As filed with the United States Securities and Exchange Commission on May24, 2019

Registration No. 333-             

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACTOF 1933

CHINA RECYCLING ENERGY CORPORATION

(Name of Registrant as specified in its charter)

4/F, Tower C

Rong Cheng Yun Gu Building

Keji 3^rd Road, Yanta District

Xi’an City, Shaanxi Province

China 710068

+ 86-29-8769-1097
(Address and telephone number of principal executive offices and principal place of business)

Guohua Ku, Chief Executive Officer

4/F, Tower C

Rong Cheng Yun Gu Building

Keji 3^rd Road, Yanta District

Xi An City, Shaanxi Province

China

+ 86-29-8769-1097
(Name address and telephone number of agent for service)

Copies to:

Jeffrey Li

Ada Danelo

Garvey Schubert Barer, P.C.

Flour Mill Building
1000 Potomac Street NW, Suite 200
Washington, D.C. 20007-3501

(202) 298-1735

Approximate date of commencement of proposedsale to the public: From time to time after this registration statement is declared effective.

If any of the securities being registered on thisForm are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the followingbox:  ☒

If this Form is filed to register additional securitiesfor an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registrationstatement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filedpursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement numberof the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filedpursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement numberof the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided to Section 7(a)(2)(B) of the Securities Act.  ☐

CALCULATION OF REGISTRATION FEE

The Registrant hereby amendsthis Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall filea further amendment which specifically states that this Registration Statement shall thereafter become effective in accordancewith Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as theSecurities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete andmay be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commissionis effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securitiesin any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MAY 24, 2019

CHINA RECYCLING ENERGY CORPORATION

5,658,641 Shares of Common Stock

The selling shareholders identified in this prospectusmay offer and sell up to 5,658,641 shares of our common stock, of which (i) 3,754,536 shares of common stock of the registrant,par value $0.001 per share (“Common Stock”), are issuable upon the exercise of common stock purchase warrants of theregistrant issued pursuant to private placements (the “Investor Warrants”); (ii) 304,105 shares of Common Stock areissuable upon the exercise of common stock purchase warrants of the registrant issued to the placement agent’s designeesin connection with such private placements (the “Agent Warrants,” and together with the Investor Warrants, the “Warrants”);and (iii) 1,600,000 shares of Common Stock were sold to a selling shareholder in a prior private placement.

We are not selling any shares of our common stockin this offering and will not receive any proceeds from this offering. However, upon a cash exercise of the Warrants by the sellingstockholders, we will receive a per share exercise price of $1.3725 or $0.9365 for Investor Warrants and $1.875 or $1.00 for AgentWarrants, depending on the terms of the Warrant, before any adjustments as set forth in the Warrants. If the Warrants are exercisedin a cashless exercise, we will not receive any proceeds from the exercise of the Warrants. We have agreed to pay certain registrationexpenses, other than underwriting discounts and commissions.

The selling stockholders may from time to timesell, transfer or otherwise dispose of any or all of their shares of Common Stock in a number of different ways and at varyingprices. See “Plan of Distribution” for more information.

We may amend or supplement this prospectus fromtime to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplementscarefully before you make your investment decision.

Our common stock trades on the Nasdaq CapitalMarket under the symbol “CREG.” The closing price of our common stock on the Nasdaq Capital Market on May 22,2019, was $0.501 per share.

Investing in our CommonStock involves significant risks. See “Risk Factors” beginning on page 11 of this prospectus.

Neither the Securitiesand Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securitiesor passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                     ,2019.

TABLE OF CONTENTS

This prospectus is part ofa registration statement that we filed with the SEC pursuant to which the selling stockholders named herein may, from time to time,offer and sell or otherwise dispose of the shares of our common stock covered by this prospectus.  You should not assume thatthe information contained in this prospectus is accurate on any date subsequent to the date set forth on the front cover of thisprospectus or that any information we have incorporated by reference is correct on any date subsequent to the date of the documentincorporated by reference, even though this prospectus is delivered or shares of common stock are sold or otherwise disposed ofon a later date.  It is important for you to read and consider all information contained in this prospectus, including thedocuments incorporated by reference herein, in making your investment decision. You should also read and consider the informationin the documents to which we have referred you under the captions “Where You Can Find More Information” and “Incorporationof Certain Information by Reference” in this prospectus.

We have not authorized anydealer, salesman or other person to give any information or to make any representation other than those contained or incorporatedby reference in this prospectus. You must not rely upon any information or representation not contained or incorporated by referencein this prospectus. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any of our sharesof common stock other than the shares of our common stock covered hereby, nor does this prospectus constitute an offer to sellor the solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such offeror solicitation in such jurisdiction.

This prospectus contains forward-lookingstatements that are subject to a number of risks and uncertainties, many of which are beyond our control. See “Risk Factors”and “Cautionary Note Regarding Forward-Looking Statements.”

Unless the context otherwiserequires, the terms “CREG,” “the Company,” “we,” “us” and “our” inthis prospectus refer to China Recycling Energy Corporation, our subsidiaries and consolidated entities. “China” andthe “PRC” refer to the People’s Republic of China.

RISK FACTORS

An investment in our securitiesinvolves significant risks. You should carefully consider each of the risk factors set forth in our most recent Annual Report onForm 10-K, which was filed with the SEC on April 16, 2019, as amended by that Form 10-K/A filed on April 29, 2019, and as may beupdated from time to time by our Quarterly Reports on Form 10-Q and other SEC filings filed after such annual report, and futurefilings with the SEC, which are incorporated by reference into this prospectus. Before making an investment decision, you shouldcarefully consider these risks as well as other information we include or incorporate by reference in this prospectus and any prospectussupplement. Any of these risks and uncertainties could have a material adverse effect on our business, financial condition, cashflows and results of operations. If that occurs, the trading price of our common stock could decline materially and you could loseall or part of your investment.

The risks we have incorporatedby reference into this prospectus are not the only risks we face. We may experience additional risks and uncertainties not currentlyknown to us, or as a result of developments occurring in the future. Conditions that we currently deem to be immaterial may alsomaterially and adversely affect our business, financial condition, cash flows, results of operations and prospects.

Risks Related to our Common Stock

The market price for our common stock may be volatile.

The market price for our commonstock is highly volatile and subject to wide fluctuations in response to factors including the following:

In addition, the securitiesmarkets from time to time experience significant price and volume fluctuations that are not related to the operating performanceof particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Shareholders could experience substantial dilution.

We may issue additional sharesof our capital stock to raise additional cash for working capital. If we issue additional shares of our capital stock, our shareholderswill experience dilution in their respective percentage ownership in the company.

We have no present intention to pay dividends.

We have not paid dividendsor made other cash distributions on our common stock during any of the past three years, and we do not expect to declare or payany dividends in the foreseeable future. We intend to retain any future earnings for working capital and to finance current operationsand expansion of our business.

A large portion of our common stock is controlledby a small number of shareholders.

A large portion of our commonstock is held by a small number of shareholders. As a result, these shareholders are able to influence the outcome of shareholdervotes on various matters, including the election of directors and extraordinary corporate transactions including business combinations.In addition, the occurrence of sales of a large number of shares of our common stock, or the perception that these sales couldoccur, may affect our stock price and could impair our ability to obtain capital through an offering of equity securities. Furthermore,the current ratios of ownership of our common stock reduce the public float and liquidity of our common stock which can in turnaffect the market price of our common stock.

We may be unable to maintain compliance withNASDAQ Marketplace Rules which could cause our common stock to be delisted from the NASDAQ Capital Market. This could result inthe 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 MarketplaceRules our common stock must maintain a minimum price of $1.00 per share for continued inclusion on the NASDAQ Capital Market. Theper 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 commonstock 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 stockon an over-the-counter market, and many investors may not buy or sell our common stock due to difficulty in accessing over-the-countermarkets, or due to policies preventing them from trading in securities not listed on a national exchange or other reasons. Forthese reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causingthe value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operationsby limiting our ability to attract and retain qualified executives and employees and limiting our ability to raise capital.

On June 19, 2015, the Companywas notified by The NASDAQ Stock Market (the “NASDAQ”) that the Company was not in compliance with the $1.00 minimumclosing bid price requirement under the NASDAQ Listing Rules (the “Minimum Closing Bid Price”) and the Company wasafforded 180 calendar days, or until December 16, 2015, to regain compliance with the requirement of Minimum Closing Bid Price.The Company did not regain compliance with the minimum $1.00 bid price per share by December 16, 2015. On December 7, 2015, theCompany transferred the listing of its securities from The NASDAQ Global Market to The Nasdaq Capital Market (the “CapitalMarket”). On December 17, 2015, the Company received a letter from NASDAQ indicating that NASDAQ determined that the Companyis eligible for an additional 180 calendar day period, or until June 13, 2016 (the “Second Compliance Period”), toregain compliance. NASDAQ’s determination was based on the Company meeting the continued listing requirement for market valueof publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of thebid price requirement, and the Company’s written notice to NASDAQ of its intention to cure the deficiency during the SecondCompliance Period by effecting a reverse stock split, if necessary.

On May 24, 2016, the Companyfiled with the Nevada Secretary of State’s office a Certificate of Change, by which the Company authorized and approved a1-for-10 reverse stock split of the Company’s authorized shares of common stock from 200,000,000 shares to 20,000,000 shares,accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock (the “ReverseStock Split”). The common stock continues to have a par value of $0.001. The Certificate of Change became effective on May25, 2016, and the Reverse Stock Split became effective for trading purposes at the market opening on May 26, 2016, at which timethe Company’s common stock began trading on the Nasdaq Capital Market on a split-adjusted basis under the symbol “CREG.”The CUSIP number for the Company’s common stock post-Reverse Stock Split is 168913200.

Risks Related to Our Business Operations

In recent years, the growth of Chinese economyhas experienced slowdown, and if the growth of the economy continues to slow or if the economy contracts, our financial conditionmay be materially and adversely affected.

The rapid growth of the PRCeconomy has historically resulted in widespread growth opportunities in industries across China. As a result of the global financialcrisis and the inability of enterprises to gain comparable access to the same amounts of capital available in past years, the businessclimate has changed and growth of private enterprise in the PRC have slowed down. An economic slowdown could have an adverse effecton our financial condition. Further, if economic growth slows, and if, in conjunction, inflation is allowed to proceed unchecked,our costs would likely increase, and there can be no assurance that we would be able to increase our prices to an extent that wouldoffset the increase in our expenses.

We depend on the waste energy of our customers to generate electricity.

We acquire waste pressure,heat and gases from steelworks, cement, coking or metallurgy plants and use these to generate power. Therefore, our power generatingcapacity depends on the availability of an adequate supply of our “raw materials” from our customers. If we do nothave enough supply, power generated for those customers will be impeded. Since our contracts are often structured so that we receivecompensation based on the amount of energy we supply, a reduction in production may cause problems for our revenues and resultsof operations.

Our revenue depends on gaining new customersand project contracts and purchase commitments from customers.

Currently and historically,we have only had a limited number of projects in process at any time. Thus, our revenues have historically resulted, and are expectedto continue in the immediate future to result, primarily from the sale and operation of our waste energy recycling projects that,once completed, typically produce ongoing revenues from energy production. Customers may change or delay orders for any numberof reasons, such as force majeure or government approval factors that are unrelated to us. As a result, in order to maintain andexpand our business, we must continue to develop and obtain new orders. However, it is difficult to predict whether and when wewill receive such orders or project contracts due to the lengthy process, which may be affected by factors that we do not control,such as market and economic conditions, financing arrangements, commodity prices, environmental issues and government approvals.

We may require additional funds to run ourbusiness and may be required to raise these funds on terms which are not favorable to us or which reduce our stock price.

We may need to complete additionalequity or debt financings to fund our operations. Our inability to obtain additional financing could adversely affect our business.Financings may not be available at all or on terms favorable to us. In addition, these financings, if completed, may not meet ourcapital needs and could result in substantial dilution to our stockholders.

Changes in the economic and credit environmentcould have an adverse effect on demand for our projects, which would in turn have a negative impact on our results of operations,our cash flows, our financial condition, our ability to borrow and our stock price.

Since late 2008 and continuingthrough 2018, global market and economic conditions have been disrupted and volatile. Concerns over slowdown of Chinese economy,geopolitical issues, the availability and cost of credit, to this increased volatility. These factors, combined with decliningbusiness and consumer confidence and increased unemployment, precipitated a global recession. It is difficult to predict how longthe current economic conditions will persist or whether they will deteriorate further. As a result, these conditions could adverselyaffect our financial condition and results of operations.

The slow growth of global economyhas also resulted in tighter credit conditions, which may lead to higher financing costs. Although poor market conditions can actas an incentive for our customers to reduce their energy costs, if the global economic slowdown persists and has material adverseeffects on our customers’ business, our customers may delay or cancel their plan of installing waste energy recycling projects.

Decreases in the price of coal, oil and gasor a decline in popular support for “green” energy technologies could reduce demand for our waste energy recyclingprojects, which could materially harm our ability to grow our business.

Higher coal, oil and gas pricesprovide incentives for customers to invest in “green” energy technologies such as our waste energy recycling projectsthat reduce their need for fossil fuels. Conversely, lower coal, oil and gas prices would tend to reduce the incentive for customersto invest in capital equipment to produce electric power or seek out alternative energy sources. Demand for our projects and servicesdepends in part on the current and future commodity prices of coal, oil and gas. We have no control over the current or futureprices of these commodities.

In addition, popular supportby governments, corporations and individuals for “green” energy technologies may change. Because of the ongoing developmentof, and the possible change in support for, “green” energy technologies we cannot assure you that negative changesto this industry will not occur. Changes in government or popular support for “green” energy technologies could havea material adverse effect on our business, prospects and results of operations.

Changes in the growth of demand for or pricingof electricity could reduce demand for our waste energy recycling projects, which could materially harm our ability to grow ourbusiness.

Our revenues depend on ourability to provide savings on energy costs for our clients. According to the National Bureau of Statistics of the PRC, China’stotal electricity consumption in 2018 was 6.84 trillion kilowatt-hours, up 8.5 percent year on year, the highest growth rate since2012. The growth in electricity consumption increases due to the continued development of the Chinese economy. However, such growthis unpredictable and depends on general economic conditions and consumer demand, both of which are beyond our control. Furthermore,pricing of electricity in the PRC is set in advance by the state or local electricity administration and may be artificially depressedby governmental regulation or influenced by supply and demand imbalances. If these changes reduce the cost of electricity fromtraditional sources of supply, the demand for our waste energy recycling projects could be reduced, and therefore, could materiallyharm our ability to grow our business.

Our insurance may not cover all liabilitiesand damages.

Our industry can be dangerousand hazardous. The insurance we carry might not be enough to cover all the liabilities and damages that may be caused by potentialaccidents.

A downturn in the Chinese economy may slowdown our growth and profitability.

The growth of the Chinese economyhas been uneven across geographic regions and economic sectors. There is no assurance that growth of the Chinese economy will besteady or that any downturn will not have a negative effect on our business. Our profitability will decrease if less energy isconsumed due to a downturn in the Chinese economy.

Our heavy reliance on the experience andexpertise of our management may cause adverse impacts on us if a management member departs.

We depend on key personnelfor the success of our business. Our business may be severely disrupted if we lose the services of our key executives and employeesor fail to add new senior and middle managers to our management.

Our future success is heavilydependent upon the continued service of our key executives. We also rely on a number of key technology staff for the operationof our company. Our future success is also dependent upon our ability to attract and retain qualified senior and middle managersto our management team. If one or more of our current or future key executives or employees are unable or unwilling to continuein their present positions, we may not be able to easily replace them, and our business may be severely disrupted. In addition,if any of these key executives or employees joins a competitor or forms a competing company, we could lose customers and suppliersand incur additional expenses to recruit and train personnel. We do not maintain key-man life insurance for any of our key executives.

We may need more capital for the operationand failure to raise capital we need may delay the development plan and reduce the profits.

If we do not have adequateincome or our capital cannot meet the requirement for expansion of operations, we will need to seek financing to continue our businessdevelopment. If we fail to acquire adequate financial resources at acceptable terms, we might have to postpone our proposed businessdevelopment plans and reduce projections of our future incomes.

Our use of a “Build-Operate-Transfer”model requires us to invest substantial financial and technical resources in a project before we deliver a waste energy recyclingproject.

We use a “Build-Operate-Transfer”model to provide our waste energy recycling projects to our customers. This process requires us to provide significant capitalat the beginning of each project. The design, construction and completion of a waste energy recycling project is highly technicaland the time necessary to complete a project can take three to 12 months without any delays, including delays outside our controlsuch as from the result of customer’s operations, and we incur significant expenses as part of this process. Our initialcash outlay and the length of the delivery time makes us particularly vulnerable to the loss of a significant customer or contractbecause we may be unable to quickly replace the lost cash flow.

Our BOT model and the accounting for ourprojects as sales-type leases could result in a difference between our revenue recognition and our cash flows.

While we recognize a largeportion of the revenue from each project when it goes on-line, all of the cash flow from the project is received in even monthlypayments across the term of the lease. Although our revenues may be high, the initial cash outlay required for each project issubstantial and even with the recovery of this cost in the early years of each lease, we may need to raise additional capital resultingin a dilution in your holdings. This discrepancy between revenue recognition and cash flow could also contribute to volatilityin our stock price.

