) on May 7, 2026. The hearing request will automatically stay any suspension or delisting action pending the hearing and the expiration of any additional extension period if granted by the Panel following the hearing.
Comparison of Operating
Results for the yearsthree months ended SeptemberMarch 30,31, 20252026 and 20242025
Total sales for the ninethree
months ended SeptemberMarch 30,31, 2025,2026, amounted to $ 173,659.$108,353. The company signed an Operation and
Maintenance Contract for a power station.stations. The contract
has total amount RMB1.8RMB3.0 million (US$0.2US$0.4 million), per annum, starting from March 1, 2025 to
February 28, 2035 for 10 years with a third party.parties. The Company recognized
the revenue based on the time period.
Cost of sales (“COS”)
for the
nine three months ended SeptemberMarch 30,31, 2025,2026, was $94,028.$53,683.
For the ninethree months ended
September 30,March 2025,31, 2026, the gross margin was 46%.50%.
Operating expenses consisted
of general and administrative expenses (“G&A”) totaling $2,480,809$593,307 for the ninethree months ended September
30,March 2025,31, 2026, compared to $747,540
$1,171,209 for the ninethree months ended SeptemberMarch 30,31, 2024.2025. This represented
an increasea decrease of $1,733,269$577,902 year-over-year.period-over-period The increase was mainly attributabledue to anexpenses increase control
in financingthe costs of $948,648 and share-based
compensation of $831,520.company.
NET
NON-OPERATING NON-OPERATING
INCOME (EXPENSES).INCOME.
Net non-operating income (expenses
) consisted of gain or loss from
note conversion, interest income, interest expenses, and other miscellaneous expenses. For the ninethree months
ended SeptemberMarch 30,31, 2025,2026, net
non-operating income were $10,965$64,141 compared to non-operating
expenses income of $190,577$311,849 for the ninethree months ended SeptemberMarch 30,31, 2024.2025. The primary
reason was
the provision of financial support to other companies, which generated interest income of $98,999, coupled with the reversal of a $200,000
provision for impaired prepayments,prepayments offsetting byin the interestfirst expensesquarter of $251,414.2025, which did not incur in 2026.
Income
tax expense was $39,437
$72,914 for the ninethree months ended SeptemberMarch 30,31, 2025,2026, compared with income
tax expense of $14,168$33,919 for the ninethree months ended SeptemberMarch 30,31, 2024. The consolidated effective2025.
income tax rate for the nine months ended September 30, 2025, and 2024 were -0.23% and 1.5%,
respectively. In 2025,2026, Management concluded that the realizability of related tax benefits from these losses was uncertain due to the
continuing operating
losses at the US parent company. Accordingly, a 100% valuation allowance was provided against the deferred tax
asset.
Net loss for the ninethree months ended September
30,March 2025,31, 2026, was $2,429,650$547,410 compared
to loss of $952,285$884,460 for the ninethree months ended September
30,March 2024,31, 2025, representing ana increasedecrease in net loss of $1,477,365$337,050. The increasedecrease in net loss
was mainly driven by risingcontrol on the operating expenses and
the reversalrevenue ofrecognized impairmentdue provision,to asnew previouslycontract discussed.obtained.
Comparison of Results of Operations for
the three months ended September 30, 2025 and 2024
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.
SALES. Total
sales for the three months ended September 30, 2025 and 2024 were $90,820.
COST OF SALES. Cost
of sales for the three months ended September 30, 2025 and 2024 were $46,610.
GROSS PROFIT.
Gross profit for the three months ended September 30, 2025 and 2024 were $44,210 with gross margin of 49%.
OPERATING EXPENSES. Operating
expenses consisted of general and administrative expenses (“G&A”) totaling $257,700 for the three months ended September
30, 2025, compared to $188,295 for the three months ended September 30, 2023, an increase of $69,405 or 37%. The increase in operating
expenses was mainly due to increased professional fee by $69,734.
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 September 30, 2025, net non-operating expenses was $82,194 compared to non-operating
income of $74,436 for the three months ended September 30, 2024. For the three months ended September 30, 2025, we had $32,786 interest
income, which was partly offset by $114,980 interest expense on note payable. For the three months ended September 30, 2024, we had $27,216
interest income, which was partly offset by $99,520 interest expense on note payable and $1,995 loss on note conversion.
INCOME TAX EXPENSE. Income tax
expense was 4,690 for the three months ended September 30, 2025, compared with nil for the three months ended September 30, 2024. The
consolidated effective income tax rate for the three months ended September 30, 2025 and 2024 were -1.6% and nil, respectively.
