UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☒ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a–6(e)(2)) |
| ☐ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to §240.14a–12 |
China Recycling Energy Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. |
| ☐ | Fee computed on table below per Exchange Act Rules 14a–6(i)(1) and 0–11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0–11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0–11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
CHINA RECYCLING ENERGY CORPORATION
4/F, Tower C
Rong Cheng Yun Gu Building
Keji 3rd Road, Yanta District
Xi’an City, Shaanxi Province
China 710075
OctoberMay ●, 20182019
Dear Stockholder:
You are cordially invited to attend a special meetingthe 2019 Annual Meeting of the stockholdersStockholders of China Recycling Energy Corporation, a Nevada corporation, to be held at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China on November 21, 2018,July 2, 2019, at 10:00 a.m. local time.
The attached Notice of SpecialAnnual Meeting of Stockholders and Proxy Statement describe the formal business to be transacted at the specialannual meeting. Our directors and officers will be present to respond to appropriate questions from stockholders. Stockholders may attend the special meeting in person.
Whether or not you plan to attend the meeting, please vote as soon as possible. You can vote by returning thePlease mark, date, sign and return your proxy card in the enclosed postage-prepaid envelope.envelope by following the instructions on the proxy card at your earliest convenience. This will ensure that your shares will be represented and voted at the meeting, even if you do not attend. If you attend the meeting, you may revoke your proxy and personally cast your vote. Attendance at the meeting does not of itself revoke your proxy.
For a discussion of risk factors you should consider in evaluating the proposals set forth in this proxy statement that you are being asked to adopt, see “Risk Factors” beginning on page 9.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE ISSUANCE OF OUR COMMON OR PREFERRED SHARES DISCUSSED HEREIN OR DETERMINED IF THIS PROXY STATEMENT IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
| Sincerely, | |
| /s/ Guohua Ku | |
| Guohua Ku | |
| Chief Executive Officer and | |
| Chairman of the Board of Directors |
CHINA RECYCLING ENERGY CORPORATION
4/F, Tower C
Rong Cheng Yun Gu Building
Keji 3rd Road, Yanta District
Xi’an City, Shaanxi Province
China 710075
NOTICE OF SPECIALANNUAL MEETING OF STOCKHOLDERS
To Be Held November 21, 2018July 2, 2019
NOTICE HEREBY IS GIVEN that a special meeting (the “Special Meeting”)the 2019 Annual Meeting of the stockholdersStockholders of China Recycling Energy Corporation, a Nevada corporation, (“CREG”), will be held at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China on November 21, 2018,July 2, 2019, at 10:00 a.m. local time, to consider and act upon the following:
| To elect five directors, each to serve until the 2020 Annual Meeting of Stockholders; | ||
| 2. | To ratify the appointment of MJF and Associates, APC as our independent registered public accounting firm for the fiscal year ending December 31, 2019; | |
| 3. | To approve an amendment to | |
| To |
The BoardInformation relating to the above matters is set forth in the attached Proxy Statement. Stockholders of Directors of the Company (the “Board of Directors” or the “Board”) and the Company’s management has fixedrecord at the close of business on October 12, 2018 as the record date for determining the stockholdersMay 7, 2019 are entitled to receive notice of and to vote at the Special2019 Annual Meeting and any adjournment and postponements thereof (the “Record Date”).
After careful consideration, the Board of Directors recommends a vote IN FAVOR OF the Amendment, a vote IN FAVOR OF the Share Issuance, and a vote IN FAVOR OF the grant of discretionary authority to the Company’s CEO to adjourn the Special Meeting.
Stockholders are cordially invited to attend the Special Meeting in person. Whether you plan to attend the Special Meeting or not, please complete, sign and date the enclosed Proxy Card and return it without delay in the enclosed postage-prepaid envelope. If you do attend the Special Meeting, you may withdraw your proxy and vote personally on each matter brought before the meeting.YOUR VOTE IS VERY IMPORTANT.adjournments thereof.
| By Order of the Board of Directors | |
| /s/ Guohua Ku | |
| Chief Executive Officer and | |
| Chairman of the Board of Directors | |
| Xi’an City, Shaanxi Province, China | |
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be held on July 2, 2019:
WHETHER OR NOT YOU PLAN TO ATTEND OUR 2019 Annual Meeting OF STOCKHOLDERS, YOUR VOTE IS IMPORTANT. PLEASE READ THE ATTACHED PROXY STATEMENT AND PROMPTLY COMPLETE, EXECUTE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE–PAID ENVELOPE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. IF YOU ATTEND OUR 2019 ANNUAL MEETING OF STOCKHOLDERS, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
CHINA RECYCLING ENERGY CORPORATION
4/F, Tower C
Rong Cheng Yun Gu Building
Keji 3rd Road, Yanta District
Xi’an City, Shaanxi Province
China 710075
PROXY STATEMENT
FOR A SPECIALTHE ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 21, 2018July 2, 2019
We are furnishing this Proxy Statement to the stockholders of China Recycling Energy Corporation in connection with the solicitation, by the Board of Directors of China Recycling Energy Corporation (the “Board”), of proxies to be voted at a special meetingour 2019 Annual Meeting of our stockholdersStockholders to be held at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rdRoad, Yanta District, Xi’an City, Shaanxi Province, 710075 China, on November 21, 2018,July 2, 2019, at 10:00 a.m. local time, and at any adjournments or postponements of the meeting.
When used in this Proxy Statement, the terms “we,” “us,” “our,” the “Company” and “CREG” refer to China Recycling Energy Corporation, a Nevada corporation, and its wholly-owned subsidiaries, Shanghai Yinghua Financial Leasing Co., Ltd. (“Yinghua”) and Sifang Holdings Co., Ltd. (“Sifang”), and Sifang’s wholly-owned subsidiaries, Huahong New Energy Technology Co., Ltd. (“Huahong”) and Shanghai TCH, Shanghai TCH’s wholly-owned subsidiaries, Xi’an TCH Energy Technology Company, Ltd. (“Xi’an TCH”), Xi’an TCH’s wholly-owned subsidiary Erdos TCH Energy Saving Development Co., Ltd. (“Erdos TCH”) and Zhongxun Energy Investment (Beijing) Co., Ltd (“Zhongxun”); and Xi’an TCH’s 90% and Shanghai TCH’s 10% owned subsidiary Xi’an Zhonghong New Energy Technology Co., Ltd.Ltd.. “China” and the “PRC” refer to the People’s Republic of China, excluding, for the purposes of this Proxy Statement, Hong Kong, Macau and Taiwan.
The date on which we are first sending this Proxy Statement and form of proxy card to our stockholders is on or about October●, 2018.May ●, 2019.
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before the Special Meeting. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished to you by such bank, broker or other nominee, which is considered the stockholder of record, in order to vote. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. Your broker or other agent cannot vote on discretionary matters without your instructions.
If you are a stockholder of record and fail to return your proxy card to us or vote by ballot in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you are a stockholder of record, voting in person by ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain from the record holder a valid “legal” proxy issued in your name in order to vote in person at the Special Meeting.
We encourage you to read the accompanying proxy statement carefully and in its entirety (including any documents incorporated by reference into the proxy statement), as well as the documents we file from time to time with the Securities and Exchange Commission, includingThis Proxy Statement, our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. If2018, and other proxy materials, including the Proxy Card and the Notice of Annual Meeting, are available online at http://www.sec.gov/edgar.shtml. Directions to our 2019 Annual Meeting of Stockholders are available by calling +86-29-8769-1097.
ABOUT THE 2019 Annual Meeting
General: Date, Time and Place
We are providing this Proxy Statement to you have any questions concerning anyin connection with the solicitation, on behalf of the proposalsour Board, of proxies to be voted upon at the Specialour 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”) or the accompanying proxy statement, would like additional copiesany postponement or adjournment of the accompanying proxy statement or need help voting your shares of common stock, please contact the Company’s Corporate Secretarythat meeting. The 2019 Annual Meeting will held on July 2, 2019, at 10:00 a.m. local time at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China, or call +86-29-8769-1097 (standard long-distances calling charges may apply).
Thank you for your participation. We look forward to your continued support.
TABLE OF CONTENTS
Annexes
Exhibits
i
QUESTIONS AND ANSWERS ABOUT THE PROPOSALSChina.
The following are answersMatters to some questions that you, as a stockholder of China Recycling Energy Corporation, may have regarding the other matters being considered at the Special Meeting. We urge you to read carefully the remainder of this proxy statementbe Considered and the documents incorporated herein by reference because the information in this section does not provide all the information that might be important to you with respect to the other matters being considered at the Special Meeting. Additional important information is also contained in the annexes to and the documents incorporated by reference into this proxy statement.Voted Upon
CREG will hold the Special Meetingbe asked to consider and vote upon these proposals. This proxy statement contains important information about(i) to elect the nominees named herein as directors, (ii) to ratify the selection of our independent registered public accounting firm, and (iii) approve an amendment to our Articles of Incorporation to (i) increase the total number of our authorized shares of common stock, par value $0.001 per share, from 20,000,000 shares to 100,000,000 shares and (ii) authorize the issuance of up to 60,000,000 shares of blank check preferred stock, par value $0.001 per share. The Board does not know of any matters to be acted uponbrought before the meeting other than as set forth in the notice of meeting. If any other matters properly come before the meeting, the persons named in the enclosed form of proxy or their substitutes will vote in accordance with their best judgment on such matters.
Record Date; Stock Outstanding and Entitled to Vote
Our Board has established May 7, 2019, as the record date. Only holders of shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), as of the record date are entitled to notice of, and to vote at, the Special2019 Annual Meeting. Stockholders should read it carefully. TheEach share of common stock entitles the holder thereof to one vote per share on each matter presented to our stockholders for approval at the 2019 Annual Meeting. At the close of business on April 24, 2019, we had 16,106,498 shares of common stock outstanding. We expect approximately the same number of shares to be outstanding as of the record date.
Quorum; Required Vote
A quorum of stockholders is important.
In order to complete the Share Issuance, CREG stockholders must vote to approve the Amendment and the Share Issuance, and all other requirementsrequired for the Company to completetransaction of business at the Share Issuance must be fulfilled.
Stockholders2019 Annual Meeting. The presence of Record
If yourat least one-third of all of our shares of CREG common stock are registered directlyissued and outstanding and entitled to vote at the meeting, present in your name with CREG’s transfer agent, Securities Transfer Corporation, you areperson or represented by proxy, will constitute a quorum at the stockholder of record of those shares and thesemeeting. Votes cast by proxy materials have been mailed to you by the Company. You may vote your shares by mail or in person at the Special2019 Annual Meeting will be tabulated by an election inspector appointed for the meeting and will be taken into account in determining whether or not a quorum is present. Abstentions and broker non-votes, which occur when a broker has not received customer instructions and indicates that it does not have the discretionary authority to vote on a particular matter on the proxy card, will be included in determining the presence of a quorum at the 2019 Annual Meeting. Your vote authorizes Guohua Ku, Chairman
Assuming that a quorum is present, our stockholders may take action at the annual meeting with the votes described below.