There is collection risk associated withpayments to be received over the terms of agreements with customers of our waste energy recycling projects.

We depend in part on the viabilityof our customers for collections under our BOT model. Customers may experience financial difficulties that could cause them tobe unable to fulfill their contractual payment obligations to us. Although our customers usually provide collateral or other guaranteesto secure their obligations to provide the minimum electricity income from the waste energy recycling projects, there is no guaranteethat such collateral will be sufficient to meet all obligations under the respective contract. As a result, our future revenuesand cash flows could be adversely affected.

We may not be able to assemble and deliverour waste energy recycling projects as quickly as customers may require which could cause us to lose sales and could harm our reputation.

We may not be able to assembleour waste energy recycling projects and deliver them to our customers at the times they require. Manufacturing delays and interruptionscan occur for many reasons, including, but not limited to:

Assembly of our waste energyrecycling projects is complex. If we fail to assemble and deliver our waste energy recycling projects in a timely fashion, ourreputation may be harmed, we may jeopardize existing orders and lose potential future sales, and we may be forced to pay penaltiesto our customers.

We operate in an emerging competitive industryand if we are unable to compete successfully our revenue and profitability will be adversely affected.

Currently, the PRC waste energyrecycling market is fragmented but competitive. As the industry evolves, we anticipate that competition will increase. We currentlyface competition primarily from companies that focus on one type of waste energy recycling project or one industry in the wasteenergy recycling market, some of which may have more expertise in their area of focus than we do. We also compete against companiesthat have substantial competitive advantage because of longer operating histories and larger marketing budgets, as well as substantiallygreater financial and other resources than us. Our largest potential clients may choose to build their own systems. National orglobal competitors could enter the market with more substantial financial and workforce resources, stronger existing customer relationships,and greater name recognition or could choose to target medium to small companies in our traditional markets. Competitors couldfocus their substantial resources on developing a more attractive solution set than ours or products with technologies that reducedemand for energy beyond what our solutions can provide and at cheaper prices. Competition also places downward pressure on ourcontract prices and profit margins, which presents us with significant challenges in our ability to maintain strong growth ratesand acceptable profit margins. If we are unable to meet these competitive challenges, we could lose market share to our competitorsand experience an overall reduction in our profits.

If we infringe the rights of third parties,we could be prevented from selling products, forced to pay damages and compelled to defend against litigation.

If our waste energy recyclingprojects, methods, processes and other technologies infringe proprietary rights of other parties, we may have to obtain licenses(which may not be available on commercially reasonable terms, if at all), redesign our waste energy recycling projects or processes,stop using the subject matter claimed in the asserted patents, pay damages, or defend litigation or administrative proceedings,which may be costly whether we win or lose. All of the above could result in a substantial diversion of valuable management resourcesand we could incur substantial costs.

We believe we have taken reasonablesteps, including prior patent searches, to ensure we have the freedom to operate under our intellectual property rights, and thatour development and commercialization efforts can be carried out as planned without infringing others’ proprietary rights.However, a third-party patent may have been filed or will be filed that may contain subject matter of relevance to our development,causing a third-party patent holder to claim infringement. Resolution of such issues sometimes results in lengthy and costly legalproceedings, the outcome of which we cannot predict accurately.

We may not be able to adequately respondto changes in technology affecting the waste energy recycling industry.

Our industry could experiencerapid technological changes and new product introductions. Current competitors or new market entrants could introduce new or enhancedproducts with features which render the systems used in our projects obsolete or less marketable. Our future success will depend,in part, on our ability to respond to changing technology and industry standards in a timely and cost-effective manner. We maynot be successful in effectively using new technologies, developing new systems or enhancing our existing systems and technologyon a timely basis. Our new technologies or enhancements may not achieve market acceptance. Our pursuit of new technologies mayrequire substantial time and expense. We may need to license new technologies to respond to technological change. These licensesmay not be available to us on terms that we can accept. Finally, we may not succeed in adapting our projects to new technologiesas they emerge.

We are dependent on third parties for manufacturingkey components and delays by third parties may cause delays in assembly and increased costs to us.

We rely upon third partiesfor the manufacture of key components. Delays and difficulties in the manufacturing of our waste energy recycling projects couldsubstantially harm our revenues. There are limited sources of supply for some key waste energy recycling project components. Businessdisruptions, financial difficulties of the manufacturers or suppliers of these components, or raw material shortages could increaseour costs, reduce the availability of these components or delay our delivery of projects to customers. To date, we have been ableto obtain adequate supplies of these key components. If we are unable to obtain a sufficient supply of required components, wecould experience significant delays in construction, which could result in the loss of orders and customers, and could materiallyand adversely affect our business, financial condition and results of operations. If the cost of components increases, we may notbe able to pass on price increases to our customers if we are to remain competitively priced. This would reduce profit, which inturn would reduce the value of your investment.

Increases in income tax rates, changes inincome tax laws or disagreements with tax authorities could adversely affect our business, financial condition or results of operations.

Weare subject to income taxes in the United States and in certain foreign jurisdictions in which we operate. Increases in incometax rates or other changes in income tax laws that apply to our business could reduce our after-tax income from such jurisdictionand could adversely affect our business, financial condition or results of operations. Our operations outside the United Statesgenerate a significant portion of our income. In addition, the United States and many of the other countries in which our productsare distributed or sold, including countries in which we have significant operations, have recently made or are actively consideringchanges to existing tax laws. For example, the Tax Cuts and Jobs Act (the “TCJ Act”) was recently signed into law inthe United States. The changes in the TCJ Act are broad and complex and we are continuing to examine the impact the TCJ Act mayhave on our business and financial results. This provisional expense is subject to change, possibly materially, due to, among otherthings, changes in estimates, interpretations and assumptions we have made, changes in Internal Revenue Service (IRS) interpretations,the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to theTCJ Act and future actions by states within the United States that have not yet adopted state-level laws similar to the TCJ Act.

Additionalchanges in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign earnings, including changes in howexisting tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations.

Weare also subject to regular reviews, examinations and audits by the IRS and other taxing authorities with respect to income andnon-income based taxes both within and outside the United States. Economic and political pressures to increase tax revenues injurisdictions in which we operate, or the adoption of new or reformed tax legislation or regulation, may make resolving tax disputesmore difficult and the final resolution of tax audits and any related litigation could differ from our historical provisions andaccruals, resulting in an adverse impact on our business, financial condition or results of operations. In addition, in connectionwith the Organization for Economic Co-operation and Development Base Erosion and Profit Shifting project, companies are requiredto disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profitsearned in various countries.

Risks Related to the People’s Republicof China

Adverse changes in political and economicpolicies of the PRC government could have a material adverse effect on the overall economic growth of China, which could materiallyand adversely affect the demand for our projects and our business.

Currently, all of our operationsare conducted in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantlyby economic, political and legal developments in China. The PRC economy differs from the economies of most developed countriesin many respects, including:

While the PRC economy has grownsignificantly since the late 1970s, the growth has been uneven, both geographically and among various sectors of the economy. ThePRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of thesemeasures benefit the overall PRC economy, but may also have a negative effect on us. For example, our financial condition and resultsof operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicableto us.

The PRC economy has been transitioningfrom a planned economy to a more market-oriented economy. Although the PRC government has in recent years implemented measuresemphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and theestablishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China isstill owned by the PRC government. The continued control of these assets and other aspects of the national economy by the PRC governmentcould materially and adversely affect our business. The PRC government also exercises significant control over economic growthin China through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetarypolicy and providing preferential treatment to particular industries or companies. Efforts by the PRC government to slow the paceof growth of the PRC economy could result in decreased capital expenditure by energy users, which in turn could reduce demand forour products. In addition, the PRC government, which regulates the power industry in China, has adopted laws related to renewableenergy, and has adopted policies for the accelerated development of renewable energy as part of a Development Plan promulgatedon August 31, 2007.

Any adverse change in the economicconditions or government policies in China could have a material adverse effect on the overall economic growth and the level ofenergy investments and expenditures in China, which in turn could lead to a reduction in demand for our products and consequentlyhave a material adverse effect on our business and prospects.

Restrictions under PRC law on our subsidiaries’ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments oracquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our business.

We conduct all of our businessthrough our consolidated subsidiaries and affiliated companies operating in the PRC. We rely on dividends paid by these consolidatedsubsidiaries for our cash needs, including the funds necessary to pay any dividends and other cash distributions to our stockholders,to service any debt we may incur and to pay our operating expenses. The payment of dividends by entities established in the PRCis subject to limitations imposed by government regulations. Regulations in the PRC currently permit payment of dividends onlyout of accumulated profits as determined in accordance with accounting standards and regulations in the PRC, subject to certainstatutory procedural requirements and these may not be calculated in the same manner as US GAAP. In addition, each of our subsidiariesin China is required to set aside a certain amount of its after-tax profits each year, if any, to fund certain statutory reserves.These reserves are not distributable as cash dividends. Furthermore, if our subsidiaries in China incur debt on their own behalfin the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Anylimitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability togrow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct ourbusiness.

Fluctuation in the value of the Renminbimay have a material adverse effect on your investment.

The value of the Renminbi (“RMB”)against the US Dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s politicaland economic conditions. The conversion of RMB into foreign currencies, including US Dollars, has historically been set by thePeople’s Bank of China. On March 17, 2014, the PRC government changed its policy of pegging the value of the RMB to the USDollar. Under the new policy, the RMB is permitted to fluctuate within a band against a basket of certain foreign currencies, determinedby the Bank of China, against which it can rise or fall by as much as 2% each day. Since the adoption of this new policy, the valueof the RMB against the US Dollar has fluctuated on a daily basis within narrow ranges, but overall has strengthened against theUS Dollar. There remains significant international pressure on the PRC government to further liberalize its currency policy, whichcould result in a further and more significant appreciation in the value of the RMB against the US Dollar. Appreciation or depreciationin the value of the RMB relative to the US Dollar would affect our financial results reported in US Dollar terms even if thereis no underlying change in our business or results of operations. In addition, if we decide to convert our RMB into US Dollarsfor the purpose of making payments for dividends on our common stock or for other business purposes, appreciation of the US Dollaragainst the RMB would have a negative effect on the US Dollar amount available to us.

The PRC currency is not a freely convertiblecurrency, which could limit our ability to obtain sufficient foreign currency to support our business operations in the future.In addition, changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency orconduct other foreign exchange business.

The PRC government imposescontrols on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC.We receive substantially all of our revenues in RMB, which is currently not a freely convertible currency. Shortages in the availabilityof foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends, or otherwise satisfy foreigncurrency-denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, includingprofit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without priorapproval from the PRC State Administration of Foreign Exchange, or the SAFE, by complying with certain procedural requirements.However, approval from appropriate governmental authorities is required where RMB are to be converted into foreign currency andremitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies.

The PRC government may alsoat its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchangecontrol system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to paycertain of our expenses as they come due.

There are significant uncertainties underthe Enterprise Income Tax Law regarding our PRC enterprise income tax liabilities, such as tax on dividends paid to us by our PRCsubsidiaries and tax on any dividends we pay to our non-PRC stockholders.

The Enterprise Income Tax Law,also known as the EIT Law, provides that enterprises established outside of the PRC whose “de facto management bodies”are located in the PRC are considered as a “tax-resident enterprise” and are generally subject to the uniform 25.0%enterprise income tax rate on global income. Under the implementation regulations to EIT Law, “de facto management body”refers to a managing body that in practice exercises overall management control over the production and business, personnel, accountingand assets of an enterprise. In addition, on April 22, 2009, the State Administration of Taxation of the PRC issued the Noticeon the Issues Regarding Recognition of Overseas Incorporated Enterprises that are Domestically Controlled as PRC Resident EnterprisesBased on the De Facto Management Body Criteria, which was retroactively effective as of January 1, 2008. This notice providesthat an overseas incorporated enterprise that is controlled domestically will be recognized as a “tax-resident enterprise”if it satisfies all of the following conditions: (i) the senior management responsible for daily production/business operationsare primarily located in the PRC, and the location(s) where such senior management execute their responsibilities are primarilyin the PRC; (ii) strategic financial and personnel decisions are made or approved by organizations or personnel located in thePRC; (iii) major properties, accounting ledgers, company seals and minutes of board meetings and stockholder meetings, etc., aremaintained in the PRC; and (iv) 50.0% or more of the board members with voting rights or senior management habitually reside inthe PRC.

In addition, dividends paidby us to our non-PRC stockholders as well as gains realized by such stockholders from the sale or transfer of our stock may besubject to a PRC tax under the EIT Law, and we may be required to withhold PRC tax on dividends paid to our non-PRC stockholders.

PRC regulation of loans to and direct investmentby offshore holding companies in PRC entities may delay or prevent us from making loans or additional capital contributions toour PRC operating companies, which could materially and adversely affect our liquidity and ability to fund and expand our business.

As an offshore holding companyof PRC operating companies, we may make loans or additional capital contributions to our PRC operating companies. Any loans toour PRC operating companies are subject to PRC regulations. For example, loans to our operating companies in China to finance theiractivities may not exceed statutory limits and must be registered with SAFE. If we decide to make capital contributions to ouroperating entities in the PRC, the PRC Ministry of Commerce, or MOFCOM, (or MOFCOM’s local counterpart, depending on theamount involved) may need to approve these capital contributions. We cannot assure you that we will be able to obtain these governmentapprovals on a timely basis, if at all, with respect to any such capital contributions. If we fail to receive such approvals, ourability to capitalize our PRC operations may be negatively affected, which could adversely affect our ability to fund and expandour business.

We may face PRC regulatory risks relatingto our equity incentive plan.

On March 28, 2007, the SAFEpromulgated a notice requiring PRC individuals who are granted stock options and other types of stock-based awards by an overseaspublicly-listed company to obtain approval from the local SAFE branch through an agent of the overseas publicly-listed company(generally its PRC subsidiary or a financial institution).

We urged our PRC managementpersonnel, directors, employees and consultants who were granted stock options under our Incentive Plan to register them with thelocal SAFE pursuant to the said regulation. However, we cannot ensure that each of these individuals have carried out all of therequired registration procedures.

If we, or any of these persons,fail to comply with the relevant rules or requirements, we may be subject to penalties, and may become subject to more stringentreview and approval processes with respect to our foreign exchange activities, such as our PRC subsidiaries’ dividend paymentto us or borrowing foreign currency loans, all of which may adversely affect our business and financial condition.

The Chinese government exerts substantialinfluence over the manner in which we must conduct our business activities.

The Chinese government hasexercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation andstate ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relatingto taxation, environmental regulations, land use rights, property and other matters. The central or local governments of thesejurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expendituresand efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in thefuture, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economyor regional or local variations in the implementation of economic policies, could have a significant effect on economic conditionsin China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

Uncertainties with respect to the PRC legalsystem could adversely affect us and we may have limited legal recourse under PRC law if disputes arise under our contracts withthird parties.

Since 1979, PRC legislationand regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However,China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover allaspects of economic activities in China in particular, because these laws and regulations are relatively new, and because of thelimited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulationsinvolve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of whichare not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violationof these policies and rules until some time after violation.

The Chinese government hasenacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce,taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited,and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. The resolution of these mattersmay be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legalmerits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, orto seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtueof the Chinese legal system, we may be unable to prevent others from violating our rights. The occurrence of any such events couldhave a material adverse effect on our business, financial condition and results of operations.

We must comply with the Foreign Corrupt PracticesAct and Chinese anti-corruption laws.

We are required to comply withthe United States Foreign Corrupt Practices Act, or FCPA, which prohibits US companies from engaging in bribery or other prohibitedpayments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors,are not subject to these prohibitions. The PRC also strictly prohibits bribery of government officials. Certain of our suppliersare owned by the PRC government and our dealings with them are likely to be considered to be with government officials for thesepurposes. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in China. It isour policy to prohibit our employees and to discourage our agents, representatives and consultants from engaging in such practices.If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, givingour competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses,which would put us at a disadvantage. Our employees, agents, representatives and consultants may not always be subject to our control.If any of them violates FCPA or other anti-corruption law, we might be held responsible. We could suffer severe penalties in thatevent. In addition, the US government may seek to hold us liable for successor liability FCPA violations committed by companiesin which we invest or which we acquire.

We may have difficulty maintaining adequatemanagement, legal and financial controls in the PRC.

The PRC historically has beendeficient in western style management and financial reporting concepts and practices, as well as in modern banking, and other controlsystems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a resultof these factors, and especially since we are a publicly listed company in the US and subject to regulation as such, we may experiencedifficulty in maintaining management, legal and financial controls, collecting financial data and preparing financial statements,books of account and corporate records and instituting business practices that meet western standards. We may have difficulty establishingadequate management, legal and financial controls in the PRC. Therefore, we may, in turn, experience difficulties in implementingand maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, and otherapplicable laws, rules and regulations. This may result in significant deficiencies or material weaknesses in our internal controlswhich could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations andthe requirements of the Sarbanes-Oxley Act of 2002. Any such deficiencies, weaknesses or lack of compliance could have a materiallyadverse effect on our business and the market price of our stock.

