CER Turns to Profit and Doubles Revenue to $25.6 Million in First Half 2011

SHANGHAI, Aug. 15, 2011 /PRNewswire-Asia/ -- China Energy Recovery Inc. (CGYV.PK) ("CER"), an international leader in the design, fabrication and installation of waste heat recovery systems, today announced financial results for the second quarter and first half of fiscal 2011, ending June 30, 2011, as compared with the figures for the same period in 2010.

Highlights for the 2nd quarter 2011, compared with the same quarter 2010:

• Revenues increased 154% to $18.3 million.
• Gross profit increased 217% to $3,142,000.
• Net income increased 294% to $1,067,000.

Highlights for the half year, compared with first half year 2010:

• Revenues increased 127% to $25.6 million.
• Gross profit increased 172% to $4,381,000.
• Net income increased 48% to $681,000.

First half 2011 results

Revenues for the first half ended June 30, 2011, were $25.6 million, up from $11.3 million in the same period a year ago.

Gross profit in the first half increased to $4,381,089 or 17.1 percent of sales, compared to $1,608,060 or 14.2 percent of sales in the same period a year ago. The company achieved an operating gain of $504,941 compared to loss of $898,224 in the same period a year ago.

Benefitting from increases in income from operations, net income increased to $680,796 compared to $459,644 in the same period a year ago.

"Revenue growth in the second quarter and first half of the year reflects our marketing efforts and new manufacturing facility and, in particular, one significant EPC contract," CER Chief Executive Officer Qinqhuan Wu said. Mr. Wu continued, "In the first half of 2011, with our new manufacturing facility in operation and our ability to perform more EPC contracts, we saw improvements in our revenues and gross profits. For the second half of 2011, based on our current contracts and production schedule, we anticipate positive results in line with the first half of the year."

What is Waste Heat Energy Recovery?

Industrial facilities release significant amounts of excess heat into the atmosphere in the form of hot exhaust gases or high-pressure steam. Energy recovery is the process of recovering as much as two-thirds of that wasted energy and converting it into usable heat energy or electricity, dramatically lowering energy costs. Energy recovery systems are also capable of lowering heat pollution and capturing harmful pollutants that would otherwise be released into the environment. It is estimated that if energy currently wasted by all the U.S. industrial facilities could be recovered, it could produce power equivalent to 20% of U.S. electricity generation capacity without burning any additional fossil fuel, and could help many industries to meet stringent environmental regulations.

About China Energy Recovery, Inc.

CER is an international engineering and manufacturing company that specializes in the design, construction and installation of waste heat energy recovery systems that captures and converts industrial waste energy produced by heavy industrial processes such as petroleum and chemicals refining, paper manufacturing and refining into low-cost electrical power, which enables industrial manufacturers to reduce their energy costs, shrink their emissions footprint and generate salable emissions credits.  The company's primary focus is the Chinese market; however, CER's systems are operating in heavy industrial plants located in Egypt, Korea, Vietnam and Malaysia. CER is building China's first state-of-the-art, energy recovery system research and fabrication facility, which will allow CER to meet increased demand for its products and services. For more information on CER, please visit: http://www.chinaenergyrecovery.com/s/Home.asp. Information on CER's website does not comprise a part of this press release.

Forward-Looking Statement Disclaimer

This press release includes "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, included in the press release that address activities, events or developments that CER believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors that CER believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of CER and may not materialize, including, without limitation, the efficacy and market acceptance of CER's products and services, CER's ability to execute on its business plan and strategies and CER's ability to successfully complete orders and collect revenues therefrom. Investors are cautioned that any such statements are not guarantees of future performance. Actual results or developments may differ materially from those projected in the forward-looking statements as a result of many factors. Furthermore, CER does not intend (and is not obligated) to update publicly any forward-looking statements, except as required by law. The contents of this release should be considered in conjunction with the warnings and cautionary statements contained in CER's filings with the Securities and Exchange Commission.