Election of Directors. Under Nevada law and Chief Executive Officerthe Fourth Amended and Restated Bylaws of the Company and Adeline Gu, Chief Financial Officer and Secretary(“Bylaws”), the affirmative vote of a plurality of the Company,votes cast by the holders of our shares of common stock is required to elect each director. Consequently, only shares that are voted in favor of a particular nominee will be counted toward such nominee’s achievement of a plurality. Stockholders do not have any rights to cumulate their votes in the election of directors. Abstentions and broker non-votes will not be counted toward a nominee’s total.
Ratification of the selection of MJF and Associates, APC as your proxy, withour independent registered public accounting firm. The affirmative vote of the powerholders of a majority of the shares actually voted on the proposal at the 2019 Annual Meeting, provided a quorum is present, is required to appoint her substitute, to representratify the selection of MJF and Associates, APC as our independent registered public accounting firm. Abstentions will have the effect of a vote your shares“against” the ratification of the appointment of MJF and Associates, APC as you directed.our independent registered public accounting firm. Broker non-votes may be voted for or against this proposal by a broker.
Beneficial OwnersAmendment to our Articles of Incorporation. The affirmative vote of the holders of a majority of the shares actually voted on the proposal at the 2019 Annual Meeting, provided a quorum is present, is required to approve the proposed amendment to our Articles of Incorporation. Abstentions and broker non-votes will have the effect of a vote “against” the amendment to our Articles of Incorporation.
If your shares of CREG common stock are held in a stock brokerage account, by a bank, broker or other nominee, you are considered the beneficial owner of shares held in street nameAbstentions and these proxy materials are being forwarded to you by your bank, broker or nominee that is considered the holder of record of those shares. As the beneficial owner, you have the right to direct your bank, broker, trustee or nominee on how to vote your shares signing and returning a proxy card. Your bank, broker, trustee or nominee will send you instructions for voting your shares. Please note that you may not vote shares held in street name by returning a proxy card directly to CREG or by voting in person at the Special Meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank or nominee. Further, brokers, banks and nominees who hold shares of CREG common stock on your behalf may not give a proxy to CREG to vote those shares without specific instructions from you.Broker Non-Votes
For a discussion of the rules regarding the voting of shares held by beneficial owners, please see the question below entitled “If I am a beneficial owner of shares of CREG common stock, what happens if I don’t provide voting instructions? What is discretionary voting?”
Under applicable regulations, if a broker holds shares on your behalf, and you do not instruct your broker how to vote those shares on a matter considered “routine,” the broker may generally vote your shares for you. A “broker non-vote” occurs when a broker has not received voting instructions from you on a “non-routine” matter, in which case the broker does not have authority to vote your shares with respect to such matter. Unless you provide voting instructions to a broker holding shares on your behalf, your broker may no longernot use discretionary authority to vote your shares on any of the matters to be considered at the Special Meeting.2019 Annual Meeting other than the ratification of our independent registered public accounting firm. Please vote your proxy so your vote can be counted.
Voting Procedure; Voting of Proxies; Revocation of Proxies
If you choose either of the first two methods, you must submit your notice of revocation or your new proxy to the Corporate Secretary of CREG, as specified in this proxy statement, no later than the beginning of the Special Meeting. If your shares are heldregistered directly in streetyour name with our transfer agent, Securities Transfer Corporation, you are considered the “stockholder of record” with respect to those shares. As the stockholder of record, you may vote in person at the 2019 Annual Meeting or vote by proxy using the accompanying proxy card. Whether or not you plan to attend the annual meeting, we urge you to vote by proxy to ensure your broker, bank or nominee,vote is counted. You may still attend the 2019 Annual Meeting and vote in person even if you should contact them to change your vote.have already voted by proxy.
By Internet – stockholders may vote on the internet by logging on to www.proxyvote.com and following the instructions given.
4
FORWARD-LOOKING STATEMENTSBy Telephone – stockholders may vote by calling 1-800-690-6903 (toll-free) with a touch tone telephone and following the recorded instructions.
This proxy statement, including information incorporated by reference into this proxy statement, includes forward-looking statements regarding, among other things, CREG’s plans, strategies and prospects, both business and financial. Although CREG believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, CREG cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under “Risk Factors” from time to time in CREG’s filings with the SEC. ManyBy Mail – stockholders must request a paper copy of the forward-looking statements contained in this presentationproxy materials to receive a proxy card and follow the instructions given for mailing. A paper copy of the proxy materials may be identifiedobtained by logging onto www.proxyvote.com and following the use of forward-looking words such as “believe”, “expect”, “anticipate”, “should”, “planned”, “will”, “may”, “intend”, “estimated”, “aim”, “on track”, “target”, “opportunity”, “tentative”, “positioning”, “designed”, “create”, “predict”, “project”, “seek”, “would”, “could”, “continue”, “ongoing”, “upside”, “increases”instructions given. To vote using the proxy card, simply print the proxy card, complete, sign and “potential”, among others. Important factors that could cause actual resultsdate it and return it promptly to differ materially fromVote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717. In the forward-looking statements we make in this presentation are set forth in other reports or documents that we file from time to time withalternative, the SEC, and include, but are not limited to:
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement. All forward-looking statements included herein attributable to CREG or any person acting on any party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Exceptcard can be mailed directly to the extent required by applicable laws and regulations, CREG undertakes no obligations to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement or to reflect the occurrence of unanticipated events.
Before a stockholder grants its proxy or instructs how its vote should be cast or vote on the proposals described herein, it should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement may adversely affect CREG.
5
SUMMARY
This summary highlights selected information from this proxy statement and does not contain all of the information that is important to you. To better understand the proposals to be submitted for a vote at the Special Meeting, you should read this entire document carefully, including the Amendment to our Articles of Incorporation attached asAnnex A and the Equity Purchase Agreement attached hereto asExhibit 1.
Unless the context otherwise requires, the terms “CREG,” “the Company,” “we,” “us” and “our” in this prospectus refer to China Recycling Energy Corporation, our subsidiaries and consolidated entities. “China” and the “PRC” refer to the People’s Republic of China.
The Company
We are currently engaged in the recycling energy business, providing energy savings and recycling products and services. We are a leading developer of waste energy recycling projects for industrial applications in China, and we believe we are the only developer to use a Build-Operate-Transfer (“BOT”) model to provide energy saving and recovery facilities for multiple energy intensive industries in China. Our waste energy recycling projects allow customers which use substantial amounts of electricity to recapture previously wasted pressure, heat, and gas from their manufacturing processes to generate electricity. We currently offer waste energy recycling systems to companies for use in iron and steel, nonferrous metal, cement, coal and petrochemical plants. We construct our projects at our customer’s facility and the electricity produced is used on-site by the customer. While some of our competitors offer projects targeting one or two industries, we serve multiple industries.
We develop fully customized projects across several verticals to better meet customer’s energy recovery needs. Our waste pressure-to-energy solution primarily consists of the Blast Furnace Top Gas Recovery Turbine Unit (“TRT”), a system that utilizes high pressure gas emitted from the blast furnace top to drive turbine units and generate electricity. Our waste heat-to-energy solution primarily consists of heat power generation projects for applications in cement, steel, coking coal, and nonferrous metal industries, which collect the residual heat from various manufacturing processes, e.g. the entrance and exit ends of the cement rotary kilns, to generate electricity. Our waste gas-to-energy solution primarily consists of the Waste Gas Power Generation system (“WGPG”) and the Combined Cycle Power Plant (the “CCPP”). A WGPG system utilizes flammable waste gas from coal mining, petroleum exploitation, refinery processing or other sources as a fuel source to generate electricity through the use of a gas turbine. A CCPP system employs more than one power generating cycle to utilize the waste gas, which not only generates electricity by burning the flammable waste gas in a gas turbine (as a WGPG) but also uses the waste heat from burning the gas to make steam to generate additional electricity via a steam turbine.
We provide a clean-technology and energy-efficient solution aimed at reducing the air pollution and energy shortage problems in China. Our projects capture industrial waste energy to produce low-cost electricity, enabling industrial manufacturers to reduce their energy costs, lower their operating costs, and extend the life of primary manufacturing equipment. In addition, our waste energy recycling projects allow our industrial customers to reduce their reliance on China’s centralized national power grid, which is prone to black-outs or brown-outs or is completely inaccessible from certain remote areas. Our projects generally produce lower carbon dioxide emissions and other pollutants, and are hence more environmentally friendly than other forms of power generation.
Since 2007, we have primarily used the BOT model to serve our customers. For each project, we design, finance, construct and install the waste energy recycling projects for our customers, operate the projects for five to twenty years, and then transfer the projects to the owners. The BOT model creates a win-win solution for both our customers and us. We provide the capital expenditure financing in exchange for attractive returns on each project; our customers can focus their capital resources on their core businesses, do not need to invest additional capitals to comply with government environmental regulations, reduce noise and emissions and reduce their energy costs. We in turn efficiently recapture our costs through the stream of lease payments.
We are in the process of transforming and expanding into an energy storage integrated solution provider. We plan to pursue disciplined and targeted expansion strategies for market areas that we currently do not serve. We are actively seeking and exploring opportunities to apply energy storage technologies to 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 participant in resource development and utilization of demand response, we plan to provide services including peak shaving with compensation and frequency modulation. We intend to gradually form motor load performance for peak and low-hours, which will account for about 3% of the annual maximum power load on the demand side and to ensure the electricity supply and demand balance for situations of non-severe power shortages.
Our business is primarily conducted through our wholly-owned subsidiaries, Sifang Holdings Co., Ltd. (“Sifang”) and Shanghai YinghuaCompany: Ms. Adeline Gu, Chief Financial Leasing Co., Ltd (“Yinghua”); Sifang’s wholly-owned subsidiaries, Huahong New Energy Technology Co., Ltd. (“Huahong”) and 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’s 90% owned subsidiary, Xi’an Zhonghong New Energy Technology Co., Ltd. (“Zhonghong”). Shanghai TCH was established as a foreign investment enterprise in Shanghai under the laws of the PRC on May 25, 2004. Xi’an TCH was incorporated in Xi’an, Shaanxi Province under the laws of the PRC in November 2007. Erdos TCH was incorporated in April 2009. Huahong was incorporated in February 2009. Xi’an Zhonghong New Energy Technology Co., Ltd. was incorporated in July 2013. Xi’an TCHowns 90% of Zhonghong. Zhonghong provides energy saving solutions and services, including constructing, selling and leasing energy saving systems and equipment to customers. Zhongxun was incorporated in March 2014, and is a wholly-owned subsidiary of Xi’an TCH.
Our Projects
We design, finance, construct, operate and eventually transfer waste energy recycling projects to meet the energy saving and recovery needs of our customers. Our waste energy recycling projects use the pressure, heat or gas, which is generated as a byproduct of a variety of industrial processes, to create electricity. The residual energy from industrial processes, which was traditionally wasted, may be captured in a recovery process and utilized by our waste energy recycling projects to generate electricity instead of burning additional fuel and additional emissions. Among a wide variety of waste-to-energy technologies and solutions, we primarily focus on waste pressure to energy systems, waste heat to energy systems and waste gas power generation systems. We do not manufacture the equipment and materials that are used in the construction of our waste energy recycling projects. Rather, we incorporate standard power generating equipment into a fully integrated onsite project for our customers.