If we fail to maintain an effective systemof internal control over financial reporting, our ability to accurately and timely report our financial results or prevent fraudmay be adversely affected and investor confidence and the market price of our ordinary shares may be adversely impacted.

As directed by SOX 404, theSEC adopted rules requiring public companies to include a report of management on the company’s internal controls over financialreporting in their annual reports. Our management may conclude that our internal controls over our financial reporting are noteffective, which could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliabilityof our reporting processes, which could adversely impact the market price of our common stock.

Your ability to bring an action against usor against our directors and officers, or to enforce a judgment against us or them, will be limited because we conduct substantiallyall of our operations in the PRC and because the majority of our directors and officers reside outside of the United States.

We are a Nevada corporationbut nearly all of our assets are located outside of the US. Most of our current operations are conducted in the PRC. In addition,most of our directors and officers are nationals and residents of the PRC. A substantial portion of the assets of these personsis located outside the US. As a result, it may be difficult for you to effect service of process within the United States uponthese persons. It may also be difficult for you to enforce in US courts judgments on the civil liability provisions of the US federalsecurities laws against us and our officers and directors. In addition, there is uncertainty as to whether the courts of the PRCwould recognize or enforce judgments of US courts. The recognition and enforcement of foreign judgments are provided for underthe PRC Civil Procedures Law. Courts in the PRC may recognize and enforce foreign judgments in accordance with therequirements of the PRC Civil Procedures Law based on treaties between the PRC and the country where the judgmentis made or on reciprocity between jurisdictions. The PRC does not have any treaties or other arrangements that provide for thereciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC CivilProcedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decidethat the judgment violates basic principles of PRC law or national sovereignty, security or the public interest. So it is uncertainwhether a PRC court would enforce a judgment rendered by a court in the US.

A failure by our stockholders or beneficialowners who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits,restrict our overseas and cross-border investment activities or subject us to liability under PRC laws, which could adversely affectour business and financial condition.

On October 21, 2005, SAFE issuedthe Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and RoundtripInvestments via Offshore Special Purpose Vehicles, or State Administration of Foreign Exchange of China (“SAFE”) Circular75. SAFE Circular 75 states that PRC residents (including both legal persons and natural persons) must register with SAFE or itslocal branch in connection with their establishment or control of an offshore entity established for the purpose of overseas equityfinancing involving a roundtrip investment whereby the offshore entity acquires or controls onshore assets or equity interestsheld by the PRC residents. In addition, such PRC residents must update their SAFE registrations when the offshore SPV undergoesmaterial events relating to increases or decreases in investment amount, transfers or exchanges of shares, mergers or divisions,long-term equity or debt investments, external guarantees, or other material events that do not involve roundtrip investments.To further clarify the implementation of SAFE Circular 75, the General Affairs Department of SAFE issued SAFE Circular 106 on May29, 2007. Under SAFE Circular 106, PRC subsidiaries of an offshore company governed by SAFE Circular 75 are required to coordinateand supervise the filing of SAFE registrations in a timely manner by the offshore holding company’s shareholders who arePRC residents. If these shareholders fail to comply, the PRC subsidiaries are required to report to the local SAFE authorities.If our shareholders who are PRC residents do not complete their registration with the local SAFE authorities, our PRC subsidiarieswill be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation tous, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries.

On July 14, 2014, SAFE promulgatedthe Circular Relating to Foreign Exchange Administration of Offshore Investment, Financing and Return Investment by Domestic ResidentsUtilizing Special Purpose Vehicles (Circular 37). Replacing an earlier circular published by SAFE in 2005 (Circular 75), Circular37 further simplifies the registration process for Chinese residents seeking the round-trip investment transactions where Chinesecompanies (Domestic Entities) are re-organized to create an offshore holding company (the SPV) that will control the Domestic Entitiesand seek offshore financing. Also, for the first time overseas investments by Chinese individuals are formally legalized underCircular 37.

We are committed to complying,and to ensuring that our shareholders, who are PRC residents, comply with the SAFE Circular 37 requirements. We believe that allof our PRC resident shareholders and beneficial owners have completed their required registrations with SAFE, or are otherwisein the process of registering. However, we may not at all times be fully aware or informed of the identities of all our beneficialowners who are PRC residents, and we may not always be able to compel our beneficial owners to comply with the SAFE Circular 37requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents will atall times comply with, or in the future make or obtain any applicable registrations or approvals required by, SAFE Circular 37or other related regulations. Failure by any such shareholders or beneficial owners to comply with SAFE Circular 37 could subjectus to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ abilityto make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

PRC regulations involve complex proceduresfor acquisitions conducted by foreign investors that could make our restructuring or an offering subject to government approval.

Pursuant to the Regulationson Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (“M&A Rule”), effective as of September8, 2006 and revised as of June 22, 2009, additional procedures and requirements were established that are expected to make mergerand acquisition activities in China by foreign investors more time-consuming and complex, including requirements in some instancesthat MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domesticenterprise, or that the approval from MOFCOM be obtained in circumstances where overseas companies established or controlled byPRC enterprises or residents acquire affiliated domestic companies and special anti-monopoly submissions for parties meeting certainreporting thresholds.

The M&A Rules require offshorecompanies formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies orindividuals to obtain the approval of MOFCOM prior to a cross-border share swap and the CSRC prior to the public listing of theirsecurities on an overseas stock exchange through share swap. On September 21, 2006, pursuant to the M&A Rule and other PRCLaws, the CSRC published on its official website relevant guidance with respect to the listing and trading of PRC domestic enterprises’securities on overseas stock exchanges (“Related Clarifications”), including a list of application materials regardingthe listing on overseas stock exchange by special purpose vehicles, however, the CSRC currently has not issued any definitive ruleconcerning whether an offering, is subject to the M&A Rule and Related Clarifications.

There are substantial uncertaintiesregarding the interpretation and application of the above rules, and MOFCOM and CSRC have yet to promulgate any written provisionsor formally to declare or state whether the overseas listing of a PRC related company similar to us will be subject to approvalsfrom MOFCOM and CSRC with respect to any offering or a failure to maintain an offering. If MOFCOM and CSRC approvals are requiredin connection with our previous restructuring, our failure to obtain or delay in obtaining such approval could result in penaltiesimposed by MOFCOM, CSRC and other PRC regulatory agencies. These penalties could include fines and penalties on our operationsin China, restriction or limitation on remitting dividends outside of China, and other forms of sanctions that may cause a materialand adverse effect on our business, operations and financial conditions.

Notwithstanding those provisions,we are advised by our PRC counsel, Shaanxi Yan Tan Law Firm, MOFCOM and CSRC approvals are not required in the context of our previousrestructuring, because our previous restructuring does not constitute a cross-border share swap contemplated by the M&A Rule.However, we cannot assure you that the relevant PRC government agencies, including MOFCOM and CSRC, would reach the same conclusion,and we still cannot rule out the possibility that MOFCOM and CSRC may deem our listing structure as circumventing the M&A Ruleand Related Clarifications, in particular in consideration of the fact that our restructuring was completed through several steps.Please refer to the Company History section about our restructuring.

PRC regulations also involve complex proceduresfor acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions.

We may grow our business inpart by acquiring other companies in the PRC. Complying with the requirements of the M&A Rule to complete such transactionscould be time-consuming, and any required approval processes, including approval from MOFCOM, may delay or inhibit our abilityto complete such transactions, which could affect our ability to expand our business or maintain our market share.

Our labor costs may increase due to the implementationof the new PRC Labor Contract Law.

The PRC Labor Contract Lawwas adopted by the Standing Committee of the National People’s Congress of PRC in June 2007 and became effective on January1, 2008. The Implementation Rules of the PRC Labor Contract Law were passed by the PRC State Council in September 2008 and becameeffective that same month. The implementation of the new law and its Implementation Rules, particularly the following provisions,may increase our labor costs: (a) an employer shall make monetary compensation, which shall be based on the number of an employee’sworking years with the employer at the rate of one month’s wage for each year, to the employee upon termination of an employmentcontract with certain exceptions (for example, in circumstances where the term of a fixed-term employment contract expires andthe employee does not agree to renew the contract even though the conditions offered by the employer are the same as or betterthan those stipulated in the current contract); (b) the wages of an employee who is on probation may not be less than the lowestwage level for the same job with the employer or less than 80% of the wage agreed upon in the employment contract, and may notbe less than the local minimum wage rate; (c) if an employee has been working for the employer for a consecutive period of notless than 10 years, or if a fixed-term employment contract with an employee was entered into on two consecutive occasions, generallythe employer should enter into an open-ended employment contract with such employee, unless the employee requests a fixed-termemployment contract; (d) if an employer fails, in violation of the related provisions, to enter into an open-ended employment contractwith an employee, it shall in each month pay to the employee twice his/her wage, starting from the date on which an open-endedemployment contract should have been entered into; (e) if an employer fails to enter into a written employment contract with anemployee more than one month but less than one year after the date on which it started employing him/her, it shall in each monthpay to the employee twice his/her wage; and (f) if an employer hires an employee whose employment contract with another employerhas not yet been terminated or ended, causing the other employer to suffer a loss, the later hiring employer shall be jointly andseverally liable with the employee for the compensation for such loss. Our labor costs may increase due to the implementation ofthe new PRC Labor Contract Law and the Implementation Rules of the PRC Labor Contract Law and our business and results of operationsmay be materially and adversely affected.

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21Eof the Securities Exchange Act of 1934, as amended, or the Exchange Act, regarding our company that include, but are not limitedto, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of managementfor future operations; any statements concerning proposed new products, services or developments; any statements regarding futureeconomic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’sbeliefs and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,”“plans,” “predicts,” “potential,” “believes,” “seeks,” “hopes,”“estimates,” “should,” “may,” “will,” “with a view to” and variationsof these words or similar expressions are intended to identify forward-looking statements. These statements are not guaranteesof future performance and are subject to risks, uncertainties and assumptions that are difficult to predict.

These forward-looking statementsinvolve various risks and uncertainties. Although we believe our expectations expressed in these forward-looking statements arereasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations.Important risks and factors that could cause our actual results to be materially different from our expectations are generallyset forth in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results ofOperations,” “Our Business” and other sections in this prospectus. You should read this prospectus and the documentswe refer to thoroughly with the understanding that our actual future results may be materially different from and worse than whatwe expect. Other sections of this prospectus include additional factors which could adversely impact our business and financialperformance.

This prospectus contains statisticaldata we obtained from various publicly available government publications and industry-specific third party reports. Statisticaldata in these publications also include projections based on a number of assumptions. The markets for our products may not growat the rate projected by market data, or at all. The failure of these markets to grow at the projected rates may have a materialadverse effect on our business and the market price of our securities. In addition, the rapidly changing nature of our customers’industries results in significant uncertainties in any projections or estimates relating to the growth prospects or future conditionof our markets. Furthermore, if any one or more of the assumptions underlying the market data is later found to be incorrect, actualresults may differ from the projections based on these assumptions. You should not place undue reliance on these forward-lookingstatements.

Unless otherwise indicated,information in this prospectus concerning economic conditions and our industry is based on information from independent industryanalysts and publications, as well as our estimates. Except where otherwise noted, our estimates are derived from publicly availableinformation released by third party sources, as well as data from our internal research, and are based on such data and our knowledgeof our industry, which we believe to be reasonable. None of the independent industry publication market data cited in this prospectuswas prepared on our or our affiliates’ behalf.

The forward-looking statementsmade in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus.Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as aresult of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrenceof unanticipated events. You should read this prospectus and the documents we refer to in this prospectus and have filed as exhibitsto this prospectus completely and with the understanding that our actual future results may be materially different from what weexpect.

USE OF PROCEEDS

We will not receive any proceedsfrom sale of the shares of common stock covered by this prospectus by the selling shareholders. To the extent the sellingshareholders exercise for cash all of the warrants covering the 4,058,641 shares of common stock issuable upon exercise of allof the warrants held by such selling shareholders at the initial exercise prices of $0.9365 and $1.3725 per share for InvestorWarrants and $1.00 and $1.875 per share for Agent Warrants, we would receive $4,807,313.22 from such exercises. The warrantsmay expire without having been exercised. Even if some or all of these warrants are exercised, we cannot predict when they willbe exercised and when we would receive the proceeds. We intend to use any proceeds we receive upon exercise of the warrants forgeneral working capital and other corporate purposes.

DETERMINATION OF OFFERING PRICE

Theselling stockholders will offer their shares at prevailing market or privately negotiated prices, in one or more transactions thatmay take place by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers forresale.  The selling stockholders will receive all proceeds from the sale of the common stock. We will, however, receivethe sale price of any common stock we sell to the selling stockholder upon exercise of any warrants held by such stockholder.

The $0.9365, $1.3725, $1.00 and $1.875 per share initial exercise price of the warrants is not necessarilyrelated to our book value, net worth or any other established criteria of value and may or may not be considered the fair valueof our common stock included in the warrants. These prices were established in connection with our private placement and resultedfrom negotiations with the investors therein. After the date of this prospectus, our common stock may trade at prices above orbelow the applicable exercise price. You should not consider such exercise price as an indication of value of our Company or ourcommon stock. You should not assume or expect that our shares of common stock will trade at or above the exercise price in anygiven time period. The market price of our common stock may decline after the exercise of warrants and you may not be sell theshares of our common stock. You should obtain a current quote for our common stock before exercising and make your own assessmentof our business and financial condition, our prospects for the future, and the terms of the warrants. On May 22, 2019, the closingsale price of our common stock was $0.501 per share on the Nasdaq Capital Market.

DIVIDEND POLICY

We do not currently have anyplans to pay any cash dividends in the foreseeable future on our ordinary shares. We currently intend to retain most, if not all,of our available funds and any future earnings to operate and expand our business.

We are a holding company incorporatedin the State of Nevada. We rely on dividends paid by our subsidiaries for our cash needs. The payment of dividends by entitiesorganized in China is subject to limitations. Regulations in the PRC currently permit payment of dividends only out of accumulatedprofits based on PRC accounting standards and regulations. Our Chinese subsidiaries are also required to withhold at least 10%of their after-tax profit based on China’s accounting standards each year as their general reserves until the cumulativeamount of such reserves reach 50% of its registered capital. These reserves are not distributable as cash dividends.

The Boards of Directors ofour PRC subsidiaries, which are foreign-owned enterprises, have the discretion to allocate a portion of their respective after-taxprofits to its staff welfare and bonus funds, which are likewise not distributable to their equity owners except in the event ofa liquidation of the foreign-invested enterprise. If the respective Boards decide to pay dividends in the future, these restrictionsmay impede our ability to pay dividends and/or the amount of dividends we could pay. In addition, if our subsidiaries incur debtin the future, the instruments governing such debt may restrict such entities’ ability to pay dividends or make other distributionsto us.

Our Board of Directors hasdiscretion to pay dividends. Even if our Board of Directors decides to pay dividends, the form, frequency and amount will dependupon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictionsand other factors that our Board of Directors may deem relevant. 

MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Safe Harbor Declaration

The comments made throughoutthis prospectus should be read in conjunction with our financial statements and the notes thereto, and other financial informationappearing elsewhere in this prospectus. In addition to historical information, the following discussion and other parts of thisprospectus contain certain forward-looking information. When used in this discussion, the words, “believes,” “anticipates,”“expects” and similar expressions are intended to identify forward-looking statements. Such statements are subjectto certain risks and uncertainties, which could cause actual results to differ materially from projected results, due to a numberof factors beyond our control. We do not undertake to publicly update or revise any of these forward-looking statements, even ifexperience or future changes show that the indicated results or events will not be realized. Readers are cautioned not to placeundue reliance on these forward-looking statements, which speak only as of the date hereof. Readers also are urged to carefullyreview and consider our discussions regarding the various factors that affect the company’s business, which are describedin this section and elsewhere in this prospectus.

OVERVIEW OF BUSINESS BACKGROUND

China Recycling Energy Corporation (the “Company”or “CREG”) was incorporated on May 8, 1980 as Boulder Brewing Company under the laws of the State of Colorado. On September6, 2001, the Company changed its state of incorporation to Nevada. In 2004, the Company changed its name from Boulder Brewing Companyto China Digital Wireless, Inc. and on March 8, 2007, the Company again changed its name from China Digital Wireless, Inc. to itscurrent name, China Recycling Energy Corporation. The Company, through its subsidiaries, sells and leases energy saving systemsand equipment to its customers in the People’s Republic of China (“PRC”). Typically, the Company transfers ownershipof the waste energy recycling power generating projects to its customers at the end of each sales-type lease and provides financingto its customers for the cost of the projects as described below.

The Company is in the process of transforming andexpanding into an energy storage integrated solution provider. We plan to pursue disciplined and targeted expansion strategiesfor market areas that we currently do not serve. We are actively seeking and exploring opportunities to apply energy storage technologiesto 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.By supporting and motivating all kinds of the electric power market to participate in resource development and utilization of demandresponse, we plan to provide services including peak shaving with compensation and frequency modulation. We intend to graduallyform motor load performance for peak and low-hours, which will account for about 3% of the annual maximum power load on the demandside and to ensure the electricity supply and demand balance for situations of non-severe power shortages.

