23. RESTATEMENT

On April 28, 2016, Erdos TCH and Erdos entered a supplemental agreement, effective on May 1, 2016, Erdos TCH cancelled monthly minimum lease payments from Erdos, and charges Erdos based on actual electricity sold at RMB 0.30 / Kwh.

The Company evaluated the modified terms for payments based on actual electricity sold as minimum lease payments as defined in ASC 840-10-25-4, since lease payments that depend on a factor directly related to the future use of the leased property are contingent rentals and are excluded from minimum lease payments in their entirety; accordingly, the Company wrote off the net investment receivables of these leases at lease modification date. The consolidated financial statements for the year ended December 31, 2016 and as of December 31, 2016 were restated to reflect the above determination.

The following table presents the effects of the restatement on the accompanying consolidated balance sheet at December 31, 2016:

	Previously			Restated			Net Adjustment
Current portion of investment in sales-type leases, net	$	9,385,453		$	8,101,583		$	(1,283,870	)
								-
Investment in sales-type leases, net (Non-current)		101,706,978			49,161,943			(52,545,035	)
								-
Total Assets	$	264,512,065		$	210,683,160		$	(53,828,905	)
								-
Deferred tax liability, net (current)	$	1,418,078		$	1,097,111		$	(320,967	)
Deferred tax liability, net (Non-current)		7,482,901			1,968,241			(5,514,660	)

Total Liabilities		63,078,884			57,243,257			(5,835,627	)
								-
Statutory reserve		14,473,924			14,296,223			(177,701	)
Accumulated other comprehensive income		(10,544,426	)		(8,415,101	)		2,129,325
Retained earnings		85,838,638			35,893,736			(49,944,902	)
								-
Total Company stockholders’ equity		201,565,612			153,572,334			(47,993,278	)
								-
Total liabilities and equity	$	264,512,065		$	210,683,160		$	(53,828,905	)

The following table presents the effects of the restatement on the accompanying consolidated statement of income and comprehensive income for the year ended December 31, 2016:

	As Previously Reported			Restated			Net Adjustment
Contingent rental income	$	6,645		$	4,482,850		$	4,476,205
Cost of sales		11,654			74,415			62,761
Gross profit (loss)		(5,009	)		4,408,435			4,413,444
Interest income on sales-type leases		12,165,572			11,629,410			(536,162	)
Total operating income		12,160,563			16,037,845			3,877,282
General and administrative expenses		1,563,333			4,531,730			2,968,397
Impairment loss on net investment receivable		242,305			57,368,330			57,126,025
Income (loss) from operations		10,354,925			(45,862,215	)		(56,217,140	)
								-
Income (loss) before income tax		641,047			(55,576,093	)		(56,217,140	)
Income tax expense (benefit)		(838,988	)		(6,933,525	)		(6,094,537	)
								-
Net income (loss) attributable to China Recycling Energy Corporation		1,827,171			(48,295,432	)		(50,122,603	)
Foreign currency translation gain (loss)		(13,754,741	)		(11,625,416	)		2,129,325
Comprehensive income (loss) attributable to China Recycling Energy Corporation	$	(11,927,570	)	$	(59,920,848	)	$	(47,993,278	)

The following table presents the effects of the restatement on the accompanying consolidated statement of cash flows for the year ended December 31, 2016:

	As Previously Reported			Restated			Net Adjustment
Income including noncontrolling interest	$	1,480,035		$	(48,642,568	)	$	(50,122,603	)
Impairment loss on net investment receivable		242,305			57,368,330			57,126,025
Changes in deferred tax		(2,737,993	)		(8,832,530	)		(6,094,537	)
Interest receivable on sales type leases		(4,283,517	)		(5,192,402	)		(908,885	)

Net cash provided by operating activities	$	39,514,211	$		39,514,211		$	-