Waste Pressure to Energy Systems
TRT is a power generating system utilizing the exhaust pressure and heat from industrial processes in the iron, steel, petrochemical, chemical and non-ferrous metals industries, often from blast furnace gases in the metal production industries. Without TRT power systems, blast furnace gas is treated by various de-pressurizing valves to decrease its pressure and temperature before the gas is transmitted to end users. No electricity is generated during the process and noise and heat pollution is released. In a TRT system, the blast furnace gas produced during the smelting process is directed through the system to decrease its pressure and temperature. The released pressure and heat is then utilized to drive the turbine unit to generate electricity, which is then transmitted back to the producer. We believe our projects are superior to those of our competitors due to the inclusion of advanced dry-type de-dusting technology, joined turbine systems, and automatic power grid synchronization.
Waste Heat to Energy Systems
Waste heat to energy systems utilize waste heat generated in industrial production to generate electricity. The waste heat is trapped to heat a boiler to create steam and power a steam turbine. Our waste heat to energy system uses waste heat from cement production and from metal production. The projects can use about 35% of the waste heat generated by the cement kiln, and generate up to 50% of the electricity needed to operate the cement plant.
Waste Gas to Energy Systems
Our Waste Gas to Energy Systems primarily include WGPG systems and CCPP systems. WGPG uses the flammable waste gases emitted from industrial production processes such as blast furnace gas, coke furnace gas, and oil gas, to power gas-fired generators to create energy. A CCPP system employs more than one power generating cycle to utilize the waste gas, which is more efficient because it not only generates electricity by burning the flammable waste gas in a gas-fired generator (WGPG) but also uses the waste heat from burning the gas to make steam to generate additional electricity via a steam generator (CCPP).
Our Corporate Information
We are headquartered in China. Our principal executive offices are locatedOfficer, at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, BeilinYanta District, Xi’an City, Shaanxi Province, 710075 China.
If you vote by telephone or via the Internet, you do not need to return your proxy card. Telephone and Internet voting are available 24 hours a day and will close at 11:59 P.M. China Time on July 1, 2019.
In Person - stockholders may vote in person at the 2019 Annual Meeting. To vote in person, come to the 2019 Annual Meeting and our telephone number at this location is +86-29-8769-1098. Our website address is www.creg-cn.com. Information contained on our websitewe will give you a ballot when you arrive. The Board recommends that you vote using one of the other voting methods, since it is not incorporated by reference into this prospectuspractical for most stockholders to attend the 2019 Annual Meeting.
Please note that the notice letter you received directing you to the website at which the proxy materials are available is not the proxy card and you should not consider information on our websitebe used to be part of this prospectus.submit your vote.
Recommendation to Stockholders
After careful consideration,If you do not return a signed proxy card and do not attend the Boardmeeting and vote in person, your shares will not be voted. Shares of Directors recommendsour common stock represented by properly executed proxies that are received by us and are not revoked will be voted at the 2019 Annual Meeting in accordance with the instructions contained therein. If you return a vote IN FAVORsigned and dated proxy card and instructions are not given, such proxies will be voted FOR election of each nominee for director named herein,FOR ratification of the amendment toselection of MJF and Associates, APC as our Articles of Incorporation, as amended, IN FAVOR OF the issuance of commonindependent registered public accounting firm, and preferred shares in connection with the equity purchase transaction, and a vote IN FAVOR OF the grant of discretionary authority to the Company’s CEO to adjourn the Special Meeting.
Interests of CREG’s Directors and Officers in the Proposals
As of the Record Date, the directors and executive officers of CREG as a group owned and were entitled to vote●FOR shares of the common stock of the Company, representing approximately●% of the outstanding shares of CREG common stock on that date. CREG expects that its directors and executive officers will vote their shares in favor of each of the proposals, but none of the Company’s directors or executive officers other has entered into any agreement obligating any of them to do so.
Besides the equity ownership of CREG detailed above, the directors and executive officers of the Company do not have interests different than the other stockholders of CREG.
Appraisal Rights
CREG stockholders do not have appraisal rights in connection with the proposals under applicable state law.
Dissenter’s Rights
Our stockholders have no right under applicable state law, our Articles of Incorporation, as amended, or our Fourth Amended and Restated Bylaws to dissent from the proposals.
Conditions to the Issuance of Shares in Connection with the Equity Purchase Transaction
The Company’s ability to issue shares of its Common Stock and preferred stock to consummate the Share Issuance will be conditioned on the adoption by the Company’s stockholders of the proposed amendment to our Articles of Incorporation, as amended, andIncorporation. In addition, we reserve the satisfaction of the conditions describedright to exercise discretionary authority to vote proxies, in the Equity Purchase Agreement, dated September 30, 2018,manner determined by and between Shanghai TCH Energy Technology Co., Ltd. and Jinhua Wang,us, in our sole discretion, on any matters brought before the 2019 Annual Meeting for which was filed with our Current Report on Form 8-K, filed withwe did not receive adequate notice under the proxy rules promulgated by the Securities and Exchange Commission on October 2, 2018, and is attached hereto asExhibit 1(“SEC”).
If you hold your shares in “street name” through a stockbroker, bank or other nominee rather than directly in your own name, you are considered the “beneficial owner” of such shares. Because a beneficial owner is not a stockholder of record, you may not vote these shares in person at the 2019 Annual Meeting unless you obtain a “legal proxy” from the broker, bank or nominee that holds your shares, giving you the right to vote those shares at the meeting. If you wish to attend the 2019 Annual Meeting and vote in person, you will need to contact your broker, bank or nominee to obtain a legal proxy.
Your proxy is revocable at any time before it is voted at the 2019 Annual Meeting in any of the following three ways:
1. You may submit another properly completed proxy bearing a later date.
RISK FACTORS2. You may send a written notice that you are revoking your proxy to Ms. Adeline Gu, our Chief Financial Officer, at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China.
An investment3. You may attend the annual meeting and vote in our securities involves a high degree of risk. Before making any investment decision, you should carefully considerperson. However, simply attending the risk factors, under the caption “Risk Factors” in our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q, which are incorporatedmeeting will not, by reference in this prospectus, as well as in any applicable prospectus supplement, as updated by our subsequent filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
These risks could materially affect our business, results of operation or financial condition and affect the value of our securities. Additional risks and uncertainties that are not yet identified may also materially harm our business, operating results and financial condition and could result in a complete loss ofitself, revoke your investment. You could lose all or part of your investment. For more information, see “Where You Can Find More Information.”proxy.
THE SPECIAL MEETINGDissenters’ Right of Appraisal
Stockholders are not entitled to any appraisal or similar rights of dissenters with respect to any of the proposals to be acted upon at the 2019 Annual Meeting.
Proxy Solicitation
We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
Householding
Date, TimeSEC rules permit us to deliver a single proxy statement and Placeannual report to one address shared by two or more of our stockholders. This delivery method is referred to as “householding” and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one proxy statement and annual report to multiple stockholders who share an address, unless we received contrary instructions from the impacted stockholders prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and annual report to any stockholder at the shared address to which a single copy of those documents were delivered. If you prefer to receive separate copies of the Special Meeting
The special meeting of the stockholders of CREG (the “Special Meeting”) will be held at 10:00 a.m., local time, on Wednesday, November 21, 2018, at the Company’s principal executive officesproxy statement and annual report, contact Ms. Adeline Gu, our Chief Financial Officer, at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rdRoad, Yanta District, Xi’an City, Shaanxi Province, 710075 China.
Matters to be Voted Upon at the Special MeetingStockholder List
At the Special Meeting, CREG is asking its stockholders as of the record date of October 12, 2018 (the “Record Date”) to consider and vote upon proposals:
Record Date; Shares Entitled to Vote; Quorum
Stockholders will be entitled to vote or direct votes to be castFor at the Special Meeting if they owned shares of CREG common stock on the Record Date. Stockholders will have one vote for each share of CREG common stock owned at the close of business on the Record Date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes relatedleast ten days prior to the shares you beneficially own are properly counted. On the Record Date, there were approximately●sharesmeeting, a list of CREG common stock outstanding.
A quorum of CREG stockholders is necessary to hold a valid meeting. The presence of at least one-third of all of our shares of common stock issued and outstanding and entitled to vote at the Special2019 Annual Meeting, presentarranged in person or representedalphabetical order, showing the address of and number of shares registered in the name of each stockholder, will be open for examination by proxy,any stockholder, for any purpose related to the 2019 Annual Meeting, during ordinary business hours at our principal executive offices. The list will constitute a quorumalso be available for examination at the Special2019 Annual Meeting. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.
Vote Required; Abstentions and Broker Non-VotesOther Business
The approvalBoard is not aware of any other matters to be presented at the 2019 Annual Meeting other than those mentioned in this Proxy Statement and our accompanying Notice of Annual Meeting of Stockholders. If, however, any other matters properly come before the 2019 Annual Meeting, the persons named in the accompanying proxy will vote in accordance with their best judgment.
Proposals of Stockholders for 2020 Annual Meeting
Stockholder proposals will be considered for inclusion in the proxy statement for the 2020 Annual Meeting in accordance with Rule 14a-8 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), if they are received by the Company, on or before December 30, 2019.
Stockholder notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the proposals requirebusiness desired to be brought before the affirmative vote of a majorityannual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on our books, of the stockholder proposing such business, (iii) the class and number of shares representedof CREG, which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Exchange Act, in his capacity as a proponent to a stockholder proposal.
A stockholder’s notice relating to nomination for directors shall set forth as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of CREG, which are beneficially owned by such person, (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person(s) (naming such person(s)) pursuant to which the nominations are to be made by the stockholder and (v) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation such person’s written consent to being named in our Proxy Statement, if any, as a nominee and to serving as a director if elected).
Proposals and notices of intention to present proposals at the meeting and entitled2020 Annual Meeting should be addressed to vote on that proposal. Abstentions and broker non-votes will have the same effect as a vote “against” eachMs. Adeline Gu, our Chief Financial Officer, at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China.
A copy of the proposals.full text of the provisions of our Bylaws, as amended, dealing with stockholder proposals is available to stockholders from our Secretary upon written request and an electronic copy of is available at the SEC’s website located at www.sec.gov.
Voting Results of 2019 Annual Meeting
Voting results will be published in a Current Report on Form 8-K issued by us within four (4) business days following the annual meeting.
95
Shares Held by CREG’s Directors and Executive OfficersPROPOSAL 1 – ELECTION OF DIRECTORS
AsNominees
Our Bylaws provide that the Board shall consist of not less than three (3) nor more than eleven (11) directors. Our Board has fixed the number of directors to be elected at the 2019 Annual Meeting at five (5). Vacancies on the Board may be filled only by persons elected by a majority of the Record Date,remaining directors. A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the Board of Directors) will serve for the remainder of the one year term in which the vacancy occurred and until the director’s successor is elected and qualified.
Our Board currently consists of five (5) members. Our current directors will stand for re-election at the 2019 Annual Meeting. All of the nominees were previously elected by our stockholders at the 2018 Annual Meeting.
If elected as a director at the 2019 Annual Meeting, each of the nominees would serve a one-year term expiring at the 2020 Annual Meeting of Stockholders and until his or her successor has been duly elected and qualified. Biographical information regarding each of the nominees is set forth below. No family relationships exist among any of our director nominees or executive officers.
Each of the nominees has consented to serve as a director if elected. If any nominee should be unavailable to serve for any reason (which is not anticipated), the Board may designate a substitute nominee or nominees (in which event the persons named on the enclosed proxy card will vote the shares represented by all valid proxy cards for the election of such substitute nominee or nominees), allow the vacancies to remain open until a suitable candidate or candidates are located, or by resolution provide for a lesser number of directors.