Our Subsidiaries

Our business is primarily conducted through ourwholly-owned subsidiaries, Sifang Holdings Co., Ltd. (“Sifang”) and Shanghai Yinghua Financial Leasing Co., Ltd (“Yinghua”);Sifang’s wholly-owned subsidiaries, Huahong New Energy Technology Co., Ltd. (“Huahong”) and Shanghai TCH EnergyTech Co., Ltd. (“Shanghai TCH”); Shanghai TCH’s wholly-owned subsidiary, Xi’an TCH Energy Technology Company,Ltd (“Xi’an TCH”), Xi’an TCH’s wholly-owned subsidiaries, Erdos TCH Energy Saving Development Co.,Ltd (“Erdos TCH”) and Zhongxun Energy Investment (Beijing) Co., Ltd (“Zhongxun”); and Xi’an TCH’s90% and Shanghai TCH’s 10% owned subsidiary, Xi’an Zhonghong New Energy Technology Co., Ltd. (“Zhonghong”).Zhonghong provides energy saving solutions and services, including constructing, selling and leasing energy saving systems andequipment to customers, and project investment. 

The Company’s organizational chart as ofMarch 31, 2019 is as follows:

CREG Legal Structure

Shanghai TCH and its Subsidiaries

Shanghai TCH was established as a foreign investmententerprise in Shanghai under the laws of the PRC on May 25, 2004 and has a registered capital of $29.80 million. Xi’an TCHwas incorporated in Xi’an, Shaanxi Province under the laws of the PRC on November 8, 2007. In February 2009, Huahong wasincorporated in Xi’an, Shaanxi province. Erdos TCH was incorporated in April 2009 in Erdos, Inner Mongolia Autonomous Region.On July 19, 2013, Xi’an TCH formed Xi’an Zhonghong New Energy Technology Co., Ltd (“Zhonghong”). Xi’anTCH owns 90% and Shanghai TCH owns 10% of Zhonghong, which provides energy saving solutions and services, including constructing,selling and leasing energy saving systems and equipment to customers.

As of March 31, 2019, Shanghai TCH, through itssubsidiaries, had sales or sales-type leases with the following party: Pucheng (for two biomass power generation (“BMPG”)systems).      

The Fund Management Company and the HYREF Fund

On June 25, 2013, Xi’an TCH and HongyuanHuifu Venture Capital Co. Ltd (“Hongyuan Huifu”) jointly established Beijing Hongyuan Recycling Energy Investment ManagementCompany Ltd. (the “Fund Management Company”) with registered capital of RMB 10 million ($1.45 million). Xi’anTCH made an initial capital contribution of RMB 4 million ($650,000) and had a 40% ownership interest in the Fund Management Company.With respect to the Fund Management Company, voting rights and dividend rights are allocated 80% and 20% between Hongyuan Huifuand Xi’an TCH, respectively.

The Fund Management Company is the general partnerof Beijing Hongyuan Recycling Energy Investment Center, LLP (the “HYREF Fund”), a limited liability partnership establishedJuly 18, 2013 in Beijing. The Fund Management Company made an initial capital contribution of RMB 5 million ($830,000) to the HYREFFund. RMB 460 million ($77 million) was fully subscribed by all partners for the HYREF Fund. The HYREF Fund has three limited partners:(1) China Orient Asset Management Co., Ltd., which made an initial capital contribution of RMB 280 million ($46.67 million) tothe HYREF Fund and is a preferred limited partner; (2) Hongyuan Huifu, which made an initial capital contribution of RMB 100 million($16.67 million) to the HYREF Fund and is an ordinary limited partner; and (3) the Company’s wholly-owned subsidiary, Xi’anTCH, which made an initial capital contribution of RMB 75 million ($12.5 million) to the HYREF Fund and is a secondary limitedpartner. In addition, Xi’an TCH and HongyuanHuifu formed Beijing Hongyuan Recycling Energy Investment Management CompanyLtd. to manage this Fund and also subscribed in the amount of RMB 5 million ($830,000) from the Fund. The term of the HYREF Fund’spartnership is six years from the date of its establishment, expiring on July 18, 2019. The term is four years from the date ofcontribution for the preferred limited partner, and four years from the date of contribution for the ordinary limited partner.The size of the HYREF Fund is RMB 460 million ($77 million). The HYREF Fund was formed for the purpose of investing in Xi’anZhonghong New Energy Technology Co., Ltd., a then 90% owned subsidiary of Xi’an TCH, for the construction of two coke dryquenching (“CDQ”) waste heat power generation (“WHPG”) stations with Jiangsu Tianyu Energy and ChemicalGroup Co., Ltd. (“Tianyu”) and one CDQ WHPG station with Boxing County Chengli Gas Supply Co., Ltd. (“Chengli”).

On December 29, 2018, Xi’an TCH entered intoa Share Transfer Agreement with Hongyuan Huifu, pursuant to which Xi’an TCH transferred its 40% ownership in the Fund ManagementCompany to Hongyuan Huifu for consideration of RMB 3,453,867 ($0.53 million). The transfer was completed on January 22, 2019. TheCompany did not have any ownership in the Fund Management Company after this transaction.

Erdos TCH – Joint Venture

On April 14, 2009, the Company formed Erdos TCHas a joint venture (the “JV” or “Erdos TCH”) with Erdos Metallurgy Co., Ltd. (“Erdos”) to recyclewaste heat from Erdos’ metal refining plants to generate power and steam to be sold back to Erdos. The JV has a term of 20years with a total investment for the project estimated at $79 million (RMB 500 million) and an initial investment of $17.55 million(RMB 120 million). Erdos contributed 7% of the total investment for the project, and Xi’an TCH contributed 93%. Accordingto Xi’an TCH and Erdos’ agreement on profit distribution, Xi’an TCH and Erdos will receive 80% and 20%, respectively,of the profit from the JV until Xi’an TCH receives the complete return of its investment. Xi’an TCH and Erdos willthen receive 60% and 40%, respectively, of the profit from the JV. On June 15, 2013, Xi’an TCH and Erdos entered into a sharetransfer agreement, pursuant to which Erdos transferred and sold its 7% ownership interest in the JV to Xi’an TCH for $1.29million (RMB 8 million), plus certain accumulated profits as described below. Xi’an TCH paid the $1.29 million in July 2013and, as a result, became the sole stockholder of Erdos TCH. In addition, Xi’an TCH is required to pay Erdos accumulated profitsfrom inception up to June 30, 2013 in accordance with the supplementary agreement entered on August 6, 2013. In August 2013, Xi’anTCH paid 20% of the accumulated profit (calculated under PRC GAAP) of $226,000 to Erdos. Erdos TCH currently has two power generationsystems 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 powercapacity. 

With the current economic conditions in China,the government has limited and reduced over-capacity and production in the iron and steel industry, which has resulted in a sharpdecrease of Erdos Metallurgy Co., Ltd’s production of ferrosilicon, its revenue and cash flows, and has made it difficultfor Erdos to make the monthly minimum lease payment.

After considering the challenging economic conditionsfacing Erdos, and to maintain the long-term cooperative relationship between the parties, which we believe will continue to producelong-term benefits, on April 28, 2016, Erdos TCH and Erdos entered into a supplemental agreement, effective May 1, 2016. Underthe supplemental agreement, Erdos TCH cancelled monthly minimum lease payments from Erdos, and agreed to charge Erdos based onactual electricity sold at RMB 0.30 / KWH, which such price will be adjusted annually based on prevailing market conditions.   

The Company evaluated the modified terms for paymentsbased on actual electricity sold as minimum lease payments as defined in ASC 840-10-25-4, since lease payments that depend on afactor directly related to the future use of the leased property are contingent rentals and, accordingly, are excluded from minimumlease payments in their entirety. The Company wrote off the net investment receivables of these leases at the lease modificationdate. In addition, Erdos TCH has 30% ownership in DaTangShiDai (BinZhou) Energy Savings Technology Co., Ltd. (“BinZhou EnergySavings”), 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 contributionbeen made.

Shenqiu Yuneng Biomass Power Generation Projects

On May 25, 2011, Xi’an TCH entered into aLetter of Intent with Shenqiu YuNeng Thermal Power Co., Ltd. (“Shenqiu”) to reconstruct and transform a Thermal PowerGeneration System owned by Shenqiu into a 75T/H BMPG System for $3.57 million (RMB 22.5 million). The project commenced in June2011 and was completed in the third quarter of 2011. On September 28, 2011, Xi’an TCH entered into a Biomass Power GenerationAsset Transfer Agreement with Shenqiu (the “Shenqiu Transfer Agreement”). Pursuant to the Shenqiu Transfer Agreement,Shenqiu sold Xi’an TCH a set of 12 MW BMPG systems (after Xi’an TCH converted the system for BMPG purposes). As considerationfor the BMPG systems, Xi’an TCH paid Shenqiu $10.94 million (RMB 70 million) in cash in three installments within six monthsupon the transfer of ownership of the systems. By the end of 2012, all of the consideration was paid. On September 28, 2011, Xi’anTCH and Shenqiu also entered into a Biomass Power Generation Project Lease Agreement (the “2011 Shenqiu Lease”). Underthe 2011 Shenqiu Lease, Xi’an TCH agreed to lease a set of 12 MW BMPG systems to Shenqiu at a monthly rental rate of $286,000(RMB 1.8 million) for 11 years. Upon expiration of the 2011 Shenqiu Lease, ownership of this system will transfer from Xi’anTCH to Shenqiu at no additional cost. In connection with the 2011 Shenqiu Lease, Shenqiu paid one month’s rent as a securitydeposit to Xi’an TCH, in addition to providing personal guarantees.

On October 8, 2012, Xi’an TCH entered intoa Letter of Intent for technical reformation of Shenqiu Project Phase II with Shenqiu for technical reformation to enlarge thecapacity of the Shenqiu Project Phase I (the “Shenqiu Phase II Project”). The technical reformation involved the constructionof another 12 MW BMPG system. After the reformation, the generation capacity of the power plant increased to 24 MW. The projectcommenced on October 25, 2012 and was completed during the first quarter of 2013. The total cost of the project was $11.1 million(RMB 68 million). On March 30, 2013, Xi’an TCH and Shenqiu entered into a BMPG Project Lease Agreement (the “2013 ShenqiuLease”). Under the 2013 Shenqiu Lease, Xi’an TCH agreed to lease the second set of 12 MW BMPG systems to Shenqiu for$239,000 (RMB 1.5 million) per month for 9.5 years. When the 2022 Shenqiu Lease expires, ownership of this system will transferfrom Xi’an TCH to Shenqiu at no additional cost. 

On January 4, 2019, Xi’an Zhonghong, Xi’anTCH, and Mr. Chonggong Bai, a resident of China, entered into a Projects Transfer Agreement (the “Agreement”), pursuantto which Xi’an TCH transferred two Biomass Power Generation Projects in Shenqiu (“Shenqiu Phase I and II Projects”)to Mr. Bai for RMB 127,066,000 ($18.55 million). Mr. Bai transferred all the equity shares of his wholly owned company, Xi’anHanneng Enterprises Management Consulting Co. Ltd. (“Xi’an Hanneng”) to Beijing Hongyuan Recycling Energy InvestmentCenter, LLP (the “HYREF”) as repayment for the loan made by Xi’an Zhonghong to HYREE as consideration for thetransfer of the Shenqiu Phase I and II Projects. The transfer was completed February 15, 2019.

Pucheng Biomass Power Generation Projects

On June 29, 2010, Xi’an TCH entered intoa Biomass Power Generation (“BMPG”) Project Lease Agreement with Pucheng XinHengYuan Biomass Power Generation Co.,Ltd. (“Pucheng”), a limited liability company incorporated in China. Under this lease agreement, Xi’an TCH leaseda set of 12MW BMPG systems to Pucheng at a minimum of $279,400 (RMB 1,900,000) per month for a term of 15 years (“PuchengPhase I”).

On September 11, 2013, Xi’an TCH enteredinto a BMPG Asset Transfer Agreement (the “Pucheng Transfer Agreement”) with Pucheng Xin Heng Yuan Biomass Power GenerationCorporation (“Pucheng”), a limited liability company incorporated in China. The Pucheng Transfer Agreement providedfor the sale by Pucheng to Xi’an TCH of a set of 12 MW BMPG systems with the completion of system transformation for a purchaseprice of RMB 100 million ($16.48 million) in the form of 8,766,547 shares of common stock of the Company at $1.87 per share. Alsoon September 11, 2013, Xi’an TCH also entered into a BMPG Project Lease Agreement with Pucheng (the “Pucheng Lease”).Under the Pucheng Lease, Xi’an TCH leases this same set of 12 MW BMPG system to Pucheng, and combines this lease with thelease for the 12 MW BMPG station of Pucheng Phase I project, under a single lease to Pucheng for RMB 3.8 million ($0.63 million)per month (the “Pucheng Phase II Project”). The term for the consolidated lease is from September 2013 to June 2025.The lease agreement for the 12 MW station from Pucheng Phase I project terminated upon the effective date of the Pucheng Lease.The ownership of two 12 MW BMPG systems will transfer to Pucheng at no additional charge when the Pucheng Lease expires. 

Chengli Waste Heat Power Generation Projects

On July 19, 2013, Xi’an TCH formed a newcompany, “Xi’an Zhonghong New Energy Technology Co., Ltd.” (“Zhonghong”), with registered capitalof RMB 30 million ($4.85 million). Xi’an TCH paid RMB 27 million ($4.37 million) and owns 90% of Zhonghong. Zhonghong isengaged to provide energy saving solution and services, including constructing, selling and leasing energy saving systems and equipmentto customers. On December 29, 2018, Shanghai TCH entered into a Share Transfer Agreement with HYREF, pursuant to which HYREF transferredits 10% ownership in Xi’an Zhonghong to Shanghai TCH for consideration of RMB 3 million ($0.44 million). The transfer wascompleted January 22, 2019.

On July 24, 2013, Zhonghong entered into a CooperativeAgreement of CDQ and CDQ WHPG Project with Boxing County Chengli Gas Supply Co., Ltd. (“Chengli”). The parties enteredinto a supplement agreement on July 26, 2013. Pursuant to these agreements, Zhonghong agreed to design, build and maintain a 25MW CDQ system and a CDQ WHPG system to supply power to Chengli, and Chengli agreed to pay energy saving fees (the “ChengliProject”). Chengli will contract the operation of the system to a third party contractor that is mutually agreed to by Zhonghong.In addition, Chengli will provide the land for the CDQ system and CDQ WHPG system at no cost to Zhonghong. The term of these Agreementsis 20 years. The watt hours generated by the Chengli Project will be charged at RMB 0.42 ($0.068) per KWH (excluding tax). Theoperating time shall be based upon an average 8,000 hours annually. If the operating time is less than 8,000 hours per year dueto a reason attributable to Chengli, then time charged shall be 8,000 hours a year, and if it is less than 8,000 hours due to areason attributable to Zhonghong, then it shall be charged at actual operating hours. The construction of the Chengli Project wascompleted in the second quarter of 2015 and the project successfully completed commissioning tests in the first quarter of 2017.The Chengli Project is now operational, however, due to intensifying environmental protection, the local environmental authoritiesrequired the project owner constructing CDQ sewage treatment to complete supporting works, which were completed and passed throughacceptance inspection during the quarter ended September 30, 2018. However, the owner of Chengli Project changed from Chengli toShandong Boxing Shengli Technology Company Ltd. (“Shengli”). This change resulted from transfer of the equity ownershipof Chengli to Shengli (a private company). Chengli, a 100% state-owned enterprise that is 100% owned by the local Power SupplyBureau, is not allowed to carry out business activities, and Shengli, the new owner, is not entitled to the high on-grid prices,and thus demanded a renegotiation of the settlement terms for the project.

On July 22, 2013, Zhonghong entered into an Engineering,Procurement and Construction (“EPC”) General Contractor Agreement for the Boxing County Chengli Gas Supply Co., Ltd.CDQ Power Generation Project (the “Chengli Project”) with Xi’an Huaxin New Energy Co., Ltd. (“Huaxin”).Zhonghong, as the owner of the Chengli Project, contracted EPC services for a CDQ system and a 25 MW CDQ WHPG system for Chenglito Huaxin. Huaxin shall provide construction, equipment procurement, transportation, installation and adjustment, test run, constructionengineering management and other necessary services to complete the Chengli Project and ensure the CDQ system and CDQ WHPG systemfor Chengli meet the inspection and acceptance requirements and work normally. The Chengli Project is a turn-key project in whichHuaxin is responsible for monitoring the quality, safety, duration and cost of the Chengli Project. The total contract price isRMB 200 million ($33.34 million), which includes all materials, equipment, labor, transportation, electricity, water, waste disposal,machinery and safety costs.

On December 29, 2018, Xi’an Zhonghong, Xi’anTCH, the “HYREF”, Guohua Ku, and Mr. Chonggong Bai entered into a CDQ WHPG Station Fixed Assets Transfer Agreement,pursuant to which Xi’an Zhonghong transferred Chengli CDQ WHPG station as the repayment of loan at RMB 188,639,400 ($27.54million) to HYREF. Xi’an Zhonghong, Xi’an TCH, Guohua Ku and Chonggong Bai also agreed to buy back the CDQ WHPG Stationwhen conditions under the Buy Back Agreement are met . The transfer was completed January 22, 2019.