NET LOSS. Net
loss for the three months ended September 30, 2025 was $300,374 compared to $262,731 for the three months ended September 30, 2024, an
increase of net loss of $37,643. This increase in net loss was mainly due to increased operating expenses by $69,405 , increased income
tax expense by $4,690 and increased interest expense on note payable by $15,460, which was partly offset by increased Gross profit by
$44,210 and interest income by $5,570 as described above.
Comparison of ninethree
months ended SeptemberMarch 30,31, 2025,2026, and 20242025
As of SeptemberMarch 30,31, 2025, 2026,
the Company maintained cash and equivalents of $131.88million,$158.8 million, other current assets (excluding cash and equivalents) of $0.26million,$66,782, current
liabilities of $11.37million,$8.6 million, and working capital of $120.76million,$150.3 million, with a current ratio of11.69:1of 18.5 and a debt-to-equity ratio of 0.110.09:1.
The following is a summary
of cash flows provided by or used in each of the indicated types of activities, for the six-three- months periods ended September
30,March 2025,31, 2026, and 2024
2025:
Net cash generatedused fromin operating
activities was $64.44million$(125,927) for the ninethree months ended SeptemberMarch 30,31, 2025,2026, compared to $0.33$64.6 million net cash usedprovided for the ninethree months
ended SeptemberMarch 30,31, 2024.2025. The increasedecrease in net cash inflow for the ninethree months ended SeptemberMarch 30,31, 2025,2026, was mainly driven by the recovery collection
of $65.6 million in advance payments to suppliers, which generated cash inflows.inflows in Q1 2025 and no such event happened in Q1 2026.
Net cash provided by investing activities was $55.2$156.84 million and $68.5 $55.20
million respectively for the ninethree months ended SeptemberMarch 30,31, 2025,2026, and 2024. For the nine months ended September 30, 2025, repayments of short-term loans decreased by $-12.52million.2025. As of SeptemberMarch 30,31, 2025,2026, the Company hadhas recoveredcollected aback short-termUS$156.8
million in short term loan of $55,660,131 (RMB406.3 million) from Xi’an Yingtai Energy Conservation Technology Co., Ltd (“Xi’an Yingtai”), an unrelated party of the Company.receivable.
NetThere was no net cash
provided by
financing activities was $9.87 million during the ninethree months ended SeptemberMarch 30,31, 2025, primarily
attributable to proceeds from equity issuance.2026.
Going Concern
The Company’s financial
statements are prepared assuming that the Company will continue as a going concern.
The Company incurred an operating loss of $2.4
million, and reported net loss of $2.4 million for nine months ended September 30, 2025. As the Company implements its future business
plan, it may continue to incur operating losses and generate negative operating cash flows.
In 2025, the Company collected back $65.6 million advance to supplier and had positive operating cash flow during the nine months ended September 30, 2025. At the end of September 30, 2025, the Company had accumulated deficit balance of $64.5 million and cash balance of $131.9 million. The Company has collected back RMB405.8 million in accounts receivable and recovered RMB476 million in supplier advances and raised capital through of common stock issuance during the first quarter of 2025.
The Company’s ability
to continue as a going concern is dependent upon the successful execution of its business strategy to eventually achieve profitable operations.
The accompanying financial statements do not include any adjustments that would be necessary if the Company is unable to continue as a
going concern.
The PRC maintains currency controls and capital transfer regulations that require us to comply with certain requirements on capital movement of. The Company may transfer USD cash to its PRC subsidiaries through following channels: (i) an equity investment (by increasing the Company’s registered capital in a PRC subsidiary), or (ii) a stockholder loan. The Company’s PRC subsidiaries have not transferred any earnings or cash to the Company to date. The Company’s business is primarily conducted through its subsidiaries. The Company functions as a holding entity and its material assets consist solely of the equity interests in its PRC-based subsidiaries. The Company relies on dividends distribution from its subsidiaries to meet 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. Under applicable PRC laws and regulations (noted below) , the Company’s PRC subsidiaries are legally required to allocate 10% of annual after-tax income into general reserve fund, prior to payment of dividends. These requirements, combined with other regulatory constraints, materially limit the subsidiaries’ ability to distribute a portion of net assets as dividends to the parent company.
The Company’s contractual
obligations as of SeptemberMarch 30,31, 2025,2026, are as follows:
The Company believes it has sufficient cash as
of SeptemberMarch 30,31, 2025,2026, and a sufficient channel to obtain any loans that may be necessary
to meet its working capital needs from commercial
institutions. 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. In November 2024, we paid the Entrusted loan principal of $10,548,957 (RMB77 million), with interest still outstanding.
CREG insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding CREG (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 32,031 | $66.0K | 0.0% | New position |