Executive Officers and Directors
The following table sets forth certain information regarding our executive officers and director nominees as of CREGApril 24, 2019:
| Name | Age | Position | ||
| Guohua Ku | 57 | Chief Executive Officer, Director and Chairman of the Board | ||
| Binfeng (Adeline) Gu | 41 | Chief Financial Officer and Secretary | ||
| Xiaoping Guo(1) | 66 | Director (Independent) | ||
| Geyun Wang | 50 | Director, Vice President | ||
| Xiaogang Zhu(1)(2) | 64 | Director (Independent) | ||
| LuLu Sun(1) | 40 | Director (Independent) |
| (1) | Member or nominee, as applicable, of Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. |
| (2) | Mr. Xiaogang Zhu 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 Exchange Act of 1934 and as defined by NASDAQ Rule 5605(a)(2). |
Mr. Guohua Kuwas appointed as a group owneddirector and were entitled to vote● sharesour Chief Executive Officer as of December 10, 2008. He was elected Chairman of the common stockBoard as of April 1, 2009. Prior to joining the Company, Mr. Ku served as a Senior Engineer for Yingfeng Technology from 2003 to 2007. From 1979 to 2003, Mr. Ku served in multiple capacities for Shaanxi Blast Air Blower (Group) Co., Ltd., with his last position serving as a Senior Engineer. Mr. Ku’s experience as our Chief Executive Officer, as well as Chairman of the Board, and extensive scientific and operational knowledge and expertise qualifies him to serve as Chairman of the Board and led the Board to conclude that he should be nominated to serve another term as a director.
Ms. Adeline Gu was appointed as the Company’s Chief Financial Officer and Secretary on September 28, 2016. Ms. Gu has been serving as the director of the office of Board of Directors of the Company representing approximatelyfrom August, 2012 to September 27, 2016. She was the Investor Relations Director Assistant of China Natural Gas, Inc. from December 2007 to August 13, 2012. From March 2007 to December 2007, Ms. Gu was the Manager of Investment Department of Xi’an Huiyi Venture Capital Co., Ltd. Ms. Gu studied at Northwest University of China from September, 1995 to June, 1999 and received her bachelor degree, majoring in English. Ms. Gu has held a Chinese Accounting Certificate since 2000.
●Mr. Xiaoping Guo% was first appointed as a director on June 1, 2017 by the board to fill a pending vacancy. Mr. Guo has served as the assistant to the president of Datang New Energy Co., Ltd., since 2010. Mr. Guo received his bachelor degree from the Xi’an Jiaotong University in 1977, and his master’s degree in systems engineering from the same school in 2000. Mr. Guo’s extensive project engineering and development experience, as well as his management experience, qualifies him to serve on our Board and led the Board to conclude that he should be nominated as a director.
Mr. Geyun Wangwas initially elected as a director at the 2014 Annual Meeting, and he also serves as a Vice President of the outstanding sharesCompany. Mr. Wang is responsible for the procurement of CREG common stockengineering equipment and tendering for project construction, as well as supervision of installation and commissioning for EPC projects. Mr. Wang was the Deputy General Manager of our subsidiary Xi'an TCH Energy Technology Co., Ltd. between 2007 and 2015 and he was appointed as a Vice President of the Company in 2015. Prior to this position, from 2001 to 2007, Mr. Wang served as the Vice President of Sales of Shaanxi Baoji Hongguang Iron & Steel Co., Ltd., where he was responsible for sales of steel products. Mr. Wang received his bachelor degree from Northwestern Polytechnical University in 1988. Mr. Wang’s extensive project construction and management experience, as well as his extensive industry and market expertise, qualifies him to serve on our Board and led the Board to conclude that date. CREG expectshe should be nominated as a director.
Mr. Xiaogang Zhu was first appointed as a director on June 1, 2017 by the board to fill a pending vacancy. Mr. Zhu has served as a financial consultant to Shaanxi Coal Chemical Engineering New Energy Co., Ltd., since May 2014. From December 2007 until May 10, 2014, Mr. Zhu served as the Company’s accounting manager and vice president of accounting. Prior to that, Mr. Zhu was the Chief Financial Officer of 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 should be nominated as a director.
Ms. LuLu Sunwas first appointed as a director on August 5, 2015 by the board to fill a pending vacancy. Ms. Sun serves as Marketing Director for Net Engine Power Tech. Ltd. Co. in China from June 2013 to present and she was the New Media Business Development Director for Rayli Magazine in China from June 2009 to May 2013. From July 2002 to May 2009, Ms. Sun was the Business Development Project Manager for Sina Mobile in China. Ms. Sun's extensive experience in marketing and business development in China qualifies her to serve on our Board and led the Board to conclude that she should be nominated as a director.
All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified.
There are no arrangements or understandings pursuant to which our directors are selected or nominated.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF
EACH OF THE DIRECTOR NOMINEES NAMED IN THIS PROXY STATEMENT.
CORPORATE GOVERNANCE
Leadership Structure and Role in Risk Oversight
The Company’s current board leadership structure separates the board chair and principal executive officer roles into two positions. Mr. Ku has served as both Chairman of the Board and CEO of the Company since April 1, 2009. Our Board continues to believe there are important advantages to Mr. Ku serving in both roles at this time. Mr. Ku is the director most familiar with our business and industry and is best situated to propose Board agendas and lead Board discussions on important matters. Mr. Ku provides a strong link between management and the Board, which promotes clear communication and enhances strategic planning and implementation of corporate strategies. Another advantage is the clarity of leadership provided by one person representing us to employees, stockholders and other stakeholders. The Board has not named a lead independent director.
Our Board is responsible for oversight of the Company’s risk management practices while management is responsible for the day-to-day risk management processes. In the Board’s opinion, this division of responsibilities is the most effective approach for addressing the risks facing the Company. The Board receives periodic reports from management regarding the most significant risks facing the Company. In addition, the Audit Committee assists the Board in its oversight of our risk assessment and risk management policies. Our Audit Committee is empowered to appoint and oversee our independent registered public accounting firm, monitor the integrity of our financial reporting processes and systems of internal controls and provide an avenue of communication among our independent auditors, management, our internal auditing department and our Board.
Diversity
The Board does not have a formal policy with respect to Board nominee diversity. In recommending proposed nominees to the full Board, the Corporate Governance and Nominating Committee is charged with building and maintaining a board that has an ideal mix of talent and experience to achieve our business objectives in the current environment. In particular, the Corporate Governance and Nominating Committee is focused on relevant subject matter expertise, depth of knowledge in key areas that are important to us, and diversity of thought, background, perspective and experience so as to facilitate robust debate and broad thinking on strategies and tactics pursued by us.
Director Independence
Xiaoping Guo, LuLu Sun and Xiaogang Zhu are our only non-employee directors, and executive officers will vote their shares in favorour Board has determined that each of them is independent pursuant to the listing rules of NASDAQ. All of the members of each of the proposals,Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are independent as defined in NASDAQ Rule 5605(a)(2). As required under applicable NASDAQ listing standards, in the 2017 fiscal year, our independent directors met twice in regularly scheduled executive sessions at which only our independent directors were present.
Mr. Xiaogang Zhu, a nominee for 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 Exchange Act of 1934 and as defined by NASDAQ Rule 5605(a)(2).
Board Meetings and Committee Meeting; Annual Meeting Attendance
During the year ended December 31, 2018, the Board held 2 meetings and acted through unanimous consent on 8 different occasions. In addition, the Audit Committee held 4 meetings; the Corporate Governance and Nominating Committee held 1 meeting; and the Compensation Committee held 1 meeting. During the year ended December 31, 2018, each of the directors attended, in person or by telephone, more than 75% of the meetings of the Board and the committees on which he or she served. We encourage our Board members to attend our Annual Meetings, but nonewe do not have a formal policy requiring attendance. Some of our then-sitting Board members attended the 2018 Annual Meeting.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee currently consists of Xiaoping Guo, Xiaogang Zhu and LuLu Sun. Ms. LuLu Sun is the chairman of our Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee oversees all aspects of the Company’s corporate governance functions on behalf of the Board, including identifying individuals qualified to become directors, recommending to the Board the selection of director nominees for each meeting of the stockholders at which directors are elected and overseeing the monitoring and evaluation of the Company’s corporate governance practices. The Corporate Governance and Nominating Committee reviewed the performance of all of the current members of the Board and determined and recommended to the Board that all of the current directors should be nominated for re-election. No other candidates were recommended or executive officers has entered into any agreement obligating anyevaluated. The Corporate Governance and Nominating Committee operates under a written charter, which is available on our website at www.creg-cn.com under the links “Investor Relations – Corporate Governance.”
Selection of them to do so.Board Nominees
VotingOur Corporate Governance and Nominating Committee is responsible for identifying, selecting and evaluating Board candidates. From a general perspective, candidates are reviewed in the context of Proxiesthe existing Board members, our operating requirements and the long-term interests of our stockholders. In selecting candidates for appointment or re-election to the Board, the Corporate Governance and Nominating Committee of the Board considers the following criteria: (i) personal and professional ethics and integrity, including a reputation for integrity and honesty in the business community; (ii) experience as an executive officer of companies or as a senior leader of complex organizations, including scientific, government, financial or technological organizations; (iii) financial knowledge, including an understanding of finance, accounting, the financial reporting process, and company measures for operating and strategic performance; (iv) ability to critically and independently evaluate business issues, contributing diverse perspectives or viewpoints, and making practical and mature judgments; (v) a genuine interest in the Company, and the ability to spend the time required to make substantial contributions as a director; and (vi) no conflict of interest or legal impediment that would interfere with the duty of loyalty to the Company and its stockholders. In addition, the Corporate Governance and Nominating Committee reviews the qualifications of the directors to be appointed to serve as members of the Audit Committee to ensure that they meet the financial literacy and sophistication requirements under the NASDAQ rules and that at least one of them qualifies as an “audit committee financial expert” under the rules of the SEC.
Audit Committee
If your shares are registered in your name withThe Audit Committee currently consists of Xiaoping Guo, Xiaogang Zhu and LuLu Sun, each of whom is independent under NASDAQ listing standards. Xiaogang Zhu serves as chairman of our transfer agent, Securities Transfer Corporation, you may cause your shares to be voted by returning a signed proxy card, or you may vote in person at the Special Meeting. Based on your proxy cards, the proxy holders will vote your shares according to your directions.Audit Committee.
If you planThe Board determined that Mr. Zhu qualifies as an “audit committee financial expert,” as defined by NASDAQ Rule 5605(a)(2) and Item 407 of Regulation S-K. In reaching this determination, the Board made a qualitative assessment of Mr. Zhu’s level of knowledge and experience based on a number of objective and subjective factors, including formal education, financial and accounting acumen, and business experience. The Audit Committee is responsible for assisting the Board in fulfilling its oversight responsibilities with respect to: (i) the financial reports and other financial information provided by us to attend the Special Meetingpublic or any governmental body; (ii) our compliance with legal and wishregulatory requirements; (iii) our systems of internal controls regarding finance, accounting and legal compliance that have been established by management and the Board; (iv) the qualifications and independence of our independent registered public accounting firm; (v) the performance of our internal audit function and the independent registered public accounting firm; and (vi) our auditing, accounting and financial reporting processes generally. The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. In connection with its responsibilities, the Board has delegated to votethe Audit Committee the authority to select and hire our independent registered public accounting firm and determine their fees and retention terms. The Audit Committee’s policy is to pre-approve all audit and non-audit services by category, including audit-related services, tax services, and other permitted non-audit services. In accordance with the policy, the Audit Committee regularly reviews and receives updates on specific services provided by our independent registered public accounting firm. All services rendered by MJF and Associates, APC to the Company are permissible under applicable laws and regulations. During fiscal year 2018, all services requiring pre-approval and performed by the Company's accounting firm, MJF and Associates, APC, were approved in person, you will be given a ballot atadvance by the meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.
Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the Special Meeting will be voted at the Special MeetingAudit Committee in accordance with the instructionspre-approval policy. The Audit Committee operates under a written charter, which is available on our website at www.creg-cn.com under the links “Investor Relations – Corporate Governance.”
Compensation Committee
The Compensation Committee currently consists of Xiaoping Guo, Xiaogang Zhu and LuLu Sun. Mr. Guo is the chairman of our Compensation Committee. The Compensation Committee’s purpose is (i) to oversee the Company’s efforts to attract, retain and motivate members of the stockholder. InCompany’s senior management team, (ii) to carry out the eventBoard’s overall responsibility relating to the determination of compensation for all executive officers, (iii) to oversee all other aspects of the Company’s compensation policies, and (iv) to oversee the Company’s management resources, succession planning and management development activities. The Compensation Committee has the authority to engage independent advisors to assist it in carrying out its duties. During fiscal year 2018, the Compensation Committee did not engage the services of any independent advisors, experts or other third parties. We believe that properly executed proxies do not contain voting instructions forthe functioning of our Compensation Committee complies with any given proposal,applicable requirements of NASDAQ and SEC rules and regulations. The Compensation Committee operates under a written charter, which is available on our website at www.creg-cn.com under the CREG common stock represented by such proxies will be voted in favor of each such proposal.links “Investor Relations – Corporate Governance.”
If your sharesCompensation Committee Interlocks and Insider Participation in Compensation Decisions
All members of the Compensation Committee are held in “street name” throughindependent directors. With the exception of Mr. Xiaogang Zhu, no current member of our Compensation Committee is a broker, bankcurrent or former officer or employee of the Company or any of its subsidiaries, and no director or executive officer of the Company is a director or executive officer of any other nominee, you may vote through your broker, bankcorporation that has a director or other nominee by completing and returningexecutive officer who is also a director of the voting form provided by your broker, bank or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form or do not attendCompany.
Stockholder Communication with the Special Meeting and vote in person with a proxy from your broker, bank or other nominee, it will have the same effect as if you voted “AGAINST” the proposals presented for a vote.Board of Directors
RevocabilityStockholders may communicate with the Board by writing to the attention of ProxiesMs. Adeline Gu, our Chief Financial Officer, at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China.
If you areCode of Ethics
We have adopted a stockholder“code of record, you may change your voteethics” as defined by regulations promulgated under the Securities Act of 1933, as amended, and the Exchange Act that applies to all of our directors and employees worldwide, including our principal executive officer, principal financial officer and principal accounting officer. A current copy of our Code of Business Conduct and Ethics is available on our website at www.creg-cn.com under the links “Investor Relations – Corporate Governance.” We intend to disclose any amendments to the Code of Business Conduct and Ethics, as well as any waivers for executive officers or revoke your proxy at any time before it is voted atdirectors, on our website.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information provided to us by each of the Special Meeting by:following as of April 24, 2019 (unless otherwise indicated) regarding their beneficial ownership of our common stock:
| ● |
Please note that to be effective, your new proxy card, internet or telephonic voting instructions or written notice of revocation must be received by us prior to the Special Meeting. If you have submitted a proxy, your appearance at the Special Meeting, in the absence of voting in person or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.
If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a valid “legal” proxy from your bank, broker or other nominee. Any adjournment, recess or postponement of the Special Meeting for the purpose of soliciting additional proxies will allow CREG stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, recessed or postponed.
10
Board of Directors’ Recommendation
After careful consideration, the Company’s board of directors recommends that you vote or give instruction to vote:
| stock; | ||
| ● | ||
| named executive officers; | ||
| ● | ||
| ● | all of our directors and executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to the securities. Except as indicated by footnote, and subject to applicable community property laws, the persons and entities named in the table below have sole voting and sole investment power with respect to the shares set forth opposite each person’s or entity’s name.
| Common Stock | ||||||||
| Beneficially Owned | ||||||||
| Beneficial Owner | Number of Shares | Percent of Class | ||||||
| Guohua Ku | 2,644,764 | 16.42 | % | |||||
| Great Essential | 1,600,000 | 9.93 | % | |||||
| Bohan Zhang | 47,270 | * | ||||||
| Adeline Gu | 5,000 | (1) | * | |||||
| Geyun Wang | — | * | ||||||
| Xiaoping Guo | — | * | ||||||
| Xiaogang Zhu | — | — | ||||||
| LuLu Sun | — | — | ||||||
| All executive officers and directors as a group (7 persons) | 2,692,034 | 16.71 | % | |||||
| * | Less than one percent (1%) of outstanding shares. |
| (1) | Represents 5,000 shares of common stock subject to |
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation earned during the years ended December 31, 2018 and 2017, by those individuals who served as our Chief Executive Officer, 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.”
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||
| Guohua Ku (1) | 2018 | 33,078 | ||||||||||||||||||||||||||||||||
| Chief Executive Officer and | 2017 | 33,078 | -- | -- | Nil | -- | -- | -- | 33,078 | |||||||||||||||||||||||||
| Chairman of the Board | ||||||||||||||||||||||||||||||||||
| Adeline Gu (2) | 2018 | 22,052 | ||||||||||||||||||||||||||||||||
| Chief Financial | 2017 | 18,376 | -- | -- | 7,647 | -- | -- | -- | 26,023 | |||||||||||||||||||||||||
| Officer and Secretary | ||||||||||||||||||||||||||||||||||
| Geyun Wang (3) | 2018 | 27,565 | ||||||||||||||||||||||||||||||||
| Vice President | 2017 | 27,565 | -- | -- | Nil | -- | -- | -- | 27,565 | |||||||||||||||||||||||||
| (1) | Guohua Ku was appointed as Chief Executive Officer |
| (2) | Adeline Gu was appointed as Chief Financial Officer and Secretary of the |
| (3) | Geyun Wang was appointed as Vice President of |
| (4) | Reflects the aggregate grant date fair value of the applicable stock option, calculated in accordance with Accounting Standards Codification Topic 718. |
SolicitationNarrative to Summary Compensation Table
In fiscal year 2018, the primary components of Proxiesour executive compensation programs were base salary and equity compensation. We use base salary to fairly and competitively compensate our executives, including the named executive officers, for the jobs we ask them to perform. We view base salary as the most stable component of our executive compensation program, as this amount is not at risk. We believe that the base salaries of our executives should be targeted at or above the median of base salaries for executives in similar positions with similar responsibilities at comparable companies, consistent with our compensation philosophy. Because of our emphasis on performance-based compensation for executives, base salary adjustments are generally made only when we believe there is a significant deviation from the market or an increase in responsibility. Our Compensation Committee reviews the base salary levels of our executives each year to determine whether an adjustment is warranted or necessary.
Employment Contracts
Mr. Guohua Ku entered into 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 of Mr. 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. Ku receives a salary of RMB 216,000 ($33,078) annually for his service as CEO. The Company may terminate the employment agreement at any time without any prior notice to the employee if Mr. Ku engages in certain conduct, including, but not limited to (i) the violation of the rules and procedures of the Company or breaches the terms of the employment agreement; (ii) neglecting his duties or engages in malpractice for personal gain that damages the Company; (iii) entering into an employment relationship with any other employer during his employment with the Company; or (iv) the commission of a crime. The Company also may terminate the 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) the need for mass layoffs or other restructuring. Mr. Ku has the right to resign at any time upon a 30 day written notice to the Company.
In connection with her appointment as Chief Financial Officer and Secretary, the Company entered into an employment agreement with Ms. Gu on September 28, 2016. Pursuant to the terms of the employment agreement, Ms. Gu will receive compensation in the amount of RMB 10,000 (approximately $1,538) per month plus stock options for no less than 5,000 shares of common stock of the Company each year to be issued under the China Recycling Energy Corporation Omnibus Equity Plan (the “Plan”) with the specific terms of the options to be determined by the Compensation Committee of the Board in the future. The term of the employment agreement is for two years, starting on September 28, 2016. The Compensation Committee approved the grant of an option to Ms. Gu to purchase 5,000 shares of the Company’s common stock on April 27, 2017. On September 28, 2018, the Company and Ms. Gu agreed to renew Ms. Gu’s employment agreement for 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 stockholders of the Company approved the China Recycling Energy Corporation Omnibus Equity Plan (the “2015 Equity Plan”) at its annual meeting. The total aggregate shares of common stock authorized for issuance during the term of the 2015 Equity Plan is 1,246,261 shares, as adjusted following the Company’s 1-for-10 reverse stock split of the Company’s authorized shares of Common Stock, effective in May 2016. The 2015 Equity Plan will terminate on the earliest to occur of (i) the 10th anniversary of the Equity Plan's effective date, or (ii) the date on which all shares available for issuance under the Equity Plan shall have been issued as fully-vested shares.
Potential Payments Upon Termination or Change of 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 agreements without cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment agreement is scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment agreement in the absence of cause, as defined in the agreement, then we are obligated to pay the employee one month’s salary for each year we have employed the 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 stockholders of the Company approved the China Recycling Energy Corporation Omnibus Equity Plan (the “2015 Equity Plan”) at its annual meeting. The total aggregate shares of common stock authorized for issuance during the term of the 2015 Equity Plan is 1,246,261 shares, as adjusted following the Company’s 1-for-10 reverse stock split of the Company’s authorized shares of Common Stock, effective in May 2016. The 2015 Equity Plan will terminate on the earliest to occur of (i) the 10th anniversary of the Equity Plan's effective date, or (ii) the date on which all shares available for issuance under the Equity Plan shall have been issued as fully-vested shares. A total of 5,000 shares underlying options were granted to an executive officer under the 2015 Equity Plan as of December 31, 2018.