Tianyu Waste Heat Power Generation Project

On July 19, 2013, Zhonghong entered into a CooperativeAgreement (the “Tianyu Agreement”) for Energy Management of CDQ and CDQ WHPG with Jiangsu Tianyu Energy and ChemicalGroup Co., Ltd (“Tianyu”). Pursuant to the Tianyu Agreement, Zhonghong will design, build, operate and maintain twosets of 25 MW CDQ and CDQ WHPG systems for two subsidiaries of Tianyu – Xuzhou Tian’an Chemical Co., Ltd (“XuzhouTian’an”) and Xuzhou Huayu Coking Co., Ltd. (“Xuzhou Huayu”) – to be located at Xuzhou Tian’anand Xuzhou Huayu’s respective locations (the “Tianyu Project”). Upon completion of the Tianyu Project, Zhonghongwill charge Tianyu an energy saving fee of RMB 0.534 ($0.087) per KWH (excluding tax). The operating time will be based upon anaverage 8,000 hours annually for each of Xuzhou Tian’an and Xuzhou Huayu. If the operating time is less than 8,000 hoursper year due to a reason attributable to Tianyu, then time charged will be 8,000 hours a year. Because of the overcapacity andpollution of the iron and steel and related industries, the government has imposed production limitations for the energy-intensiveenterprises with heavy pollution, including Xuzhou Tian’an. Xuzhou Tian’an has slowed the construction processfor its dry quenching production line which caused the delay of our project. The construction of the Xuzhou Tian’an Projectis anticipated to be completed by the second quarter of 2019. Xuzhou Tian’an will provide the land for the CDQ and CDQ WHPGsystems for free. Xuzhou Tian’an has also guaranteed that it will purchase all of the power generated by the CDQ WHPG systems.The Xuzhou Huayu Project is currently on hold due to a conflict between Xuzhou Huayu Coking Co., Ltd. and local residents on certainpollution-related issues. The local government has acted in its capacity to coordinate the resolution of this issue. The localresidents were requested to move from the hygienic buffer zone of the project location with compensatory payments from the government.Xuzhou Huayu was required to stop production and implement technical innovations to mitigate pollution discharge including sewagetreatment, dust collection, noise control, and recycling of coal gas. Currently, some local residents have moved. Xuzhou Huayuhas completed the implementation of the technical innovations of sewage treatment, dust collection, and noise control, and theCompany is waiting for local governmental agencies to approve these technical innovations so that we can resume construction. Dueto the stricter administration of environmental protection policies and recent increase of environmental protections for the cokingindustry in Xuzhou, all local coking, as well as steel iron enterprises, are facing a similar situation of suspended productionwhile rectifying technologies and procedures. The Company expects to receive governmental acceptance and approval and to resumeconstruction in the second quarter of 2019.  

On July 22, 2013, Xi’an Zhonghong New EnergyTechnology Co., Ltd. entered into an EPC General Contractor Agreement for the Xuzhou Tianyu Group CDQ Power Generation Project(the “Project”) with Xi’an Huaxin New Energy Co., Ltd. (“Huaxin”). Zhonghong as the owner of theProject contracted EPC for the two sets of CDQ and 25 MW CDQ WHPG systems for Tianyu to Huaxin—one for Xuzhou Tian’anand one for Xuzhou Huayu. Huaxin shall provide construction, equipment procurement, transportation, installation and adjustment,test run, construction engineering management and other necessary works to complete the Project and ensure the CDQ and CDQ WHPGsystems for Tianyu meet the inspection and acceptance requirements and work normally. The Project is a turn-key project and Huaxinis responsible for the quality, safety, duration and cost of the Project. The total contract price is RMB 400 million ($66.67 million),of which RMB 200 million ($33.34 million) is for the Xuzhou Tian’an system and RMB 200 million is for the Xuzhou Huayu system.The price is a cover-all price, which includes but not limited to all the materials, equipment, labor, transportation, electricity,water, waste disposal, machinery and safety matters.

On January 4, 2019, Xi’an Zhonghong, Xi’anTCH, and Mr. Chonggong Bai, entered into a Projects Transfer Agreement (the “Agreement”), pursuant to which Xi’anZhonghong transferred a CDQ WHPG station (under construction) located in Xuzhou City for Xuzhou Huayu Coking Co., Ltd. (“XuzhouHuayu Project”) to Mr. Bai for RMB 120,000,000 ($17.52 million). Mr. Bai transferred all the equity shares of his whollyowned company, Xi’an Hanneng, to the “HYREF” as repayment for the loan made by Xi’an Zhonghong to HYREFas consideration for the transfer of the Xuzhou Huayu Project. The transfer was completed February 15, 2019.

Zhongtai WHPG Energy Management CooperativeAgreement

On December 6, 2013, Xi’an TCH entered intoa CDQ and WHPG Energy Management Cooperative Agreement (the “Zhongtai Agreement”) with Xuzhou Zhongtai Energy TechnologyCo., Ltd. (“Zhongtai”), a limited liability company incorporated in Jiangsu Province, China.

Pursuant to the Zhongtai Agreement, Xi’anTCH will design, build and maintain a 150 ton per hour CDQ system and a 25 MW CDQ WHPG system (the “Project”) and sellthe power to Zhongtai, and Xi’an TCH will also build a furnace to generate steam from the waste heat of the smoke pipelineand sell the steam to Zhongtai.

The construction period of the Project is expectedto be 18 months from the date when conditions are ready for construction to begin. Zhongtai will start to pay an energy savingfee from the date when the WHPG station passes the required 72-hour test run. The term of payment is 20 years. For the first 10years of the term, Zhongtai shall pay an energy saving fee at RMB 0.534 ($0.089) per KWH (including value added tax) for the powergenerated from the system. For the second 10 years of the term, Zhongtai shall pay an energy saving fee at RMB 0.402 ($0.067) perKWH (including value added tax). During the term of the contract the energy saving fee shall be adjusted at the same percentageas the change of local grid electricity price. Zhongtai shall also pay an energy saving service fee for the steam supplied by Xi’anTCH at RMB 100 ($16.67) per ton (including value added tax). Zhongtai and its parent company will provide guarantees to ensureZhongtai will fulfill its obligations under the Agreement. Upon the completion of the term, Xi’an TCH will transfer the systemsto Zhongtai at RMB 1 ($0.16). Zhongtai shall provide waste heat to the systems for no less than 8,000 hours per year and wastegas volume no less than 150,000 Nm3 per hour with a temperature no less than 950°C. If these requirements are not met, theterm of the Zhongtai Agreement will be extended accordingly. If Zhongtai wants to terminate the Zhongtai Agreement early, it shallprovide Xi’an TCH a 60 day notice and pay the termination fee and compensation for the damages to Xi’an TCH accordingto the following formula: (i) if it is less than five years into the term when Zhongtai requests termination, Zhongtai shall pay:Xi’an TCH’s total investment amount plus Xi’an TCH’s annual investment return times five years minus theyears in which the system has already operated; or (ii) if it is more than five years into the term when Zhongtai requests thetermination, Zhongtai shall pay Xi’an TCH’s total investment amount minus total amortization cost (the amortizationperiod is 10 years).  

On March 14, 2016, Xi’an TCH entered intoa Xuzhou Zhongtai CDQ and Waste Heat Power Generation System Transfer Agreement (the “Transfer Agreement”) with Zhongtaiand Xi’an Huaxin New Energy Co., Ltd., a limited liability company incorporated in China (the “Contractor”).

The Transfer Agreement provides for the sale toZhongtai of all the assets of the Project under construction from Xi’an TCH. Additionally, Xi’an TCH will transferto Zhongtai the Engineering, Procurement and Construction (“EPC”) Contract for the Project, which Xi’an TCH hadentered into with the Contractor in connection with the Project. As consideration for the transfer of the Project, Zhongtai isto pay to Xi’an TCH an aggregate purchase price of RMB 167,360,000 ($25.75 million and the “Transfer Price”),on the following schedule: (i) RMB 50,000,000 ($7.69 million) of the Transfer Price was paid within 20 business days from the executionof the Transfer Agreement; (ii) RMB 30,000,000 ($4.32 million) of the Transfer Price was paid within 20 business days upon thecompletion of the construction of the Project but not later than July 30, 2016; and (iii) RMB 87,360,000 ($13.45 million) of theTransfer Price was to be paid before July 30, 2017. The temporary ownership of the Project was transferred from Xi’an TCHto Zhongtai after the Xi’an TCH received the first payment of RMB 50,000,000, and the full ownership of the Project is tobe officially transferred to Zhongtai upon full payment of the Transfer Price. The Zhongtai Agreement is to be terminated and Xi’anTCH will agree not to pursue any breach of contract liability against the Zhongtai under the Zhongtai Agreement when Zhongtai fullypays the Transfer Price according to the terms of the Transfer Agreement. If the Transfer Price is not fully paid on time pursuantto the Transfer Agreement, the Transfer Agreement automatically terminates and Xi’an TCH retains ownership of the Project,and both parties would continue to possess their respective rights and obligations according to the Zhongtai Agreement and assumethe liabilities for breach of the Zhongtai Agreement. Xuzhou Taifa Special Steel Technology Co., Ltd. (“Xuzhou Taifa”)has guaranteed the payments by Zhongtai. The Company recorded a $2.82 million loss from this transaction in 2016. In 2016, Xi’anTCH had received the first payment of $7.70 million and the second payment of $4.32 million. However, the Company received a repaymentcommitment letter from Zhongtai on February 23, 2018, in which Zhongtai committed to pay the remaining payment of RMB 87,360,000($13.45 million) no later than the end of July 2018; in July 2018, Zhongtai and the Company reached a further oral agreement toextend the repayment term of RMB 87,360,000 ($13.45 million) by another two to three months. In August 2018, the Company received$1,070,000 from Zhongtai; as of March 31, 2019, the Company had receivables from Zhongtai for $11.88 million (with bad debt allowanceof $3.56 million). On January 23, 2019, Zhongtai provided an acknowledgement letter to the Company stating it expects to repaythe remaining balance of $11.88 million by the end of October 2019, once it resumes its normal production.

Related Party Transactions

As of March 31, 2019, the Company had $41,159 inadvances from the Company’s management, which bear no interest, are unsecured, and are payable upon demand.  

Critical Accounting Policies and Estimates

Our management’s discussion and analysisof our financial condition and results of operations are based on our consolidated financial statements (“CFS”), whichwere prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts ofassets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as wellas 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 readilyapparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Basis of Consolidation

The Company’s consolidated financial statements(“CFS”) include the accounts of CREG and, its subsidiary, Sifang Holdings and Yinghua; Sifang Holdings’ wholly-ownedsubsidiaries, Huahong and Shanghai TCH; Shanghai TCH’s wholly-owned subsidiary Xi’an TCH; and Xi’an TCH’ssubsidiaries, Erdos TCH, Zhonghong, and Zhongxun. Substantially all of the Company’s revenues are derived from the operationsof Shanghai TCH and its subsidiaries, which represent substantially all of the Company’s consolidated assets and liabilitiesas of March 31, 2019. All significant inter-company accounts and transactions were eliminated in consolidation. 

Use of Estimates

In preparing the CFS, management makes estimatesand assumptions that affect the reported amounts of assets and liabilities in the balance sheets as well as revenues and expensesduring the year reported. Actual results may differ from these estimates.

Concentration of Credit Risk

Cash includes cash on hand and demand depositsin accounts maintained within China. Balances at financial institutions within China are not covered by insurance. The Companyhas not experienced any losses in such accounts. 

Certain other financial instruments, which subjectthe Company to concentration of credit risk, consist of accounts and other receivables. The Company does not require collateralor other security to support these receivables. The Company conducts periodic reviews of its customers’ financial conditionand customer payment practices to minimize collection risk on accounts receivable.

The operations of the Company are located in thePRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political,economic and legal environments in the PRC.

Accounts Receivable

As of March 31, 2019, the Company had accountsreceivable of $52,959,990; of which, $36.69 million was for transferring the ownership of Huayu and Shenqiu Phase I and II systemsto Mr. Bai but waiting for completion of transfer Mr. Bai’s all the equity shares of his wholly owned company, Xi’anHanneng, to HYREF; $11.88 million was from the sales of CDQ and a CDQ WHPG system to Zhongtai, and $4.39 million accounts receivableof Erdos TCH for the electricity sold, and the Company had bad debt allowance of $3,564,268 for Zhongtai.

Interest Receivable on Sales Type Leases

As of March 31, 2019, the interest receivable onsales type leases was $5,434,301, mainly representing recognized but not yet collected interest income for the Pucheng systems.

The Company maintains reserves for potential creditlosses on receivables. Management reviews the composition of receivables and analyzes historical bad debts, customer concentrations,customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of thesereserves.  Based on an evaluation of the collectability of such receivables, as of March 31, 2019, the Company had bad debtallowance for net investment receivable of $22,534,192 for the Pucheng systems.

Revenue Recognition

Sales-type Leasing and Related Revenue Recognition

On January 1, 2019, the Company adopted Topic 842using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initialapplication. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under Topic842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accountingunder Topic 840. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU assetand a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as eitherfinance or operating, with classification affecting the pattern of expense recognition in the income statement. A modifiedretrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after,the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. 

The Company constructs and leases waste energyrecycling power generating projects to its customers. The Company typically transfers ownership of the waste energy recycling powergenerating projects to its customers at the end of the lease. Prior to January 1, 2019, the investment in these projects is recordedas investment in sales-type leases in accordance with Financial Accounting Standards Board (“FASB”) Accounting StandardsCodification (“ASC”) Topic 840, “Leases,” and its various amendments and interpretations.

The Company finances construction of waste energyrecycling power generating projects. The sales and cost of sales are recognized at the inception of the lease. The investment insales-type leases consists of the sum of the minimum lease payments receivable less unearned interest income and estimated executorycost. 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 paymentsconsist of the gross lease payments net of executory costs and contingent rentals, if any. Unearned interest is amortized to incomeover the lease term to produce a constant periodic rate of return on net investment in the lease. While revenue is recognized atthe inception of the lease, the cash flow from the sales-type lease occurs over the course of the lease, which results in interestincome and reduction of receivables. Revenue is recognized net of sales tax. 

Contingent Rental Income

The Company records the income from actual electricityusage in addition to minimum lease payment of each project as contingent rental income in the period earned. Contingent rent isnot part of minimum lease payments.

Foreign Currency Translation and ComprehensiveIncome (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 translatedat the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average rate of exchangeprevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period toperiod are included as a component of stockholders’ equity as “Accumulated other comprehensive income.” Gainsand losses from foreign currency transactions are included in income. There has been no significant fluctuation in exchange ratefor the conversion of RMB to USD after the balance sheet date.

The Company uses “Reporting ComprehensiveIncome” (codified in FASB ASC Topic 220). Comprehensive income is comprised of net income and all changes to the statementsof stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions tostockholders. 

RESULTS OF OPERATIONS

Comparison of three months Ended March 31, 2019and 2018

The following table sets forth the results of ouroperations for the periods indicated as a percentage of net sales. Certain columns may not add due to rounding.

SALES. Total sales for the three monthsended March 31, 2019 and 2018 were $621,174 and $1,422,831, respectively. The sales were from the electricity sold in Erdos TCH.

COST OF SALES. Cost of sales (“COS”)for the three months ended March 31, 2019 and 2018 were $0.

GROSS PROFIT. Gross income for the threemonths ended March 31, 2019 and 2018 were $621,174 and $1,422,831, gross margin of 100% each.

INTEREST INCOME ON SALES-TYPE LEASES. Interestincome on sales-type leases for the three months ended March 31, 2019 was $174,235, a $1.43 million decrease from $1.61 millionfor the three months ended March 31, 2018. During the three months ended March 31, 2019, interest income was derived from the ShenqiuPhase I and II systems (15 and 11.9 years, respectively) for the month of January 2019; in February 2019, the Shenqiu Phase I andII systems were transferred to Mr. Bai. 

During the three months ended March 31, 2018, interestincome was derived from the following four sales-type leases:

The decreased interest income was due to the suspensionof Pucheng systems, and the Company stopped accruing interest income in April 2018, which was impacted by China’s environmentalprotection policies, and has not resumed operations to date.

OPERATING EXPENSES. Operating expensesconsisted of general and administrative expenses, bad debt expense totaling $1,442,820 for the three months ended March 31, 2019,compared to $1,506,231 for the three months ended March 31, 2018, a decrease of $63,411 or 4%. The decrease was mainly due to decreasedpayroll expense by $44,460.

NET NON-OPERATING EXPENSES. Net non-operatingexpenses consisted of non-sales-type lease interest income, interest expenses and miscellaneous expenses. For the three monthsended March 31, 2019, net non-operating expense was $3.69 million compared to net non-operating expense of $1.39 million for thethree months ended March 31, 2018. For the three months ended March 31, 2019, we had $41,112 interest income but the amount wasoffset by $1.93 million interest expense on entrusted loan, loss on note conversion of $893,958, and loss on disposal of systemsof $1,257,170. For the three months ended March 31, 2018, we had $37,204 interest income but the amounts were offset by a $1.42million interest expense on loans.

