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Smart Powerr Corp. — Annual Report 2011
Mar 9, 2011
35421_rns_2011-03-09_389ad865-05c3-44e8-bd60-3d1d509fbb18.zip
Annual Report
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CORRESP 1 filename1.htm Unassociated Document Licensed to: Vintage Filings Document Created using EDGARizerAgent 5.3.1.0 Copyright 1995 - 2009 Thomson Reuters. All rights reserved.
Albany Atlanta Brussels Denver Los Angeles THOMAS WARDELL (404) 527-4990 www.mckennalong.com New York Philadelphia San Diego San Francisco Washington, DC EMAIL ADDRESS [email protected]
March 9, 2011
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
Re: China Recycling Energy Corporation
Form 10-K for the Fiscal Year Ended December 31, 2009
Filed March 16, 2010
File No. 1-34625
Dear Mr. Thompson:
This firm is counsel to the above-referenced company, China Recycling Energy Corporation (“CREG” or the “Company” and sometimes referred to as “we” or “our”) and is filing this response to your comment letter, dated February 28, 2011, with respect to the above-referenced filings on CREG’s behalf. For convenience of reference, we have included, in this response letter, the same caption and paragraph number, as well as the text of the comment, set forth in your comment letter followed by our response.
Form 10-K for Fiscal Year Ended December 31, 2009
Item 8. Financial Statements and Supplementary Data, page 26
Consolidated Statements of Cash Flows, page 30
- We reviewed the revised consolidated statements of cash flows provided in response to comment one in our letter dated February 9, 2011. Please provide us with a reconciliation of the changes in the “Investment in sales type leases, net,” and “Construction in progress” balance sheet line items to the “Changes in gross sales type leases receivables,” Collection of principal on sales type leases,” and “Construction in progress” reported in the statement for each year presented.
Response:
In accordance with your comment letter, dated February 28, 2011, a reconciliation of the requested changes, for fiscal years ended 2009 and 2010, is attached to and submitted with this response.
United States Securities and Exchange Commission
March 9, 2011
Page 2
Should you have any further comments or require any further information, or if any questions should arise in connection with this submission, please call me at (404) 527-4990 or Mr. James Thornton at (404) 527-8118.
Very truly yours, /s/ Thomas Wardell Thomas Wardell
cc: David Chong, CFO, China Recycling Energy Corp.
Jeffrey Li, Esq.
James L. Thornton, Esq.
EFPlaceholder CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
RECONCILATION OF CASH FLOW BASED ON BALANCE SHEET
| balance sheet date rate | balance sheet date rate | yearly average rate | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Exchange rate | 6.8282 | 6.6227 | 6.7695 | ||||||||||||||
| 2010 vs 2009 | NON-CASH | Change | |||||||||||||||
| 2009 | 2009 | 2010 | 2010 | ||||||||||||||
| RMB | USD | RMB | USD | difference of the amount @ 12/31/2009 and 12/31/2010 RMB | RMB | Changes in gross sales type leases receivables | Collection of principal on sales type leases | RMB | |||||||||
| a | b | c | b+c-a | ||||||||||||||
| Investment in sales type leases, net - current | ¥ | 30,019,464 | $ 4,396,395 | ¥ | 50,495,683 | $ 7,624,637 | |||||||||||
| Investment in sales type leases, net - noncurrent | ¥ | 328,762,385 | $ 48,147,738 | ¥ | 778,737,670 | $ 117,586,131 | |||||||||||
| Total investment in sales type lease, net | ¥ | 358,781,849 | $ 52,544,133 | ¥ | 829,233,353 | $ 125,210,768 | ¥ | -470,451,504 | ¥ | 80,000,000 | ¥ | -422,589,658 | ¥ | 32,138,154 | ¥ | -470,451,504 | |
| $ | (62,425,535 | ) | $ | 4,747,493 | |||||||||||||
| Construction in progress | ¥ | 238,023,165 | $ 34,858,845 | ¥ | 168,070,768 | $ 25,377,983 | ¥ | 69,952,397 | |||||||||
| $ | 10,333,466 |
- Non-Cash ￥ 80,000,000 is stock to be issued for purchase of equipment for biomass BMPG.