NON-EMPLOYEE DIRECTOR COMPENSATION
Non-Employee Director Compensation
The expense of soliciting proxies infollowing table sets forth certain information regarding the enclosed form will be bornecompensation earned by CREG. Proxies may also be solicited by someor awarded during the 2018 fiscal year to each of our directors, officers and employees, personally or by telephone, facsimile, e-mail or other means of communication. No additional compensation will be paid for such services.non-executive directors:
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(1) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| LuLu Sun (2) | $ | 12,000 | $ | 12,000 | ||||||||||||||||||||||||
| Xiaoping Guo(3) | $ | 12,000 | $ | 12,000 | ||||||||||||||||||||||||
| Xiaogang Zhu(3) | $ | 12,000 | $ | 12,000 | ||||||||||||||||||||||||
| (1) | In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties to the Company, as well as the skill level required to serve as a director and manage the affairs of the Company. Each non-employee director receives a monthly Board fee of $1,000. Non–employee directors do not receive additional fees for attendance at Board or Board committee meetings or for serving on Board Committees. There were no stock option exercises by non-employee directors in fiscal year 2018. There were no option awards outstanding as of December 31, 2018, for any of the non-employee directors. |
| (2) | Ms. LuLun Sun was appointed to the Board on August 5, 2015. |
| (3) | Messrs. Guo and Zhu were appointed as directors effective June 1, 2017. |
Householding of Special Meeting MaterialsEQUITY COMPENSATION PLAN INFORMATION
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy materialstable below sets forth information with respect to two or more stockholders sharingshares of our common stock that may be issued under the same address by delivering a single set2015 Plan, as of proxy materials. This process, which is commonly referred to as “householding,” potentially results in extra convenience for stockholders and cost savings for companies. December 31, 2018:
| Plan Category | Number of securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans | |||||||||
| Equity compensation plans approved by security holders | 9,000 | $ | -- | 1,241,261 | ||||||||
| Equity compensation plans not approved by security holders | -- | -- | -- | |||||||||
| Total | 9,000 | $ | -- | 1,241,261 | ||||||||
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has adoptednot implemented a written policy concerning the SEC-approved “householding” procedure.review of related party transactions; however, the Company’s policy is that the Audit Committee must review related party transactions and Board must approve all related party transactions. Further, all material related party transactions will be made or entered into on terms that are no less favorable to us than can be obtained from unaffiliated third parties.
Upon writtenA “related party transaction” is a transaction, arrangement or oral request,relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which the Company (including any of our subsidiaries) was, is or will deliver promptlybe a separateparticipant, the amount involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect interest.
As of December 31, 2018, the Company had $41,168 in advances from the Company’s management, which bear no interest, are unsecured, and are payable upon demand.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has furnished the following report on its activities during the fiscal year ended December 31, 2018. The report is not deemed to be “soliciting material” or “filed” with the SEC or subject to the SEC’s proxy rules or to the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing under the Securities Act or the Exchange Act except to the extent that the Company specifically incorporates it by reference into any such filing.
The primary function of the Audit Committee is to assist the Board in its oversight and monitoring of our financial reporting and auditing process. The Audit Committee charter sets forth the responsibilities of the Audit Committee. A copy of the NoticeAudit Committee charter is available on our website at www.creg-cn.com under the links “Investor Relations – Corporate Governance.” For fiscal year 2018, the Audit Committee was comprised of Special MeetingXiaogang Zhu (Chairman), Xiaoping Guo, and Lulu Sun, each of Stockholders this Proxywhom is independent under applicable SEC and NASDAQ listing standards.
Management has primary responsibility for our financial statements and the overall reporting process, including maintaining effective internal control over financial reporting and assessing the effectiveness of our system of internal controls. The independent registered public accounting firm audits the annual financial statements prepared by management, expresses an opinion as to whether those financial statements fairly present our financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles, and discusses with the Audit Committee any issues they believe should be raised with the Audit Committee. These discussions include a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee monitors our processes, relying, without independent verification, on the information provided to it and on the representations made by management and the independent registered public accounting firm.
In 2018, the Audit Committee held 4 meetings. Representatives of MJF and Associates, APC, our independent registered public accounting firm, attended each meeting of the Audit Committee that involved the discussion of financial statements. The Audit Committee reviewed and discussed with management and MJF and Associates, APC, our independent registered public accounting firm, our audited financial statements for the year ended December 31, 2018 and discussed MJF and Associates, APC’s judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee by Statement on Auditing Standards No. 114 (which superseded Statement on Auditing Standards No. 61), other standards of the 2017Public Company Accounting Oversight Board (United States), rules of the SEC, and other applicable regulations.
The Audit Committee also received the written disclosures and the letter from MJF and Associates, APC required by applicable requirements of the Public Company Accounting Oversight Board regarding the firm’s independence from our management and has discussed with MJF and Associates, APC its independence. The members of Audit Committee considered whether the services provided by MJF and Associates, APC, for the year ended December 31, 2018, are compatible with maintaining their independence. The Board has delegated to the Audit Committee the authority to approve the engagement of our independent registered public accounting firm.
Based upon its review of the audited financial statements and the discussions noted above, the Audit Committee recommended that the Board include the audited financial statements in our Annual Report on Form 10-K and any other documents incorporated herein by reference to any stockholder at a shared address to whichfor the Company delivered a single copy of any of these documents. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate set of proxy materials, you may:
If you are receiving more than one copy ofyear ended December 31, 2018 for filing with the proxy materials at a single address and would like to participate in householding, please contact the Company using the mailing address and phone number above. Stockholders who hold shares in street name may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding.SEC.
DESCRIPTION OF THE SECURITIES OF CHINA RECYCLING ENERGY CORPORATIONAudit Committee:
Given below is a summary of the material features of CREG’s existing securities. This summary is not a complete discussion of the articles of incorporation and bylaws of CREG that create the rights of its stockholders. You are urged to read carefully the certificate of incorporation and bylaws, which have been filed as exhibits to SEC reports filed by CREG. Please see “Where You Can Find More Information” for information on how to obtain copies of those instruments.Xiaogang Zhu (Chairman)
Xiaoping Guo
LuLu Sun
GeneralPROPOSAL NO. 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The followingAudit Committee, in accordance with its charter and authority delegated to it by the Board, has appointed the firm of MJF and Associates, APC to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2019, and the Board has directed that such appointment be submitted to our stockholders for ratification at the 2019 Annual Meeting. MJF and Associates, APC has served as our independent registered public accounting firm since February 15, 2015 and is considered by our Audit Committee to be well qualified. If the stockholders do not ratify the appointment of MJF and Associates, APC, the Audit Committee will reconsider the appointment.
Representatives of MJF and Associates, APC will participate in the 2019 Annual Meeting by phone and will have an opportunity to make a summarystatement if they desire to do so. They also will be available to respond to appropriate questions from stockholders.
THE BOARD, UPON THE RECOMMENDATION OF THE AUDIT COMMITTEE, RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL AND RATIFICATION OF MJF AND ASSOCIATES, APC AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR ENDING DECEMBER 31, 2019.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit and Non-Audit Fees
Aggregate fees and expenses for professional services rendered for us by MJF and Associates, APC for the fiscal years ended December 31, 2018 and 2017 are set forth below. The aggregate fees and expenses included in the Audit category are fees and expenses billed forthe fiscal years for the integrated audit of our capital stockannual financial statements and certain provisionsreview of our articlesinterim financial statements and statutory and regulatory filings. The aggregate fees and expenses included in each of incorporationthe other categories are fees and bylaws. This summary doesexpenses billed inthe fiscal years.
| Fiscal Year 2018 | Fiscal Year 2017 | |||||||
| Audit Fees | $ | 190,945 | $ | 171,113.23 | ||||
| Audit-Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
| Total | $ | 190,945 | $ | 171,113.23 | ||||
Audit Fees for the fiscal years ended December 31, 2018 and 2017 were for professional services rendered for the audit of our annual financial statements and of our internal control over financial reporting and quarterly review of the financial statements included in our Quarterly Reports on Form 10-Q.
Audit-Related Fees are fees not purportincluded in audit fees that are billed by the independent accountant for assurance and related services that are reasonably related to be completethe performance of the audit or review of our financial statements, which include audits in connection with acquisitions.
Tax Fees are fees billed by the independent accountant for professional services rendered for tax compliance, tax advice and tax planning.
All Other Feesare fees billed by the independent accountant for products and services not included in the foregoing categories.
The Audit Committee of the Board of Directors has determined that the provision of these services is compatible with the maintenance of the independence of MJF and Associates, APC.
Pre-approval Policies and Procedures
The Audit Committee has adopted a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. The pre-approval policy is detailed as to the particular service or category of services and is qualified in its entirety bysubject to a specific budget. The services include the provisionsengagement of the independent registered public accounting firm for audit services, audit-related services, and tax services.
If we need to engage the independent registered public accounting firm for other services, which are not considered subject to the general pre-approval as described above, then the Audit Committee must approve such specific engagement as well as the projected fees. If the timing of the project requires an expedited decision, then the Audit Committee has delegated to the Chairman of the Committee the authority to pre-approve such engagement, subject to fee limitations. The Chairman must report all such pre-approvals to the entire Audit Committee for ratification at the next Audit Committee meeting.
PROPOSAL No. 3 – Approval of the amendment to our Articles of Incorporation as amended, our
On April 22, 2019, the Board unanimously adopted a resolution setting forth a proposed amendment to Article 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 proxy statement for information on where you can obtain copies of ourCompany’s Articles of Incorporation, as amended, and Bylaws, which have been filed with and are publicly available fromwould, subject to stockholder approval, (i) increase the SEC.
Our authorized capital stock consists of 20,000,000 shares of Common Stock, par value $0.001 per share. Currently, we have no other authorized class of stock.
Common Stock and Convertible Promissory Note
As of October●, 2018, there were● sharestotal number of our common stock issued and outstanding, held by approximately● stockholders of record. There are no warrants to purchaseauthorized shares of our Common Stock outstanding asfrom 20,000,000shares to 100,000,000shares and (ii) authorize the issuance of up to 60,000,000 shares of blank check preferred stock, par value $0.001 per share (the “Amendment”).The resolution also provided that the proposed Amendment be presented to the stockholders for approval at the 2019 Annual Meeting with the recommendation of the dateBoard that the stockholders approve the proposed amendment in accordance with Chapter 78 of this proxy statement.the Nevada Revised Statutes. A copy of the proposed amendment to the Articles of Incorporation is attached hereto as Annex A.
OurIf the proposal to amend our Articles of Incorporation to increase the total number of our authorized shares of our Common Stock from 20,000,000shares to 100,000,000sharesand to authorize the issuance of up to 60,000,000 shares of blank check preferred stock, par value $0.001 per share, is currently traded onapproved by our stockholders at the NASDAQ Capital Market under2019 Annual Meeting, a Certificate of Amendment to our Articles of Incorporation will be filed with the symbol “CREG.”Secretary of State of the State of Nevada as soon as practicable after the 2019 Annual Meeting.
TheCurrently, the holders of our Common Stock are entitled to one vote per share. Our Articlesshare on all matters submitted to a vote of Incorporationour stockholders and do not provide forhave cumulative voting.voting rights. The holders of ouroutstanding shares of Common Stock are entitled to receive ratably suchany dividends if any, as may be declared by our board of directors (“BOD”)Board out of assets legally available funds; however, the current policy ofavailable. Upon our BOD is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, thewinding up, holders of our Common Stock are entitled to share ratably in all assets that are legally available for distribution. The holdersremaining after payment of ourliabilities and the liquidation preference of any then outstanding shares of preferred stock. Holders of Common Stock have no preemptive or conversion rights or other subscription rights. There are no redemption or conversion rights. sinking fund provisions applicable to the Common Stock.
All issued and outstanding shares of Common Stock are fully paid and nonassessable. Shares of our Common Stock that may be offered for resale, from time to time, will be fully paid and nonassessable.