INCOME TAX (BENEFIT)EXPENSE. Incometax benefit was $2.39 million for the three months ended March 31, 2019, compared with $0.34 million income tax expense for thethree months ended March 31, 2018. The consolidated effective income tax rate for the three months ended March 31, 2019 and 2018were (55.2)% and 253.3%, respectively. The increase in income tax benefit for three months ended March 31, 2019 was due toincreased taxable loss.

NET LOSS. Net loss for the three monthsended March 31, 2019 was $1,942,294 compared to $114,237 for the three months ended March 31, 2018, an increase of loss of $1,828,057.This increase in net loss was mainly due to the increase non-operating expenses as described above.

Comparison of years Ended December 31, 2018and 2017

The following table sets forth the results of ouroperations for the periods indicated as a percentage of net sales. Certain columns may not add due to rounding.

SALES. Total sales for the years endedDecember 31, 2018 and 2017 were $4,888,016 and $6,489,504, respectively. The sales were from the electricity sold in Erdos TCH.

COST OF SALES. Cost of sales (“COS”)for the years ended December 31, 2018 and 2017 were $0. We did not sell any new system in the years ended December 31, 2018 and2017.

GROSS PROFIT. Gross income for the yearsended December 31, 2018 and 2017 were $4,888,016 and $6,489,504, gross margin of 100% and 100%, respectively.

INTEREST INCOME ON SALES-TYPE LEASES. Interestincome on sales-type leases for the year ended December 31, 2018 was $3.31 million, a $3.30 million decrease from $6.61 millionfor the year ended December 31, 2017. During the years ended December 31, 2018 and 2017, interest income was derived from the followingfour sales-type leases:

The decreased interest income was due to suspensionof Pucheng systems, and the Company stopped accruing interest income since April 2018, which was impacted by China’s environmentalprotection policies, the operation was not yet resumed as of today.

OPERATING EXPENSES. Operating expensesconsisted of general and administrative expenses, bad debt expense and asset impairment loss totaling $66,188,920 for the yearended December 31, 2018, compared to $7,293,226 for the year ended December 31, 2017, an increase of $58,895,694 or 808%. The increasewas mainly due to increased bad debt expense of $32.21 million and increased asset impairment loss of $28.43 million. We had baddebt expense of $3.62 million for the Zhongtai system, $6.59 million for the Shenqiu systems and $22.00 million for the Puchengsystems. In addition, we recorded asset impairment loss of $6.53 million for Xuzhou Huayu, $13.78 million for Xuzhou Tian’an,and $8.12 million for Chengli.

NET NON-OPERATING EXPENSES. Net non-operatingexpenses consisted of non-sales-type lease interest income, interest expenses and miscellaneous expenses. For the year ended December31, 2018, net non-operating expense was $8.58 million compared to net non-operating expense of $5.44 million for the year endedDecember 31, 2017. For the year ended December 31, 2018, we had $153,532 interest income but the amount was offset by $8.74 millioninterest expense. For the year ended December 31, 2017, we had $143,606 interest income but the amounts were offset by a $5.56million interest expense on loans. The increase in interest expense in 2018 was due to $2.43 million penalty interest on past dueentrusted loan amount.

INCOME TAX EXPENSE. Income tax expensewas $2.63 million for the year ended December 31, 2018, compared with $8.04 million for the year ended December 31, 2017. The consolidatedeffective income tax rate for the years ended December 31, 2018 and 2017 were (4.0)% and 2,174%, respectively. The decreasein income tax expense for the years ended December 31, 2018 was due to increased taxable loss, while in 2017, we had $7.61 milliontax expense from recording the estimated one-time transition tax on post-1986 foreign unremitted earnings under the Tax Cut andJobs Act.

NET LOSS. Net loss for the year endedDecember 31, 2018 was $65,996,898 compared to $7,342,551 for the year ended December 31, 2017, an increase of loss of $58,654,347.This increase in net loss was mainly due to the decreased interest income on sales-type leases and increased bad debt expense andincreased asset impairment loss in the year ended December 31, 2018 as described above.

Liquidity and Capital Resources

Comparison of three months Ended March 31, 2019and 2018

As of March 31, 2019, the Company had cash andequivalents of $57.10 million, other current assets of $55.94 million, current liabilities of $81.73 million, working capital of$31.31 million, a current ratio of 1.38:1 and a liability-to-equity ratio of 1.06:1.

The following is a summary of cash provided byor used in each of the indicated types of activities during the three months ended March 31, 2019 and 2018:

Net cash used in operating activities was $0.77million during the three months ended March 31, 2019, compared to $1.26 million cash provided by operating activities for the threemonths ended March 31, 2018. The increase in net cash outflow for the three months ended March 31, 2019 was mainly due to increasedcash outflow on accrued labilities and other payables by $0.36 million, the refund of a $0.49 million deposit for Shenqiu PhaseI & II due to transferring the systems to Mr. Chonggong Bai, decreased collection of principal on sales-type leases by $0.99million, and increased cash outflow on other receivables by $0.08 million. 

Net cash provided by investing activities was $5,188and $0, respectively, for the three months ended March 31, 2019 and 2018. For the three months ended March 31, 2019, $5,188 wasthe proceeds from disposal of the fixed assets.

Net cash provided by financing activities was $3.62million compared to net cash provided by financing activities of $0 during the three months ended March 31, 2019 and 2018, respectively.The cash inflow in the three months ended March 31, 2019 came from the proceeds of issuance of notes of $2.00 million and proceedsfrom issuance of common stock of $1.62 million.

We do not believe inflation has had or will havea significant negative impact on our results of operations in 2019.

Transfers of Cash to and from Our Subsidiaries

The PRC has currency and capital transfer regulationsthat require us to comply with certain requirements for the movement of capital. The Company is able to transfer cash (US Dollars)to its PRC subsidiaries through: (i) an investment (by increasing the Company’s registered capital in a PRC subsidiary),or (ii) a stockholder loan. The Company’s subsidiaries in the PRC have not transferred any earnings or cash to the Companyto date. The Company’s business is primarily conducted through its subsidiaries. The Company is a holding company and itsmaterial assets consist solely of the ownership interests held in its PRC subsidiaries. The Company relies on dividends paid byits subsidiaries for its working capital and cash needs, including the funds necessary: (i) to pay dividends or cash distributionsto its stockholders, (ii) to service any debt obligations and (iii) to pay operating expenses. As a result of PRC laws and regulations(noted below) that require annual appropriations of 10% of after-tax income to be set aside in a general reserve fund prior topayment of dividends, the Company’s PRC subsidiaries are restricted in that respect, as well as in others respects notedbelow, in their ability to transfer a portion of their net assets to the Company as a dividend.  

With respect to transferring cash from the Companyto its subsidiaries, increasing the Company’s registered capital in a PRC subsidiary requires the filing of the local commercedepartment, while a stockholder loan requires a filing with the state administration of foreign exchange or its local bureau.

With respect to the payment of dividends, we notethe following:

If, for the reasons noted above, our subsidiariesare unable to pay stockholder dividends and/or make other cash payments to the Company when needed, the Company’s abilityto conduct operations, make investments, engage in acquisitions, or undertake other activities requiring working capital may bematerially and adversely affected. However, our operations and business, including investment and/or acquisitions by our subsidiarieswithin China, will not be affected as long as the capital is not transferred in or out of the PRC.

PRC Regulations

In accordance with PRC regulations on Enterpriseswith Foreign Investment and their articles of association, a foreign-invested enterprise (“FIE”) established in thePRC is required to provide statutory reserves, which are appropriated from net profit, as reported in the FIE’s PRC statutoryaccounts. A FIE is required to allocate at least 10% of its annual after-tax profit to the surplus reserve until such reserve hasreached 50% of its respective registered capital (based on the FIE’s PRC statutory accounts). The aforementioned reservesmay only be used for specific purposes and may not be distributed as cash dividends. Until such contribution of capital is satisfied,the FIE is not allowed to repatriate profits to its stockholders, unless approved by the State Administration of Foreign Exchange.After satisfaction of this requirement, the remaining funds may be appropriated at the discretion of the FIE’s board of directors.Our subsidiary, Shanghai TCH, qualifies as a FIE and is therefore subject to the above-mandated regulations on distributable profits. 

Additionally, in accordance with PRC corporatelaw, a domestic enterprise is required to maintain a surplus reserve of at least 10% of its annual after-tax profit until suchreserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. The aforementionedreserves can only be used for specific purposes and may not be distributed as cash dividends. Xi’an TCH, Huahong, Zhonghongand Erdos TCH were established as domestic enterprises; therefore, each is subject to the above-mentioned restrictions on distributableprofits.

As a result of PRC laws and regulations that requireannual appropriations of 10% of after-tax income to be set aside, prior to payment of dividends, in a general reserve fund, theCompany’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company as adividend or otherwise.

Chart of the Company’s Statutory Reserve

Pursuant to PRC corporate law, effective January1, 2006, the Company is required to maintain a statutory reserve by appropriating from its after-tax profit before declarationor payment of dividends. The statutory reserve represents restricted retained earnings. Our restricted and unrestricted retainedearnings under US GAAP are set forth below:

Off-Balance Sheet Arrangements

We have not entered into any other financial guaranteesor other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contractsthat are indexed to our shares and classified as stockholders’ equity or that are not reflected in our consolidated financialstatements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity thatserves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entitythat provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and developmentservices with us.

Contractual Obligations

The Company’s contractual obligations asof March 31, 2019 are as follows:

The Company believes it has a stable cash infloweach month and a sufficient channel to commercial institutions to obtain any loans that may be necessary to meet its working capitalneeds. Historically, we have been able to obtain loans or otherwise achieve our financing objectives due to the Chinese government’ssupport for energy-saving businesses with stable cash inflows, good credit ratings and history. The Company does not believe itwill have difficulties related to the repayment of its outstanding short-term loans.

Commitments

Xuzhou Tian’an and Xuzhou Huayu CDQ Power Generation Projects 

On July 19, 2013, Zhonghong entered into a CooperativeAgreement for Energy Management of CDQ and CDQ WHPG Project with Jiangsu Tianyu Energy and Chemical Group Co., Ltd. (“Tianyu”).

Pursuant to the Tianyu Agreement, Zhonghong willdesign, build, operate and maintain two sets of 25 MW CDQ and CDQ WHPG systems for two subsidiaries of Tianyu: one is for and willbe located at Xuzhou Tian’an Chemical Co., Ltd and one set is for and will be located at Xuzhou Huayu Coking Co., Ltd. (the“Tianyu Project”). Upon the completion of the Tianyu Project, Zhonghong will charge Tianyu an energy saving servicefee of RMB 0.534 ($0.088) per KWH (excluding tax). The operating time shall be based upon an average 8,000 hours annually for eachof Tian’an and Huayu. If the operating time for each of Tian’an and Huayu is less than 8,000 hours a year due to reasonsattributable to Tianyu, then time charged shall be 8,000 hours a year for each of Tian’an and Huayu. Xuzhou Tian’anand Huayu will provide the land for the CDQ and CDQ WHPG systems for free. Xuzhou Tian’an and Huayu also guarantee that theywill purchase all of the power generated by the CDQ WHPG systems.  

On July 22, 2013, Xi’an Zhonghong New EnergyTechnology Co., Ltd. entered into an EPC General Contractor Agreement for the Xuzhou Tianyu Group CDQ Power Generation Project(the “Project”) with Xi’an Huaxin New Energy Co., Ltd. (“Huaxin”). Zhonghong as the owner of theProject contracted EPC for the two sets of CDQ and 25 MW CDQ WHPG systems for Tianyu to Huaxin—one for Xuzhou Tian’anand one for Xuzhou Huayu. Huaxin shall provide construction, equipment procurement, transportation, installation and adjustment,test run, construction engineering management and other necessary works to complete the Project and ensure the CDQ and CDQ WHPGsystems for Tianyu meet the inspection and acceptance requirements and work normally. The project is a turn-key project and Huaxinis responsible for the quality, safety, duration and cost of the Project. The total contract price is RMB 400 million ($66.67 million),of which RMB 200 million ($28.83 million) is for the Xuzhou Tian’an system and RMB 200 million is for the Xuzhou Huayu system.The price is a cover-all price which includes but is not limited to all the materials, equipment, labor, transportation, electricity,water, waste disposal, machinery and safety matters. As of March 31, 2019, Zhonghong had $25.58 million (or $39.12 million if includingcapitalized interest) for the Tian’an project and is committed to pay an additional $4.12 million for the Tian’an project.

On January 4, 2019, Xi’an Zhonghong, Xi’anTCH, and Mr. Chonggong Bai, entered into a Projects Transfer Agreement (the “Agreement”), pursuant to which Xi’anZhonghong transferred the Xuzhou Huayu Project to Mr. Bai for RMB 120,000,000 ($17.52 million). Mr. Bai transferred all the equityshares of his wholly owned company, Xi’an Hanneng, to “HYREF” as repayment for the loan made by Xi’an Zhonghongto HYREF as consideration for the transfer of the Xuzhou Huayu Project. The transfer was completed February 15, 2019. 

Legal Proceedings

From time to time, we may be subject to legal proceedingsand claims in the ordinary course of business. We are not currently a party to any material legal proceedings, and to our knowledgenone is threatened. There can be no assurance that future legal proceedings arising in the ordinary course of business or otherwisewill not have a material adverse effect on our financial position, results of operations or cash flows. 

MANAGEMENT

Executive Officers and Directors

The following table sets forthas of May 22, 2019 the names, positions and ages of our current executive officers and directors. Our directors serve until thenext annual meeting of shareholders or until their successors are elected and qualified. Our officers are elected by the Boardand their terms of office are, except to the extent governed by an employment contract, at the discretion of the Board.

Mr. Guohua Ku wasappointed as a director and our Chief Executive Officer as of December 10, 2008. He was elected Chairman of the Board as ofApril 1, 2009. Prior to joining the Company, Mr. Ku served as a Senior Engineer for Yingfeng Technology from 2003 to2007. From 1979 to 2003, Mr. Ku served in multiple capacities for Shaanxi Blast Air Blower (Group) Co., Ltd., with his lastposition serving as a Senior Engineer. Mr. Ku’s experience as our Chief Executive Officer, as well as Chairman of theBoard, and extensive scientific and operational knowledge and expertise qualifies him to serve as Chairman of the Board and ledthe Board to conclude that he should be nominated to serve another term as a director.

Ms. Adeline Gu wasappointed as the Company’s Chief Financial Officer and Secretary on September 28, 2016. Ms. Gu has been serving as the directorof the office of Board of Directors of the Company from August, 2012 to September 27, 2016. She was the Investor Relations Directorfrom December 2007 to August 13, 2012 and Investor Relations Director Assistant from March 2006 to December 2007 of China NaturalGas, Inc. From October 2005 to March 2006, Ms. Gu was the Interpreter of Xi’an Equity Exchange & Shaanxi Watson BiologyGene Technology Co., Ltd. Ms. Gu studied at Northwest University of China from September, 1995 to June, 1999 and received her bachelordegree, majoring in English. Ms. Gu has held a Chinese Accounting Certificate since 2000..

Mr. Xiaoping Guo wasfirst appointed as a director on June 1, 2017 by the board to fill a pending vacancy. Mr. Guo has served as the assistant to thepresident of Datang New Energy Co., Ltd., since 2010. Mr. Guo received his bachelor degree from the Xi’an Jiaotong Universityin 1977, and his master’s degree in systems engineering from the same school in 2000. Mr. Guo’s extensive projectengineering and development experience, as well as his management experience, qualifies him to serve on our Board andled the Board to conclude that he should be nominated as a director.

Mr. Geyun Wang wasinitially elected as a director at the 2014 Annual Meeting, and he also serves as a Vice President of the Company. Mr. Wangis responsible for the procurement of engineering equipment and tendering for project construction, as well as supervision of installationand commissioning for EPC projects. Mr. Wang was the Deputy General Manager of our subsidiary Xi’an TCH Energy TechnologyCo., Ltd. between 2007 and 2015 and he was appointed as a Vice President of the Company in 2015. Prior to this position, from 2001to 2007, Mr. Wang served as the Vice President of Sales of Shaanxi Baoji Hongguang Iron & Steel Co., Ltd., where he wasresponsible for sales of steel products. Mr. Wang received his bachelor degree from Northwestern Polytechnical Universityin 1988. Mr. Wang’s extensive project construction and management experience, as well as his extensive industryand market expertise, qualifies him to serve on our Board and led the Board to conclude that he should be nominated as a director.

Mr. Xiaogang Zhu wasfirst appointed as a director on June 1, 2017 by the board to fill a pending vacancy. Mr. Zhu has served as a financial consultantto Shaanxi Coal Chemical Engineering New Energy Co., Ltd., since May 2014. From December 2007 until May 10, 2014, Mr. Zhu servedas the Company’s accounting manager and vice president of accounting. Prior to that, Mr. Zhu was the Chief Financial Officerof China Natural Gas, Inc., from 2005 to 2007, and as the vice president of Xi’an Dapeng Biological Technology Co., Ltd.from 2000 to 2005. Mr. Zhu received his bachelor degree in accounting from Shaanxi University of Finance and Economics in 1992.Mr. Zhu’s significant financial expertise qualifies him to serve on our Board and led the Board to conclude that he shouldbe nominated as a director.

