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 nine and three months ended September 30, 2018 and 2017, and as of September 30, 2018 were restated to reflect the above determination.

The following table presents the effects of the restatement on the accompanying consolidated balance sheet at September 30, 2018:

	As Previously Reported			Restated			Net Adjustment
Accounts receivable	$	11,629,259		$	16,042,004		$	4,412,745
Current portion of investment in sales-type leases, net		12,689,105			10,304,074			(2,385,031	)
Interest receivable on sales type leases		9,315,463			8,784,273			(531,190	)
Other receivables		5,417,891			1,350,886			(4,067,005	)

Investment in sales-type leases net (Non-current)		89,537,233			38,969,098			(50,568,135	)

Total Assets	$	277,916,146		$	224,777,530		$	(53,138,616	)

Deferred tax liability, net	$	6,937,015		$	525,434		$	(6,411,581	)

Total Liabilities		88,565,394			82,153,813			(6,411,581	)

Statutory reserve		14,777,497			14,525,712			(251,785	)
Accumulated other comprehensive income		(8,923,637	)		(7,230,147	)		1,693,490
Retained earnings		72,408,280			24,239,540			(48,168,740	)

Total Company stockholders’ equity		190,067,263			143,340,228			(46,727,035	)

Total liabilities and equity	$	277,916,146		$	224,777,530		$	(53,138,616	)

The following table presents the effects of the restatement on the accompanying consolidated statement of income and comprehensive income for the nine months ended September 30, 2018:

	As Previously Reported			Restated			Net Adjustment
Contingent rental income	$	-		$	3,948,505		$	3,948,505


Interest income on sales-type leases		3,527,278			2,771,452			(755,826	)
Total operating income		3,527,278			6,719,957			3,192,679
General and administrative expenses		4,011,563			7,427,803			3,416,240
Loss from operations		(484,285	)		(707,846	)		(223,561	)

Loss before income tax		(4,404,828	)		(4,628,389	)		(223,561	)
Income tax expense (benefit)		(3,067	)		(272,998	)		(269,931	)

Net loss attributable to China Recycling Energy Corporation		(4,128,526	)		(4,082,156	)		46,370
Foreign currency translation loss		(10,558,264	)		(8,090,700	)		2,467,564
Comprehensive loss attributable to China Recycling Energy Corporation	$	(14,686,790	)	$	(12,172,856	)	$	2,513,934

The following table presents the effects of the restatement on the accompanying consolidated statement of income and comprehensive income for the nine months ended September 30, 2017:

	As Previously Reported		Restated		Net Adjustment
Contingent rental income	$	-	$	4,989,076	$	4,989,076

Interest income on sales-type leases		6,062,347		4,984,389		(1,077,958	)
Total operating income		6,062,347		9,973,465		3,911,118
General and administrative expenses		581,308		3,916,910		3,335,602
Income from operations		5,481,039		6,056,555		575,516

Income before income tax		1,610,959		2,186,475		575,516
Income tax expense		1,179,602		953,161		(226,441	)

Net income attributable to China Recycling Energy Corporation		703,040		1,504,997		801,957
Foreign currency translation gain		8,923,161		6,772,559		(2,150,602	)
Comprehensive income attributable to China Recycling Energy Corporation	$	9,626,201	$	8,277,556	$	(1,348,645	)

The following table presents the effects of the restatement on the accompanying consolidated statement of income and comprehensive income for the three months ended September 30, 2018:

	As Previously Reported			Restated			Net Adjustment
Contingent rental income	$	-		$	1,144,237		$	1,144,237

Interest income on sales-type leases		780,270			506,971			(273,299	)
Total operating income		780,270			1,651,208			870,938
General and administrative expenses		2,679,771			3,735,397			1,055,626
Loss from operations		(1,899,501	)		(2,084,189	)		(184,688	)
								-
Loss before income tax		(2,977,518	)		(3,162,206	)		(184,688	)
Income tax benefit		(496,557	)		(540,916	)		(44,359	)
								-
Net loss attributable to China Recycling Energy Corporation		(2,394,909	)		(2,535,238	)		(140,329	)
Foreign currency translation loss		(7,971,221	)		(6,110,231	)		1,860,990
Comprehensive loss attributable to China Recycling Energy Corporation	$	(10,366,130	)	$	(8,645,469	)	$	1,720,661

The following table presents the effects of the restatement on the accompanying consolidated statement of income and comprehensive income for the three months ended September 30, 2017:

	As Previously Reported			Restated		Net Adjustment
Contingent rental income	$	-		$	1,679,804	$	1,679,804

Interest income on sales-type leases		1,731,336			1,656,806		(74,530	)
Total operating income		1,731,336			3,336,610		1,605,274
General and administrative expenses		242,007			1,382,160		1,140,153
Income from operations		1,489,329			1,954,450		465,121

Income before income tax		263,316			728,437		465,121
Income tax expense		397,636			342,166		(55,470	)

Net income (loss) attributable to China Recycling Energy Corporation		(40,892	)		479,699		520,591
Foreign currency translation gain		4,290,726			3,288,107		(1,002,619	)
Comprehensive income attributable to China Recycling Energy Corporation	$	4,249,834		$	3,767,806	$	(482,028	)

The following table presents the effects of the restatement on the accompanying consolidated statement of cash flows for the nine months ended September 30, 2018:

	As Previously Reported			Restated			Net Adjustment
Loss including noncontrolling interest	$	(4,401,761	)	$	(4,355,391	)	$	46,370
Changes in deferred tax		(1,319,933	)		(1,589,864	)		(269,931	)
Interest receivable on sales type leases		61,491			367,877			306,386
Collection of principal on sales type leases		2,764,228			2,453,103			(311,125	)
Accounts receivable		1,116,286			(1,020,973	)		(2,137,259	)
Other receivables		(2,615,525	)		(249,966	)		2,365,559

Net cash provided by operating activities	$	3,394,289		$	3,394,289		$	-

The following table presents the effects of the restatement on the accompanying consolidated statement of cash flows for the nine months ended September 30, 2017:

	As Previously Reported			Restated			Net Adjustment
Income including noncontrolling interest	$	431,357		$	1,233,314		$	801,957
Changes in deferred tax		130,260			(96,181	)		(226,441	)
Interest receivable on sales type leases		(3,142,199	)		(2,949,234	)		192,965
Collection of principal on sales type leases		1,819,850			1,296,199			(523,651	)
Accounts receivable		-			(1,644,994	)		(1,644,994	)
Other receivables		(3,167,054	)		(1,766,890	)		1,400,164

Net cash used in operating activities	$	(887,898	)	$	(887,898	)	$	-