On July 11, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Purchaser”), pursuant to which the Company sold and issued to the Purchaser a Convertible Promissory Note (the “Note”) in the amount of $1,070,000. The Purchaser purchased the Note with an original issue discount of $50,000, and the Company agreed to pay to the Purchaser $20,000 for fees and costs incurred by Purchaser in connection with the consummation of the Purchase Agreement. The Note was sold to the Purchaser pursuant to an exemption from registration under Regulation D, promulgated under the Securities Act of 1933, as amended. The Note bears interest at the rate 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 under the Note may be prepaid at any time, provided that in such circumstance the Company would pay a 125% premium on any amounts outstanding under the Note. Amounts outstanding under the Note may be converted at any time, at the Lender’s option, into shares of the Company’s common stock at a conversion price of $3.00 per share, subject to certain adjustments. During the term of the Note, the Company shall 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 price is delivered to the Company (“Purchase Price Date”) in the amounts of up to 50% of the amount outstanding during the nine month period after Purchase Price Date or any percentage of the amount outstanding under the Note at any time after the nine month 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.
Stock Transfer Agent
Our transfer agent is Securities Transfer Corporation, 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75093, phone number (469) 633-0101.
PROPOSAL 1 – AMENDMENT TO THE ARTICLES OF INCORPORATION
The Company is asking you to approve the Amendment to the Articles of Incorporation of CREG, which would (i) increase the amount of authorized shares of common stock, par value $0.001 per share (“Common Stock”), of CREG from 20,000,000 to 80,000,000 shares, and (ii) authorize 35,000,000 shares of preferred stock, par value $0.001, the rights of which may be designated from time to time by the Company’s Board of Directors. A copy of the Amendment is included as Annex A to this proxy statement.
Effects of the Increase in Authorized Shares of Common Stock
Potential uses of the additional authorized shares of Common Stock may include public or private offerings, conversions of convertible securities, issuance of stock or stock options to employees, acquisition transactions and other general corporate purposes. Increasing the authorized number of shares of the Common Stock will give us greater flexibility and will allow the Company to issue such shares, in most cases, without the expense or delay of seeking stockholder approval. The Company may issue shares of its Common Stock in connection with financing transactions and other corporate purposes which the Board of Directors believes will be in the best interest of the Company’s stockholders.stockholder. The additional shares of Common Stock will have the same rights as the presently authorized shares, including the right to cast one vote per share of Common Stock. Although the authorization of additional shares will not, in itself, have any effect on the rights of any holder of our Common Stock, the future issuance of additional shares of Common Stock (other than by way of a stock split or dividend) would have the effect of diluting the voting rights, and could have the effect of diluting earnings per share and book value per share, of existing stockholders.
EffectsThe term “blank check” preferred stock refers to stock that gives the board of Authorizing Sharesdirectors of Preferreda corporation the flexibility to create from time to time one or more series of preferred stock, and to determine the relative rights, preferences, powers and limitations of each series, including, without limitation: (i) the number of shares in each series, (ii) whether a series will bear dividends and whether dividends will be cumulative, (iii) the dividend rate and the dates of dividend payments, (iv) liquidation preferences and prices, (v) terms of redemption, including timing, rates and prices, (vi) conversion rights, (vii) any sinking fund requirements, (viii) any restrictions on the issuance of additional shares of any class or series, (ix) any voting rights and (x) any other relative, participating, optional or other special rights, preferences, powers, qualifications, limitations or restrictions.
Other than the reservation of shares in accordance with the terms of that Exchange Agreement, dated April 14, 2019, by and between the Company and Iliad Research and Trading, L.P. (the “Exchange Agreement”), and in connection with certain placement agent warrants described in our Current Reports on Form 8-K filed on April 15, 2019, at present the Board has no specific plans to issue the additional shares of Common Stock that would be available if this proposal is approved. The Board desires to have the shares available so the Company can meet its contractual obligations to maintain certain share reserves under the Exchange Agreement, to be able to issue shares upon the exercise of the placement agent warrants, which are not exercisable until the later of October 16, 2019 or on the date on which the Company amends its articles of incorporation as indicated herein, and to provide additional flexibility to use capital stock for business and financial purposes in the future. The additional shares may be used for various purposes without further stockholder approval. These purposes may include: raising capital; providing equity incentives to employees, officers or directors; establishing strategic relationships with other companies; expanding our business through the acquisition of other businesses; and other purposes.
The Amendment will permitBoard recommends that the stockholders vote “FOR” THE APPROVAL of THE AMENDMENT TO OUR ARTICLES OF INCORPORATION to increase the total number of our Boardauthorized shares of Directorsour Common Stock from 20,000,000 shares to issue100,000,000 shares and to authorize the issuance of up to 35,000,00060,000,000 shares of blank check preferred stock, par value $0.001 per share (the “Preferred Stock”), without further action by stockholders,share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers, directors and holders of more than 10% of our common stock to file with any rights, preferencesthe SEC initial reports of ownership and privileges as they may designate, including the right to approve an acquisition or other changereports of control. Potential useschanges in ownership of newly authorized Preferred Stock may include public or private offerings, conversions of convertible securities, issuance ofour common stock or stock options to employees, acquisition transactions and other general corporate purposes. Authorizingequity securities. Based solely on our review of the Preferred Stock will give us greater flexibilitycopies of these reports and will allowon information provided by the Company to issue suchreporting persons, we believe that all filing requirements of Section 16(a) of the Exchange Act were timely complied with during the fiscal year ended December 31, 2018, except for the following: Mr. Bohan Zhang did not file a Form 4 reporting the sale of 2,900 shares on August 20, 2018 and Mr. Genyun Wang did not file a Form 4 reporting the sale of 30,000 shares in most cases, withoutAugust, 2018.
STOCKHOLDER PROPOSALS
Stockholders may present proper proposals for inclusion in the expenseproxy statement and form of proxy for our 2020 Annual Meeting by submitting their proposals to us in a timely manner and in accordance with rules and regulations promulgated under our Bylaws and the Exchange Act. Advance notice of a stockholder’s proposal must be delivered to our Chief Financial Officer, Ms. Adeline Gu, at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China, on or delaybefore December 30, 2019. A proposal which is received after that date or which otherwise fails to meet the requirements for stockholder proposals established by our Bylaws, the Exchange Act and the SEC will not be included. The submission of seekinga stockholder approval. The Company may issue shares of its Preferred Stock in connection with financing transactions and other corporate purposes which the Board of Directors believesproposal does not guarantee that it will be included in the best interestproxy statement.
ANNUAL REPORT
A copy of the Company’s stockholders. AlthoughAnnual Report on Form 10-K for the authorizationyear ended December 31, 2018, which has been filed with the SEC pursuant to the Exchange Act, is being mailed to you along with this Proxy Statement. Additional copies of this Proxy Statement and/or the Preferred Stock will not, in itself, haveAnnual Report, as well as copies of any effectQuarterly Report may be obtained without charge upon written request to Ms. Adeline Gu, our Chief Financial Officer, at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China, or on the rights of any holder of our Common Stock, the future issuance of shares of Preferred Stock (other than by way of a stock split or dividend) could have the effect of diluting the voting rights, and could have the effect of diluting earnings per share and book value per share, of existing stockholders.SEC’s internet website at www.sec.gov.
The Company anticipates that, following the approval of the Company’s stockholders of this Proposal 1 and Proposal 2 below, its Board of Directors will designate a series of preferred stock to effect the share issuance described in Proposal 2 below. Such series of preferred stock will not have voting rights, but will have preferential dividend rights to participate in and receive a 15% premium on a per share basis for any dividends declared and paid by the Company on its Common Stock. The holder of the preferred shares (the “Holder”) will have the right to convert the preferred shares into shares of Common Stock on a 1:1 basis after the six month anniversary of the issuance of the preferred shares, but the Holder may only exercise such conversion right to the extent that, after giving effect to the issuance of Common Stock after such conversion, the Holder would beneficially own less than 20% of the Company’s issued and outstanding Common Stock.
Dissenter’s RightsOTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
Our stockholders haveBoard knows of no right under applicable state law, our Articlesmatters other than those referred to in this Proxy Statement and in the accompanying Notice of Incorporation, as amended, or our Fourth AmendedAnnual Meeting of Stockholders. However, if any other matter should be properly presented for consideration and Restated Bylaws to dissent from this Proposal 1.
Required Vote
Approvalvoting at the 2019 Annual Meeting, it is the intention of the Amendment requires a quorum to be present and an affirmative vote of a majority of our common stock voted atpersons named as proxies on the Special Meeting. Adoption of the Amendment is not conditioned upon the adoption of any of the other proposals.
CREG’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CREG’S STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO CREG’S ARTICLES OF INCORPORATION.
13
PROPOSAL 2 – ISSUANCE OF COMMON STOCK AND PREFERRED STOCK IN EQUITY PURCHASE TRANSACTION
Background
The key terms of the equity acquisition agreement are summarized below. A copy of the equity purchase agreement is attached as an exhibit to this proxy, and you are encouraged to review the full text of such agreement. The descriptions set forth below are not complete and are qualified in their entirety by reference to the full text of the equity purchase agreement filed herewith.
The Equity Purchase Transaction
On September 30, 2018, Shanghai TCH Energy Technology Co., Ltd. (“Xi’an TCH”), a wholly-owned subsidiary of the Company, entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Mr. Jihua Wang (“Seller”), pursuant to which Xi’an TCH will acquire 20% of the outstanding equity interests (the “Acquired Interests”) of Xi’an Xinhuan Energy Co., Ltd. (“Xinhuan”).
Xinhuan was established in 2005, with its manufacturing base located in Xinfeng industrial park, Lintong district, Xi’an (covering an area of more than 100 mu, with workshops covering over 20,000 square meters). Since its establishment, Xinhuan has been focused on energy conservation and environmental protection, and has engaged in industrial waste heat power generation, new energy research and development, the production and engineering of complete sets of equipment, engineering design, engineering general contracting, investment and operating, and advisory services. Xinhuan’s clients cover a variety of industries, including metallurgy, electric power, building materials, and chemical industries with hundreds of energy saving projects and emissions reduction in several provinces and autonomous regions of China. Xinhuan owns design and manufacturing qualifications for A-class boilers, class one and two qualifications for pressure vessels, a C-class design qualification of power industry, a class three qualification of power engineering construction and a class two qualification for electromechanical installation and construction, as well as six patents and core technologies with independent intellectual property rights.
Xinhuan has the technology to integrate core equipment for energy storage systems and the capacity for the battery PACK production line. In the next three years, Xinhuan plans to build a PACK production line with an annual output of 3GWH to fully meet its energy storage project demands and expand into the international market. The energy storage management system developed by Xinhuan has been gradually put into use in existing projects. Xinhuan’s development and use of PCS, a battery energy control management system (BMS) and a smart energy management system (EMS) of the battery inverter management system of the energy storage power station shows that Xinhuan has formed a complete set of core technology for energy storage management that will ensure the smooth development of its energy storage business. Further, Xinhuan has put its intelligent energy cloud platform into operation, which has powerful abilities to manage and make data compatible. The intelligent energy cloud platform can not only be used in energy storage projects to achieve timely and efficient management of unattended energy storage power stations, but also can be used in the distributed generation stations of new energies such as wind power, photovoltaic project docking, as well as realizing the effective combined control for large thermoelectric and hydropower stations. The platform could also build the foundation for the management of efficient energy storage power stations and eventually become the only comprehensive energy management service platform for various energies.
