22. 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, 2017 and as of December 31, 2017 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, 2017:

	As Previously Reported		Restated		Net Adjustment
Accounts receivable	$	13,369,655	$	15,858,804		2,489,149
Current portion of investment in sales-type leases, net		13,076,516		11,531,745		(1,544,771	)
Interest receivable on sales type leases		9,869,357		9,619,278		(250,079	)
Other receivables		3,064,451		1,169,660		(1,894,791	)

Investment in sales-type leases, net (non-current)		100,628,588		46,110,374		(54,518,214	)

Total Asset		287,267,296		231,548,590		(55,718,706	)

Deferred tax liability, net		8,635,151		2,157,414		(6,477,737	)

Total Liability		82,991,880		76,514,143		(6,477,737	)

Statutory reserve		14,733,361		14,525,712		(207,649	)
Accumulated other comprehensive income		1,634,627		860,553		(774,074	)
Retained earnings		76,580,942		28,321,696		(48,259,246	)

Total Company stockholders’ equity		204,754,053		155,513,084		(49,240,969	)

Total liability and equity	$	287,267,296.00	$	231,548,590	$	(55,718,706	)

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, 2017:

	As Previously Reported			Restated			Net Adjustment
Contingent rental income		-		$	6,489,504		$	6,489,504
Cost of sales		-			-			-
Gross profit		-			6,489,504			6,489,504
Interest income on sales-type leases	$	7,285,192			6,610,169			(675,023	)
Total operating income		7,285,192			13,099,673			5,814,481
General and administrative expenses		2,822,321			7,293,226			4,470,905
Impairment loss of net investment receivable		38,859			-			(38,859	)
Income from operations		4,424,012			5,806,447			1,382,435

Income (loss) before income tax		(1,012,657	)		369,778			1,382,435
Income tax expense		8,312,749			8,039,476			(273,273	)

Net loss attributable to China Recycling Energy Corporation		(8,998,259	)		(7,342,551	)		1,655,708
Foreign currency translation gain		12,179,053			9,275,654			(2,903,399	)
Comprehensive income attributable to China Recycling Energy Corporation	$	3,180,794		$	1,933,103		$	(1,247,691	)

The following table presents the effects of the restatement on the accompanying consolidated statement of cash flows for the year ended December 31, 2017:

	As Previously Reported			Restated			Net Adjustment
Loss including noncontrolling interest	$	(9,325,406	)	$	(7,669,698	)	$	1,655,708
Asset impairment loss		38,859			-			(38,859	)
Changes in deferred tax		(788,276	)		(1,061,548	)		(273,272	)
Interest receivable on sales type leases		(4,803,020	)		(4,561,000	)		242,020
Collection of principals on sales type leases		2,315,517			1,305,124			(1,010,393	)
Accounts receivable		-			(2,408,924	)		(2,408,924	)
Other receivables		(2,343,249	)		(509,529	)		1,833,720

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