Ms. LuLu Sun wasfirst appointed as a director on August 5, 2015 by the board to fill a pending vacancy. Ms. Sun serves as Marketing Directorfor Net Engine Power Tech. Ltd. Co. in China from June 2013 to present and she was the New Media Business Development Directorfor Rayli Magazine in China from June 2009 to May 2013. From July 2002 to May 2009, Ms. Sun was the Business Development ProjectManager for Sina Mobile in China. Ms. Sun’s extensive experience in marketing and business development in China qualifiesher to serve on our Board and led the Board to conclude that she should be nominated as a director.

Involvement in Certain Legal Proceedings

During the past ten years,none of our directors or executive officers has been:

None of our directors, executiveofficers or affiliates, or any beneficial owner of 5% or more of our common stock, or any associate of such persons, is an adverseparty in any material proceeding to, or has a material interest adverse to, us or any of our subsidiaries.

Corporate Governance

Director Independence

Xiaoping Guo, LuLu Sun andXiaogang Zhu are our only non-employee directors, and our Board determined that each of them is independent pursuant to the listingrules of NASDAQ. All of the members of each of the Audit Committee, Compensation Committee and Corporate Governance and NominatingCommittee are independent as defined in NASDAQ Rule 5605(a)(2). As required under applicable NASDAQ listing standards, inthe 2018 fiscal year, our independent directors met twice in regularly scheduled executive sessions at which only our independentdirectors were present.

Mr. Xiaogang Zhu, a nomineefor director, is a former employee of the Company. Our Board has determined that, as of the date of the 2019 Annual Meeting, Mr.Zhu will be “independent” under the independence requirements of Rule 10A-3 promulgated under the Securities ExchangeAct of 1934 and as defined by NASDAQ Rule 5605(a)(2).

Code of Ethics

We adopted a “code ofethics” as defined by regulations promulgated under the Securities Act of 1933, as amended, and the Exchange Act that appliesto all of our directors and employees worldwide, including our principal executive officer, principal financial officer and principalaccounting officer. A current copy of our Code of Business Conduct and Ethics is available on our website at www.creg-cn.com underthe links “Investor Relations – Corporate Governance.” We intend to disclose any amendments to the Code of BusinessConduct and Ethics, as well as any waivers for executive officers or directors, on our website. 

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizesthe compensation earned during the years ended December 31, 2018 and 2017, by those individuals who served as our Chief ExecutiveOfficer, or Chief Financial Officer during any part of fiscal year 2018 and our other most highly compensated executive officer.The individuals listed in the table below are referred to as the “named executive officers.” 

Narrative to Summary Compensation Table

In fiscal 2018, the primarycomponents of our executive compensation programs were base salary and equity compensation. We use base salary to fairly and competitivelycompensate our executives, including the named executive officers, for the jobs we ask them to perform. We view base salary asthe most stable component of our executive compensation program, as this amount is not at risk. We believe that the base salariesof our executives should be targeted at or above the median of base salaries for executives in similar positions with similar responsibilitiesat comparable companies, consistent with our compensation philosophy. Because of our emphasis on performance-based compensationfor executives, base salary adjustments are generally made only when we believe there is a significant deviation from the marketor an increase in responsibility. Our Compensation Committee reviews the base salary levels of our executives each year to determinewhether an adjustment is warranted or necessary.

Employment Contracts

Mr. Guohua Ku enteredinto an employment agreement with the Company to serve as its CEO on December 10, 2008. The agreement had a two-year term,starting December 10, 2008, that included a one-month probationary period. In accordance with the terms and conditions ofMr. Ku’s employment agreement, on December 10, 2010, 2014, December 10, 2016, and, more recently, on December 10,2018, the Company and Mr. Ku agreed to renew Mr. Ku’s employment agreement for an additional two-year term. Mr. Kureceives a salary of RMB 216,000 ($33,078) annually for his service as CEO. The Company may terminate the employment agreementat any time without any prior notice to the employee if Mr. Ku engages in certain conduct, including, but not limited to (i) theviolation of the rules and procedures of the Company or breaches the terms of the employment agreement; (ii) neglecting hisduties or engages in malpractice for personal gain that damages the Company; (iii) entering into an employment relationshipwith any other employer during his employment with the Company; or (iv) the commission of a crime. The Company also may terminatethe employment agreement upon 30 days written notice to Mr. Ku under certain other conditions, including but not limited to(i) inability to continue position due to non-work-related sickness or injury; (ii) incompetence; and (iii) theneed for mass layoffs or other restructuring. Mr. Ku has the right to resign at any time upon a 30 day written notice to theCompany.

In connection with her appointmentas Chief Financial Officer and Secretary, the Company entered into an employment agreement with Ms. Gu on September 28, 2016. Pursuantto the terms of the employment agreement, Ms. Gu will receive compensation of RMB 10,000 (approximately $1,538) per monthplus stock options for no less than 5,000 shares of common stock of the Company each year to be issued under the China RecyclingEnergy Corporation Omnibus Equity Plan (the “Plan”) with the specific terms of the options to be determined by theCompensation Committee of the Board in the future. The term of the employment agreement is for two years, starting on September28, 2016. The Compensation Committee approved the grant of an option to Ms. Gu to purchase 5,000 shares of the Company’scommon stock on April 27, 2017. On September 28, 2018, the Company and Ms. Gu agreed to renew Ms. Gu’s employment agreementfor an additional two-year term. Ms. Gu receives a salary of RMB 144,000 ($22,052) annually for her service as CFO.

In June of 2015, the stockholdersof the Company approved the China Recycling Energy Corporation Omnibus Equity Plan (the “2015 Equity Plan”) at itsannual meeting. The total aggregate shares of common stock authorized for issuance during the term of the 2015 Equity Plan is 1,246,261shares, as adjusted following the Company’s 1-for-10 reverse stock split of the Company’s authorized shares of CommonStock, effective in May 2016. The 2015 Equity Plan will terminate on the earliest to occur of (i) the 10th anniversary of the EquityPlan’s effective date, or (ii) the date on which all shares available for issuance under the Equity Plan shall have been issuedas fully-vested shares.

Potential Payments Upon Termination or Changeof Control

Employment Agreements

Certain of our executive officers,including our CEO, have an employment agreement with the Company. Under Chinese law, we may only terminate employment agreementswithout cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment agreementis scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment agreement in the absence ofcause, as defined in the agreement, then we are obligated to pay the employee one month’s salary for each year we have employedthe employee. We are, however, permitted to terminate an employee for cause without penalty pursuant to the employment agreement. 

2015 Plan

In June of 2015, the stockholdersof the Company approved the China Recycling Energy Corporation Omnibus Equity Plan (the “2015 Equity Plan”) at itsannual meeting. The total aggregate shares of common stock authorized for issuance during the term of the 2015 Equity Plan is 1,246,261shares, as adjusted following the Company’s 1-for-10 reverse stock split of the Company’s authorized shares of CommonStock, effective in May 2016. The 2015 Equity Plan will terminate on the earliest to occur of (i) the 10th anniversary of the EquityPlan’s effective date, or (ii) the date on which all shares available for issuance under the Equity Plan shall have been issuedas fully-vested shares. A total of 5,000 shares underlying options were granted to an executive officer under the 2015 Equity Planas of March 31, 2019.

Non-Employee Director Compensation

The following table sets forthcertain information regarding the compensation earned by or awarded during the 2018 fiscal year to each of our non-executivedirectors:

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 The Company has not implementeda written policy concerning the review of related party transactions; however, the Company’s policy is that the Audit Committeemust review related party transactions and Board must approve all related party transactions. Further, all material related partytransactions will be made or entered into on terms that are no less favorable to us than can be obtained from unaffiliated thirdparties.

A “related party transaction”is a transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similartransactions, arrangements or relationships in which the Company (including any of our subsidiaries) was, is or will be a participant,the amount involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect interest.

As of March 31, 2019, the Company had $41,159 inadvances from the Company’s management, which bear no interest, are unsecured, and are payable upon demand. 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT

The following table sets forthcertain information provided to us by each of the following as of May 22, 2019 (unless otherwise indicated) regarding their beneficialownership of our common stock:

Beneficial ownership is determinedin accordance with the rules of the SEC and includes voting and investment power with respect to the securities. The followingtable lists the number of shares and percentage of shares beneficially owned based on 16,106,497 shares of our common stock outstandingas of May 22, 2019. Except as indicated by footnote, and subject to applicable community property laws, the persons and entitiesnamed in the table below have sole voting and sole investment power with respect to the shares set forth opposite each person’sor entity’s name. The address for each director and executive officer is 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3^rd Road,Yanta District, Xi’an City, Shaanxi Province, China 710075.

SELLING SHAREHOLDERS

The 5,658,641shares of ourcommon stock included in this prospectus, including shares of our common stock issuable pursuant to the terms of outstanding warrants,were issued to the selling shareholders pursuant to exemptions from the registration requirements of the Securities Act pursuantto Regulation D and Regulation S promulgated thereunder.

In a private placement on April15, 2019, concurrently with a direct registered offering, we issued to investors in the direct registered offering warrants topurchase up to 1,769,454 shares of our common stock (the “April Investor Warrants”). In addition, we issued warrantsto purchase 165,149 shares of our common stock to designees of the placement agent in the private placement (the “April AgentWarrants,” and together with the April Investor Warrants, the “April Warrants”). The Warrants will be exercisablebeginning on the six month anniversary of the date of issuance at an exercise price of $0.9365 per share for the April InvestorWarrants and $1.00 per share for the April Agent Warrants. The April Investor Warrants will expire on the five and a half yearanniversary of the date of issuance and the April Agent Warrants will expire on April 15, 2024.

In a private placement on October29, 2018, concurrently with a direct registered offering, we issued to investors in the direct registered offering warrants topurchase up to 1,985,082 shares of our common stock (the “October Investor Warrants”). In addition, we issued warrantsto purchase 138,956 shares of our common stock to designees of the placement agent in the private placement (the “OctoberAgent Warrants,” and together with the October Investor Warrants, the “October Warrants”). The October Warrantsare exercisable beginning on the six month anniversary of the date of issuance at an exercise price of $ 1.3725 per share for theOctober Investor Warrants and $1.875 per share for the October Agent Warrants. The October Investor Warrants will expire on thefive and a half year anniversary of the date of issuance and the October Agent Warrants will expire on October 29, 2023.

On February 13, 2019, the Companyentered into a Securities Purchase Agreement (the “Agreement”) with Great Essential Investment, Ltd., a company incorporatedin the British Virgin Islands (the “Purchaser”), pursuant to which the Company sold to the Purchaser in a private placement1,600,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “CommonStock”), at a purchase price of $1.013 per share for an aggregate offering price of $1,620,800 (the “Private Placement”). 

The selling shareholders namedbelow, or their respective successors, including transferees, may from time to time sell or otherwise dispose of, pursuant tothis prospectus, all, some or none of their shares of our common stock being registered hereby. See “Plan of Distribution”on page 51.

The following table sets forth,as to each of the selling shareholders: the number of shares of our common stock beneficially owned, based on each selling shareholder’sownership of shares and warrants held of record as of May 22, 2019, assuming exercise of all of the warrants held by such sellingshareholder on that date, without regard to any limitations on exercise and solely for purposes of the beneficial ownership calculation;the number of shares of our common stock being offered by such selling shareholder pursuant to this prospectus; and the numberof shares of our common stock beneficially owned upon completion of the offering and the percentage of beneficial ownership uponcompletion of the offering based upon 16,106,498 shares of our common stock outstanding as of May 22, 2019, assuming full exerciseof all warrants held by the selling shareholders and outstanding on that date, without regard to any limitations on exercise, includingbut not limited to exercise date restrictions.

The registration of these sharesof common stock does not mean that the selling stockholders will sell or otherwise dispose of all or any of those securities. Theselling stockholders may sell or otherwise dispose of all, a portion or none of such shares from time to time. We do not know thenumber of shares, if any, that will be offered for sale or other disposition by any of the selling stockholders under this prospectus.Furthermore, the selling stockholders may have sold, transferred or disposed of the shares of common stock covered hereby in transactionsexempt from the registration requirements of the Securities Act since the date on which the Company filed this prospectus.

Information in the table belowand the notes thereto has been provided to us by the selling shareholders. Unless otherwise indicated, to our knowledge, each sellingshareholder listed below has sole dispositive and voting power with respect to the shares of our common stock shown below as beneficiallyowned by such selling shareholder, except to the extent authority is shared by spouses under applicable law. Beneficial ownershipand percentage have been determined in accordance with Rule 13d-3 under the Exchange Act and generally includes voting or dispositivepower with respect to the securities. The information listed below is not necessarily indicative of beneficial ownership for anyother purpose.

None of the selling shareholders, other than thoseidentified by disclosure above, has, or within the past three years has had, any position, office or material relationship withus or with any of our predecessors or affiliates.

PLAN OF DISTRIBUTION

The selling shareholders are offering from time to time 5,658,641 shares of our common stock, of which1,600,000 shares are currently outstanding and 4,058,641 shares are issuable upon the exercise of the Warrants. The selling shareholdersand any of their pledgees, donees, assignees and successors-in-interest may, from time to time, sell any or all of their sharesof our common stock being offered under this prospectus on any stock exchange, market or trading facility on which the shares aretraded or in private transactions.  These sales may be at fixed or negotiated prices.

All of the shares of our commonstock and the Warrants described above were issued previously in private transactions completed prior to the filing of the registrationstatement of which this prospectus is a part.

The selling shareholders maysell all or a portion of the shares of our common stock beneficially owned by them and offered hereby from time to time directlyor through one or more underwriters, broker-dealers or agents. If the shares of our common stock are sold through underwritersor broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent’s commissions.The shares of our common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the timeof the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions,which may involve crosses or block transactions:

The selling shareholders mayalso sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the“Securities Act”), if available, rather than under this prospectus.

If the selling shareholderseffect such transactions by selling shares of our common stock to or through underwriters, broker-dealers or agents, such underwriters,broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholdersor commissions from purchasers of the shares of our common stock for whom they may act as agent or to whom they may sell as principal(which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of thosecustomary in the types of transactions involved). In connection with sales of the shares of our common stock or otherwise, theselling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the sharesof our common stock in the course of hedging in positions they assume. The selling shareholders may also sell shares of our commonstock short and deliver shares of our common stock covered by this prospectus to close out short positions and to return borrowedshares in connection with such short sales. The selling shareholders may also loan or pledge shares of our common stock to broker-dealersthat in turn may sell such shares.

The selling shareholders maypledge or grant a security interest in some or all of the Warrants or shares of our common stock owned by them and, if they defaultin the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of our common stockfrom time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provisionof the Securities Act amending, if necessary, the list of selling shareholders to include the pledgee, transferee or other successorsin interest as selling shareholders under this prospectus. The selling shareholders also may transfer and donate the shares ofour common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will bethe selling beneficial owners for purposes of this prospectus.

The selling shareholders andany broker-dealer participating in the distribution of the shares of our common stock may be deemed to be “underwriters”within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealermay be deemed to be underwriting commissions or discounts under the Securities Act.

Under the securities laws ofsome states, the shares of our common stock may be sold in such states only through registered or licensed brokers or dealers.In addition, in some states the shares of our common stock may not be sold unless such shares have been registered or qualifiedfor sale in such state or an exemption from registration or qualification is available and is complied with.

There can be no assurance thatany selling shareholder will sell any or all of the shares of our common stock registered pursuant to the registration statementof which this prospectus is a part.

The selling shareholders andany other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rulesand regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchasesand sales of any of the shares of our common stock by the selling shareholders and any other participating person. Regulation Mmay also restrict the ability of any person engaged in the distribution of the shares of our common stock to engage in market-makingactivities with respect to the shares of our common stock. All of the foregoing may affect the marketability of the shares of ourcommon stock and the ability of any person or entity to engage in market-making activities with respect to the shares of our commonstock.

We have agreed to pay all expensesof the registration of the shares of our common stock covered by this prospectus including, without limitation, SEC filing feesand expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling shareholderwill pay all underwriting discounts and selling commissions, if any. We will indemnify the selling shareholders against liabilities,including some liabilities under the Securities Act, in accordance with our agreement to register the shares of our common stock,or the selling shareholders will be entitled to contribution.

Once sold under the registrationstatement of which this prospectus is a part, the shares of our common stock will be freely tradable in the hands of persons otherthan our affiliates.

DESCRIPTION OF CAPITAL STOCK

Thefollowing is a summary of our capital stock and certain provisions of our certificate of incorporation and bylaws. This summarydoes not purport to be complete and is qualified in its entirety by the provisions of our Articles of Incorporation, as amended,our Fourth Amended and Restated Bylaws (“Bylaws”), and applicable provisions of the Nevada Revised Statutes (the “NRS”).

See“Where You Can Find More Information” elsewhere in this prospectus for information on where you can obtain copies ofour Certificate of Incorporation and Amended and Restated Bylaws, which have been filed with and are publicly available from theSEC.

Ourauthorized capital stock consists of 20,000,000 shares of Common Stock, par value $0.001 per share.  Currently, we haveno other authorized class of stock.

DESCRIPTION OF COMMON STOCK

Asof May 22, 2019, there were 16,106,498 shares of our Common Stock outstanding, held by approximately 2,720 stockholders of record.There are warrants to purchase 4,058,641 shares of our Common Stock outstanding as of the date of this prospectus.