| Exchange rate | 6.8346 | 6.8282 | 6.831 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 vs 2008 | difference of the amount @ 12/31/2009 and 12/31/2010 RMB | NON-CASH | Change | ||||||||||||||
| 2008 | 2008 | 2009 | 2009 | RMB | Changes in gross sales type leases receivables | Collection of principal on sales type leases | |||||||||||
| RMB | USD | RMB | USD | a | b | c | b+c-a | ||||||||||
| Investment in sales type leases, net - current | ¥ | 13,468,201 | $ 1,970,591 | ¥ | 30,019,464 | $ 4,396,395 | |||||||||||
| Investment in sales type leases, net - noncurrent | ¥ | 101,410,968 | $ 14,837,879 | ¥ | 328,762,385 | $ 48,147,738 | |||||||||||
| Total investment in sales type lease, net | ¥ | 114,879,169 | $ 16,808,470 | ¥ | 358,781,849 | $ 52,544,133 | ¥ | -243,902,680 | ¥ | 90,000,000 | ¥ | -171,537,374 | ¥ | 17,634,694 | ¥ | -243,902,680 | |
| $ | (25,111,382 | ) | $ | 2,581,568 | |||||||||||||
| Construction in progress | ¥ | 25,500,000 | $ 3,731,016 | ¥ | 238,023,165 | $ 34,858,845 | (212,523,165 | ) | |||||||||
| $ | (31,111,575 | ) |
- Non-Cash ￥ 90,000,000 is inventory and advance to suppliers for the equipment which was bought in prior years (in 2008), but used in 2009 for Shengmu project.
| CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES | ||||
|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| YEARS ENDED DECEMBER 31, | ||||
| 2010 | 2009 | |||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
| Income including noncontrolling interest | $ 17,826,069 | $ | 10,061,756 | |
| Adjustments to reconcile income including noncontrolling | ||||
| interest to net cash used in operating activities: | ||||
| Changes in sales type leases receivables | (62,425,535 | ) | (25,111,381 | ) |
| Depreciation and amortization | 23,631 | 35,121 | ||
| Amortization of discount related to conversion feature of convertible note | 1,789,558 | - | ||
| Stock options and warrants | 2,940,985 | 1,793,228 | ||
| Stock compensation expense | 602,000 | - | ||
| Accrued interest on convertible notes | 246,805 | 184,530 | ||
| Changes in deferred tax | 4,516,906 | 2,085,709 | ||
| (Increase) decrease in current assets: | ||||
| Interest receivable on sales type lease | (101,476 | ) | (355,220 | ) |
| Collection of principal on sales type leases | 4,747,493 | 2,581,568 | ||
| Prepaid expenses | 31,229 | 3,415,076 | ||
| Other receivables | 1,153,682 | (1,421,503 | ) | |
| Increase (decrease) in current liabilities: | ||||
| Accounts payable | 2,622,021 | 2,394,223 | ||
| Taxes payable | 908,894 | (633,648 | ) | |
| Unearned revenue | - | (658,762 | ) | |
| Accrued liabilities and other payables | 481,783 | (745,309 | ) | |
| Construction in progress | 10,333,466 | (31,111,575 | ) | |
| Net cash used in operating activities | (14,302,489 | ) | (37,486,187 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
| Increase investment in subsidiary | - | (16,103 | ) | |
| Restricted cash | (630,697 | ) | (1,461,060 | ) |
| Acquisition of property & equipment | (81,975 | ) | (33,498 | ) |
| Net cash used in investing activities | (712,672 | ) | (1,510,661 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
| Insurance of common stock | 430,500 | 2,000,000 | ||
| Insurance of convertible notes | 7,533,391 | 3,000,000 | ||
| Notes payable - bank acceptances | - | 1,461,060 | ||
| Cash contribution from noncontrolling interest | 908,279 | 263,439 | ||
| Proceeds from loans | 15,444,272 | 25,559,947 | ||
| Advance from related parties | 682,158 | 556,940 | ||
| Net cash provided by financing activities | 24,998,600 | 32,841,386 | ||
| EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS | (23,132 | ) | 61 | |
| NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS | 9,960,307 | (6,155,401 | ) | |
| CASH & EQUIVALENTS, BEGINNING OF YEAR | 1,111,943 | 7,267,344 | ||
| CASH & EQUIVALENTS, END OF YEAR | $ 11,072,250 | $ | 1,111,943 | |
| Supplemental Cash flow data: | ||||
| Income tax paid | $ 1,745,643 | $ | 1,480,698 | |
| Interest paid | $ 4,758,991 | $ | 358,789 |
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