Contact: Jessica Hu
China Energy Recovery
[phone]*304
[e-mail]

CHINA ENERGY RECOVERY, INC.  AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2010 AND 2011 (UNAUDITED)
	Three months ended June 30,					Six months ended June 30,
		2010		2011		2010		2011
REVENUES
Third parties	$	7,206,141	$	6,976,445	$	11,299,919	$	12,581,847
Related  party		-		11,293,381		-		13,068,038
Total revenue		7,206,141		18,269,826		11,299,919		25,649,885
COST OF REVENUES
Third parties		(6,215,657)		(15,127,655)		(9,691,859)		(21,268,796)
Total cost of revenues		(6,215,657)		(15,127,655)		(9,691,859)		(21,268,796)
GROSS PROFIT		990,484		3,142,171		1,608,060		4,381,089
SELLING, GENERAL AND  ADMINISTRATIVE EXPENSES		(1,350,195)		(2,063,067)		(2,506,284)		(3,876,148)
(LOSS)/INCOME FROM  OPERATIONS		(359,711)		1,079,104		(898,224)		504,941
OTHER INCOME/(EXPENSE), NET:
Change in fair value of warrants		559,412		437,901		1,077,898		915,790
Change in fair value of derivative liabilities		507,405		161,501		818,905		323,718
Non-operating income/(expense), net		242,643		60,199		971,356		(9,936)
Interest expenses, net		(644,773)		(605,739)		(1,309,141)		(975,264)
Total other income, net		664,687		53,862		1,559,018		254,308
INCOME FROM OPERATIONS BEFORE INCOME TAXES		304,976		1,132,966		660,794		759,249
PROVISION FOR INCOME TAXES		(33,911)		(66,084)		(201,150)		(78,453)
NET INCOME		271,065		1,066,882		459,644		680,796
OTHER COMPREHENSIVE INCOME/(LOSS)
Foreign currency translation adjustment		18,568		(186,896)		28,000		(86,609)
COMPREHENSIVE INCOME	$	289,633	$	879,986	$	487,644	$	594,187
EARNINGS PER SHARE:
Basic		0.01		0.03	$	0.02	$	0.02
Diluted		0.01		0.03	$	0.02	$	0.02
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		30,883,916		31,026,225		30,809,439		30,979,564
Diluted		30,883,916		31,103,542		30,809,439		31,056,881

CHINA ENERGY RECOVERY, INC.  AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2010 AND JUNE 30, 2011 (UNAUDITED)
		December 31,		June 30,
		2010		2011
ASSETS
CURRENT ASSETS:
Cash	$	2,996,076	$	3,637,519
Restricted cash		218,346		113,418
Notes receivable		1,341,359		200,876
Accounts receivable, net of allowance for doubtful accounts-third parties		7,059,935		7,197,345
Inventories		8,661,800		13,225,136
Other current assets and receivables		1,185,032		2,390,017
Deferred financial cost		215,623		66,919
Advances on purchases		15,200,669		36,302,215
Total current assets		36,878,840		63,133,445
NON-CURRENT ASSETS:
Plant and equipment, net		10,101,755		24,899,879
Deferred tax assets		171,776		323,966
Intangible assets		2,477,959		2,599,862
Long-term accounts receivable		4,679,121		-
Total non-current assets		17,430,611		27,823,707
Total Assets	$	54,309,451	$	90,957,152
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	4,557,848	$	15,175,244
Accrued expenses and other liabilities		1,912,544		951,668
Advances from customers-third parties		27,530,065		54,497,070
Advances from customers-related party		-		2,297,156
Taxes payable		1,631,507		1,828,987
Short-term bank loans		4,333,700		5,200,028
Derivative liability, current		374,846		-
Long-term loan, current		3,177,973		543,778
Total current liabilities		43,518,483		80,493,931
NON-CURRENT LIABILITIES:
Warrant liability		1,332,760		401,423
Derivative liability		48,461		99,589
Convertible note		4,691,582		4,767,761
Long-term loan		543,778		-
Total non-current liabilities		6,616,581		5,268,773
Total Liabilities		50,135,064		85,762,704
SHAREHOLDERS' EQUITY:
Preferred stock($0.001 par value; 50,000,000 shares authorized, 200,000 shares issued and outstanding as of both December 31, 2010 and June 30, 2011)
		189		189
Common stock($0.001 par value; 100,000,000  shares authorized, 30,906,266 and  31,085,859 shares issued and outstanding as of December 31, 2010 and June 30, 2011, respectively)
		30,906		31,085
Additional Paid-in-capital		8,313,385		8,739,080
Accumulated deficit		(4,713,541)		(4,032,745)
Statutory reserves		132,802		132,802
Accumulated other comprehensive income		410,646		324,037
Total shareholders' equity		4,174,387		5,194,448
Total liabilities and shareholders' equity	$	54,309,451	$	90,957,152

SOURCE China Energy Recovery Inc.

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