OurCommon Stock is currently traded on the NASDAQ Capital Market under the symbol “CREG.”

Theholders of our Common Stock are entitled to one vote per share. Our Articles of Incorporation do not provide for cumulative voting.The holders of our Common Stock are entitled to receive ratably such dividends, if any, as may be declared by our board of directors(“BOD”) out of legally available funds; however, the current policy of our BOD is to retain earnings, if any, for operationsand growth. Upon liquidation, dissolution or winding-up, the holders of our Common Stock are entitled to share ratably in all assetsthat are legally available for distribution. The holders of our Common Stock have no preemptive, subscription, redemption or conversionrights.

Allissued and outstanding shares of Common Stock are fully paid and nonassessable. Shares of our Common Stock that may be offeredfor resale, from time to time, under this prospectus will be fully paid and nonassessable.

Anti-Takeover Effectsof Certain Provisions of Nevada Law

Asa Nevada corporation, we are also subject to certain provisions of the NRS that have anti-takeover effects and may inhibit a non-negotiatedmerger or other business combination. These provisions are intended to encourage any person interested in acquiring us to negotiatewith, and to obtain the approval of, our BOD in connection with such a transaction. However, certain of these provisions may discouragea future acquisition of us, including an acquisition in which the stockholders might otherwise receive a premium for their shares.As a result, stockholders who might desire to participate in such a transaction may not have the opportunity to do so.

TheNRS provides that specified persons who, with or through their affiliates or associates, own, or affiliates and associates of thesubject corporation at any time within two years own or did own, 10% or more of the outstanding voting stock of a corporation cannotengage in specified business combinations with the corporation for a period of two years after the date on which the person becamean interested stockholder, unless the combination meets all of the requirements of the articles of incorporation of the company,and: (i) the combination or transaction by which such person first became an interested stockholder was approved by the BOD beforethey first became an interested stockholder; or (ii) such combination is approved by: (x) the board of directors; and (y) at anannual or special meeting of the stockholders (not by written consent), the affirmative vote of stockholders representing at least60% of the outstanding voting power not beneficially owned by such interested stockholder. The law defines the term “businesscombination” to encompass a wide variety of transactions with or caused by an interested stockholder, including mergers,asset sales and other transactions in which the interested stockholder receives or could receive a benefit on other than a prorata basis with other stockholders.

TheControl Share Acquisition Statute generally applies only to Nevada corporations with at least 200 stockholders of record, includingat least 100 stockholders of record who are Nevada residents, and which conduct business directly or indirectly in Nevada. Thisstatute generally provides that any person that acquires a “controlling interest” acquires voting rights in the controlshares, as defined, only as conferred by the disinterested stockholders of the corporation at a special or annual meeting. A personacquires a “controlling interest” whenever a person acquires shares of a subject corporation that, but for the applicationof these provisions of the NRS, would enable that person to exercise (1) one-fifth or more, but less than one-third, (2) one-thirdor more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors.Once an acquirer crosses one of these thresholds, shares which it acquired in the transaction taking it over the threshold andwithin the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interestbecome “control shares.” In the event control shares are accorded full voting rights and the acquiring person has acquiredat least a majority of all of the voting power, any stockholder of record who has not voted in favor of authorizing voting rightsfor the control shares is entitled to demand payment for the fair value of its shares.

Theselaws may have a chilling effect on certain transactions if our Articles of Incorporation or Bylaws are not amended to provide thatthese provisions do not apply to us or to an acquisition of a controlling interest, or if our disinterested stockholders do notconfer voting rights in the control shares. 

EXPERTS

Theconsolidated financial statements of China Recycling Energy Corporation appearing in China Recycling Energy Corporation’sAnnual Report on Form 10-K for the years ended December 31, 2018 and 2017 have been audited by MJF & Associates, APC, an independentregistered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference.Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authorityof such firm as an expert in accounting and auditing. 

LEGAL MATTERS

The validity of the issuanceof the securities offered hereby will be passed upon for us by Garvey Schubert Barer, P.C.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informationrequirements of the Exchange Act and, in accordance therewith, file annual, quarterly and special reports, proxy statements andother information with the SEC. You may read and copy any document we file at the SEC’s Public Reference Room at 100 F Street,Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the operation of the Public ReferenceRoom. These documents also may be accessed through the SEC’s electronic data gathering, analysis and retrieval system, orEDGAR, via electronic means, including the SEC’s home page on the Internet (www.sec.gov).

This prospectus is only partof a registration statement on Form S-1 that we have filed with the SEC under the Securities Act and therefore omits certain informationcontained in the registration statement. We have also filed exhibits and schedules with the registration statement that are excludedfrom this prospectus, and you should refer to the applicable exhibit or schedule for a complete description of any statement referringto any contract or other document. You may inspect a copy of the registration statement, including the exhibits and schedules,without charge, at the public reference room or obtain a copy from the SEC upon payment of the fees prescribed by the SEC.

We also maintain a websiteat www.creg-cn.com, through which you can access our SEC filings. The information contained on our website is not incorporatedby reference into, and does not form any part of, this prospectus. We have included our website address as a factual referenceand do not intend it to be an active link to our website.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The SEC allows us to incorporate by reference the information and reports we file with it under File No. 001-34625, which means that we can disclose important information to you by referring you to those publicly available documents.The information incorporated by reference is an important part of this prospectus, and information that we file later with theSEC will automatically update and supersede the information already incorporated by reference. We are incorporating by referencethe documents listed below, which we have already filed with the SEC, and all documents subsequently filed by us pursuant to Sections13(a), 13(c), 14 or 15(d) of the Exchange Act, except as to any portion of any future report or document that is not deemed filedunder such provisions, prior to the termination of the offering:

We also incorporate by referenceall documents that we file with the SEC on or after the effective time of this prospectus pursuant to Sections 13(a), 13(c),14 or 15(d) of the Exchange Act and prior to the sale of all shares of Common Stock registered hereunder or the termination ofthe registration statement. Nothing in this prospectus shall be deemed to incorporate information furnished but not filed withthe SEC.

Any statement contained inthis prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus shall be deemed to bemodified or superseded for purposes of this prospectus to the extent that a statement contained herein or in the applicable prospectussupplement or in any other subsequently filed document which also is or is deemed to be incorporated by reference modifies or supersedesthe statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitutea part of this prospectus.

You may request a copy of thefilings incorporated herein by reference, including exhibits to such documents that are specifically incorporated by reference,at no cost, by writing or calling us at the following address or telephone number:

China Recycling Energy Corporation

124/F, Tower C

Rong Cheng Yun Gu Building

Keji 3^rd Road, Yanta District

Attn: Adeline Gu, Chief Financial Officer andCorporate Secretary

+86-29-8769-1097

Statements contained in thisprospectus as to the contents of any contract or other documents are not necessarily complete, and in each instance you are referredto the copy of the contract or other document filed as an exhibit to the registration statement or incorporated herein, each suchstatement being qualified in all respects by such reference and the exhibits and schedules thereto.

CHINA RECYCLING ENERGY CORPORATION

5,658,641 Shares of Common Stock

PROSPECTUS

             ,2019

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forththe costs and expenses that payable by us in connection with the offering described in the prospectus that is part of this registrationstatement. All amounts, other than the SEC Registration Fee, are estimates. Although we will not receive any of the proceeds fromthe sale of the shares of our common stock being registered in this registration statement, we agreed to bear the costs and expensesof the registration of such shares.

Item 14. Indemnification of Directors and Officers

Section78.138 of the NRS provides that a director or officer is not individually liable to the corporation or its shareholders or creditorsfor any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that(1) the director’s or officer’s act or failure to act constituted a breach of his fiduciary duties as a director orofficer and (2) his or her breach of those duties involved intentional misconduct, fraud or a knowing violation of law.

Thisprovision is intended to afford directors and officers protection against and to limit their potential liability for monetary damagesresulting from suits alleging a breach of the duty of care by a director or officer. As a consequence of this provision, shareholdersof our Company will be unable to recover monetary damages against directors or officers for action taken by them that may constitutenegligence or gross negligence in performance of their duties unless such conduct falls within one of the foregoing exceptions.The provision, however, does not alter the applicable standards governing a director’s or officer’s fiduciary dutyand does not eliminate or limit the right of our company or any shareholder to obtain an injunction or any other type of non-monetaryrelief in the event of a breach of fiduciary duty.

OurArticles of Incorporation, as amended, and Fourth Amended and Restated Bylaws provide, among other things, that a director, officer,employee or agent of the corporation may be indemnified against expenses (including attorneys’ fees inclusive of any appeal),judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such claim,action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposedto the best of our interests, and with respect to any criminal action or proceeding, such person had no reasonable cause to believethat such person’s conduct was unlawful.

Insofaras indemnification for liabilities arising under the Securities Act may be provided for directors, officers, employees, agentsor persons controlling an issuer pursuant to the foregoing provisions, the opinion of the SEC is that such indemnification is againstpublic policy as expressed in the Securities Act, and is therefore unenforceable. In the event that a claim for indemnificationby such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted bysuch director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion ofour counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whethersuch indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudicationof such issue.

Atthe present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours inwhich indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding, which may resultin a claim for such indemnification.

Item 15. Recent Sales of Unregistered Securities

The following list sets forthinformation regarding all unregistered securities sold or issued by us in the three years preceding the date of this registrationstatement. In each of the transactions described below the recipients of securities represented their intention to acquire thesecurities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriatelegends were affixed to the securities issued in these transactions.

The Note bears interest at therate of 8% per annum. All outstanding principal and accrued interest on the Note will become due and payable on July 11, 2020,subject to a potential one-year extension period during which interest would not accrue. The Company’s obligations underthe Note may be prepaid at any time, provided that in such circumstance the Company would pay 125% of any amounts outstanding underthe Note. Amounts outstanding under the Note may be converted at any time, at the Lender’s option, into shares of the Company’scommon stock at a conversion price of $3.00 per share, subject to certain adjustments. During the term of the Note, the Companyshall not, without the prior written consent of the Purchaser, enter into or effect certain fundamental business transactions.The Purchaser has the option to redeem the Note at any time after the six month anniversary of the date when the purchase priceis delivered to the Company (“Purchase Price Date”) in the amounts of up to 50% of the amount outstanding during thenine month period after Purchase Price Date or any percentage of the amount outstanding under the Note at any time after the ninemonth anniversary of Purchase Price Date, with such redemption amounts paid in cash or shares of the Company’s common stock,or a combination thereof, at the Company’s election.

The October Warrants and the shares ofthe Company’s Common Stock issuable upon the exercise of the October Warrants (the “October Warrant Shares”)were not registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’sRegistration Statement, and were instead offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act.Each Purchaser is either (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the SecuritiesAct. Each Purchaser, either alone or together with its representatives, has enough knowledge and experience to be considered asophisticated investor, has access to the type of information normally provided in a prospectus for a registered securities offering,and has agreed not to resell or distribute the October Warrants or the October Warrant Shares to the public except pursuant tosales registered or exempted under the Securities Act.

H.C. Wainwright & Co., LLC actedas the Company’s exclusive placement agent in connection with the offerings under the Purchase Agreement and received warrantsto purchase our Common Stock in an amount equal to 138,956 shares, on substantially the same terms as the October Warrants, withan initial exercise price of $1.875 per share and expiration date of October 29, 2023 (the “October Placement Agent Warrants”).

The Original Notes bore interest at therate of 8% per annum. All outstanding principal and accrued interest on the Original Notes would have become due and payable onJanuary 31, 2021 and February 27, 2021, respectively, in each case subject to a potential one-year extension period during whichinterest would not accrue. The Company’s obligations under the Original Notes could be prepaid at any time, provided thatin such circumstance the Company would have paid 125% of any amounts outstanding under the Original Notes. Amounts outstandingunder the Original Notes could have been converted at any time, at the Lender’s option, into shares of the Company’scommon stock at a conversion price of $3.00 per share, subject to certain adjustments. During the terms of the Original Notes,the Company could not, without the prior written consent of the Purchaser, enter into or effect certain fundamental business transactions.The Purchaser had the option to redeem the Original Notes at any time after the six month anniversary of the date when the purchaseprice for an Original Note is delivered to the Company (each, a “Purchase Price Date”) in the amounts of up to 50%of the amount outstanding during the nine month period after the applicable Purchase Price Date or any percentage of the amountoutstanding under such Original Note at any time after the nine month anniversary of the applicable Purchase Price Date, with suchredemption amounts paid in cash or shares of the Company’s common stock, or a combination thereof, at the Company’selection.

Pursuant to an Exchange Agreement datedApril 14, 2019 (the “Exchange Agreement”), the Company and the Purchaser agreed to exchange the Original Notes withtwo new promissory notes with a principal amount of $1,173,480 and $1,165,379.18, respectively (the “Exchange Notes”).All outstanding principal and accrued interest on the Exchange Notes will become due and payable on January 31, 2021 and February27, 2021, respectively. The Exchange Notes bear interest at the rate of 8% per annum and do not have conversion options in favorof the Purchaser. The Company’s obligations under the Exchange Notes may be prepaid at any time, provided that in such circumstancethe Company must pay 125% of any amounts outstanding under the Exchange Notes. Beginning on the date that is six (6) months fromthe issue date of the respective Original Notes (the “Issue Dates”) and at any time thereafter until the Exchange Notesare paid in full, Purchaser shall have the right to redeem up to $750,000 of the outstanding balance during months six to eightfollowing the respective Issue Date and any amount thereafter.

The April Warrants and the shares ofthe Company’s Common Stock issuable upon the exercise of the April Warrants (the “Warrant Shares”) were not registeredunder the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s Registration Statement,and were instead offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act. Each Purchaser was either(i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Actor (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Each Purchaser, eitheralone or together with its representatives, had sufficient knowledge and experience to be considered a sophisticated investor,had access to the type of information normally provided in a prospectus for a registered securities offering, and agreed not toresell or distribute the April Warrants or the April Warrant Shares to the public except pursuant to sales registered or exemptedunder the Securities Act.

H.C. Wainwright & Co., LLC actedas the Company’s exclusive placement agent in connection with the offerings under the Purchase Agreement and received warrantsto purchase our Common Stock in an amount equal to 165,149 shares of Common Stock (the “April Placement Agent Warrants”),on substantially the same terms as the April Warrants, except that the Placement Agent Warrants have an initial exercise priceof $1.00 per share, are exercisable commencing on the later of (i) six months of the issuance date or (ii) the date on which theCompany increases the number of its authorized shares, and expire on April 15, 2024.

Item 16. Exhibits and Financial Statement Schedules

The information required bythis item is set forth on the exhibit index that follows the signature page of this registration statement.

Item 17. Undertakings

Theundersigned registrant hereby undertakes:

(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(ii)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recentpost-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information setforth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (ifthe total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or highend of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule424(b) (§ 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% changein the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registrationstatement.

(iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statementor any material change to such information in the registration statement.

(2)That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall bedeemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at thattime shall be deemed to be the initial bona fide offering thereof.

(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold atthe termination of the offering.

(4)That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initialdistribution of the securities the undersigned registrant undertakes that in a primary offering of securities of the undersignedregistrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser,if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrantwill be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant toRule 424 promulgated under the Securities Act of 1933;

(ii)Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referredto by the undersigned registrant;

(iii)The portion of any other free writing prospectus relating to the offering containing material information about the undersignedregistrant or its securities provided by or on behalf of the undersigned registrant; and

(iv)Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(5)That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser each prospectus filed pursuantto Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule430B or other than prospectuses filed in reliance on Rule 430A promulgated under the Securities Act of 1933, shall be deemed tobe part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, thatno statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporatedor deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will,as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in theregistration statement or prospectus that was part of the registration statement or made in any such document immediately priorto such date of first use.

Theundersigned registrant hereby undertakes to provide to the agent at the closing specified in the agency agreement certificatesin such denominations and registered in such names as required by the agent to permit prompt delivery to each purchaser.

Insofaras indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling personsof the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of theCommission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Inthe event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurredor paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)is asserted by such director, officer or controlling person in connection with the securities being registered, the registrantwill, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriatejurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and willbe governed by the final adjudication of such issue.

Theundersigned registrant hereby undertakes that:

(1)For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed aspart of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuantto Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statementas of the time it was declared effective.

(2)For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectusshall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securitiesat that time shall be deemed to be the initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registrationstatement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Xi’an, China, on this 24thday of May, 2019.

SIGNATURES AND POWER OF ATTORNEY

Each person whose signatureappears below constitutes and appoints Guohua Ku and Adeline Gu as his/her true and lawful attorneys-in-fact and agents, each actingalone, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities,to sign any and all amendments (including post-effective amendments) to this registration statement on Form S-1 and any subsequentregistration statement the Registrant may hereafter file with the Securities and Exchange Commission pursuant to Rule 462 underthe Securities Act to register additional securities in connection with this registration statement, and to file this registrationstatement, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every actand thing requisite and necessary to be done in order to effectuate the same as fully, to all intents and purposes, as he or shemight or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfullydo or cause to be done by virtue hereof.

Pursuant to the requirementsof the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on thedates indicated.

The following documents listedbelow that have been previously filed with the SEC (1934 Act File No. 000-12536 unless otherwise stated) are incorporated hereinby reference:

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