Pursuant to the Purchase Agreement, Xi’an TCH will purchase the Acquired Interests for an aggregate purchase price of RMB 320 million (approximately $46.72 million) (the “Purchase Price”), which will be paid as follows: (i) in cash in the amount of RMB 60 million (approximately $8.76 million); (ii) in theenclosed form of 2.6 millionproxy card to vote the shares represented by all valid proxy cards in accordance with their judgment of the Company’s Common Stock using a value of $1.90 per share; and (iii) in the form of 17,376,950 shares of the Company’s preferred stock using a value of $1.90 per share, which such class of stock has not yet been authorized or designated. The preferred shares will have no voting rights but will have preferential dividend rights to participate in and receive a 15% premium on a per share basis for any dividends declared and paid by the Company on its Common Stock. The holder of the preferred shares (the “Holder”) will have the right to convert the preferred shares into shares of the Company’s Common Stock on a 1:1 basis after the six month anniversary of the issuance of the preferred shares, but the Holder may only exercise such conversion right to the extent that, after giving effect to the issuance of Common Stock after such conversion, the Holder would beneficially own less than 20% of the Company’s issued and outstanding Common Stock.
14
The payment of the Purchase Price in the form of the 2.6 million shares of Common Stock and 17,376,950 shares of the Company’s preferred stock (the “Share Payment”) is contingent on the Company receiving stockholder approval for the Share Payment, and to authorize the preferred shares and increase the number of authorized shares of Common Stock, as further described in Proposal 1. The shares of common and preferred stock subject to the Share Payment will be sold and issued pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. In the event that the Share Payment and other matters are not approved at the Special Meeting, as may be adjourned, the parties to the Purchase Agreement will negotiate another form of payment for the remaining portion of the Purchase Price.
The parties to the Purchase Agreement agreed to complete the transactions contemplated thereby within 60 days of the date of the Purchase Agreement or upon the approval of the stockholders of the Company, whichever comes later, and Seller agreed to various restrictions on, and covenants in relation to, its activities pending the completion of the sale of the Acquired Interests. The Purchase Agreement also contains customary representations and warranties, and covenants regarding the parties’ cooperation.
We are seeking stockholder approval to issue 2,600,000 shares of our Common Stock and 17,376,950 shares of preferred stock to consummate the Purchase Agreement (the “Share Issuance”). If stockholder approval of Proposal 1 described herein and the Share Issuance are obtained at the Special Meeting, the Share Issuance is expected to occur promptly after the Special Meeting.
THIS PROXY STATEMENT IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY OF OUR SECURITIES. THE SECURITIES REFERRED TO IN THIS PROXY STATEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD ABSENT SUCH REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.
Board of Directors Recommendation
The Board of Directors believes the approval of this Proposal 2 by our stockholderswhat is in theour best interests of the Company and our stockholders. The Board of Directors believes that the consummation of the Purchase Agreement will enhance the Company’s ability to develop energy storage technology and increase its presence in that market. To the extent that the Company is unable to consummate the Purchase Agreement because this Proposal 2 is not approved, the Board of Directors believes that the Company might lose this valuable potential acquisition and expansion opportunity and may not be able to find comparable opportunities on as favorable terms.
Reason for Stockholder Approval
Our Common Stock is listed on The NASDAQ Capital Market, and, as such, we are subject to the NASDAQ Marketplace Rules, including NASDAQ Listing Rule 5635. NASDAQ Listing Rule 5635(d) requires stockholder approval prior to the sale, issuance or potential issuance by the issuer of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock, in connection with a transaction other than a public offering. If the Share Issuance occurs, the total number of shares of our Common Stock sold pursuant to the Share Purchase Agreement may exceed 20% of the total number of shares of our Common Stock issued and outstanding on the date on which the Share Purchase Agreement was executed. As such, we are seeking stockholder approval for such transactions pursuant to NASDAQ Listing Rule 5635(d).interest.
Overall Effect of the Proposal
If approved, this Proposal 2 would result in an increase by 2,600,000 shares in the number of shares of our Common Stock outstanding, and, as a result, current stockholders who are not participating in the Purchase Agreement would own a smaller percentage of our outstanding Common Stock and, accordingly, a smaller percentage interest in the voting power, liquidation value and book value of our Common Stock. The sale or resale of any of our Common Stock issued pursuant to the Purchase Agreement could cause the market price of our Common Stock to decline. Additionally, the proposed issuance of the 17,376,950 shares of preferred stock will give the holder of such preferred shares preferential dividend and liquidation rights. If the shares of preferred stock are converted into shares of our Common Stock, current stockholders would own a smaller percentage of our outstanding Common Stock and, accordingly, a smaller percentage interest in the voting power, liquidation value and book value of our Common Stock
This approval would not limit our ability to engage in a public offering, as defined by NASDAQ, or to issue or sell a number of shares of our Common Stock (including shares issuable upon conversion or exercise of convertible debt, warrants or other securities exercisable for or convertible into our Common Stock) that is less than 20% of the outstanding shares on terms that might or might not be similar to those in this Proposal 2.
Vote Required
The affirmative vote of a majority of all of the votes present or represented and entitled to vote at the Special Meeting is required to approve this Proposal 2.
CREG’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CREG’S STOCKHOLDERSYOUR VOTE “FOR” THE SHARE ISSUANCE.
16
PROPOSAL 3 – GRANT OF DISCRETIONARY AUTHORITY TO ADJOURN THE SPECIAL MEETING
Although it is not expected, the Special Meeting may be adjourned for the purpose of soliciting additional proxies. Any such adjournment of the Special Meeting may be made without notice, other than by the announcement made at the Special Meeting, by approval of the holders of a majority of the shares of our Common Stock present in person or by proxy and entitled to vote at the Special Meeting, whether or not a quorum exists. We are soliciting proxies to grant discretionary authority to the Company’s Chief Executive Officer to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies in favor of Proposals 1 and 2. The Chief Executive Officer will have the discretion to decide whether or not to use the authority granted to such person pursuant to this Proposal 3 to adjourn the Special Meeting.
Vote Required
The affirmative vote of a majority of all of the votes present or represented and entitled to vote at the Special Meeting is required to approve this Proposal 3.
CREG’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CREG’S STOCKHOLDERS VOTE “FOR” THE GRANT OF DISCRETIONARY AUTHORITY TO ADJOURN THE SPECIAL MEETING.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTIS IMPORTANT
The following table sets forth certain information providedYou are cordially invited to usattend the 2019 Annual Meeting. However, to ensure that your shares are represented at the meeting, please submit your proxy or voting instructions by eachmail. Please see the instructions on the proxy and voting instruction card. Submitting a proxy or voting instructions will not prevent you from attending the 2019 Annual Meeting and voting in person, if you so desire, but will help the Company secure a quorum and reduce the expense of the following as of October●additional proxy solicitation, 2018 (unless otherwise indicated) regarding their beneficial ownership of our common stock:.
| Guohua Ku | ||
| Chief Executive Officer and | ||
| Chairman of the Board of Directors | ||
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to the securities. Except as indicated by footnote, and subject to applicable community property laws, the persons and entities named in the table below have sole voting and sole investment power with respect to the shares set forth opposite each person’s or entity’s name.
OTHER MATTERS
As of the date of this proxy statement, the board of directors of CREG knows of no matters that will be presented for consideration at the Special Meeting other than as described in this proxy statement. If any other matters properly come before the Special Meeting or any adjournments or postponements of the meeting and are voted upon, the enclosed proxy will confer discretionary authority on the individuals named as proxy to vote the shares represented by the proxy as to any other matters. The individuals named as proxies intend to vote in accordance with their best judgment as to any other matters.
EXPERTS
The consolidated financial statements of China Recycling Energy Corporation and its subsidiaries as of December 31, 2017 and 2016, and for each of the years in the two-year period ended December 31, 2017, have been incorporated by reference in the proxy statement in reliance on the report of MJF and Associates, APC, an independent registered public accounting firm, and upon the authority of said firm as experts in accounting and auditing. Representatives of MJF and Associates, APC, are not anticipated to be present at the Special Meeting. If such representatives do attend the Special Meeting, they will have the opportunity to make a statement if they desire to do so and will be expected to respond to appropriate questions.
18
ADDITIONAL INFORMATION
The accompanying document is the proxy statement of CREG for its special meeting of stockholders. The accompanying proxy statement incorporates important business and financial information about CREG from documents that are not included in or delivered with the accompanying proxy statement. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference into the accompanying proxy statement free of charge by requesting them in writing or by telephone from CREG at the following address and telephone number:
China Recycling Energy Corporation
124/F, Tower C
Rong Cheng Yun Gu Building
Keji 3rd Road, Yanta District
Attn: Adeline Gu, Chief Financial Officer and Corporate Secretary
+86-29-8769-1097
WHERE YOU CAN FIND MORE INFORMATION
CREG files annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. You may read and copy any of this information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including CREG, who file electronically with the SEC. The address of that website is www.sec.gov. Investors may also consult CREG’s website for more information about us. Our website address is www.creg-cn.com. Information contained on our website is not incorporated by reference into proxy statement.
The SEC allows CREG to “incorporate by reference” into this proxy statement information that CREG files with the SEC, which means that important information can be disclosed to you by referring you to those documents and those documents will be considered part of this proxy statement. The information incorporated by reference is an important part of this proxy statement. Certain information that is subsequently filed with the SEC will automatically update and supersede information in this proxy statement/prospectus and in earlier filings with the SEC. This proxy statement also contains summaries of certain provisions contained in some of the CREG documents described in this proxy statement but reference is made to the actual documents for complete information. All of these summaries are qualified in their entirety by reference to the actual documents.
The information and documents listed below, which CREG has filed with the SEC, are incorporated by reference into this proxy statement:
We also incorporate by reference all documents that we file with the SEC on or after the effective time of this proxy statement pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the occurrence of the Special Meeting. Nothing in this proxy statement will be deemed to incorporate information furnished but not filed with the SEC.
Any statement contained in this proxy statement or in a document incorporated or deemed to be incorporated by reference in this proxy statement will be deemed to be modified or superseded for purposes of this proxy statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this proxy statement.
You may request a copy of the filings 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 3rd Road, Yanta District
Attn: Adeline Gu, Chief Financial Officer and Corporate Secretary
+86-29-8769-1097
Statements contained in this proxy statement as to the contents of any contract or other documents are not necessarily complete, and in each instance you are referred to the copy of the contract or other document filed as an exhibit to the proxy statement or incorporated herein, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto.
20
Annex A
  | BARBARA K. CEGAVSKE | |||
| Secretary of State | ||||
| 202 North Carson Street | ||||
| Carson City, Nevada 89701-4201 | ||||
(775) 684-5708 Website: www.nvsos.gov | ||||
Certificate of Amendment | ||||
| (PURSUANT TO NRS 78.385 AND 78.390) | ||||
| USE BLACK INK ONLY - DO NOT HIGHLIGHT | ABOVE SPACE IS FOR OFFICE USE ONLY |
Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
1. Name of corporation:
China Recycling Energy Corporation |
2. The articles have been amended as follows: (provide article numbers, if available)
FOURTH: The
Common Preferred 60,000,000 $.001
|
3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is:
| 4. Effective date and time of filing: (optional) | Date: | Time: | ||||
| (must not be later than 90 days after the certificate is filed) | ||||||
5. Signature: (required)
| X | |
| Signature of Officer |
* If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.
IMPORTANT:Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected.
This form must be accompanied by appropriate fees. | Nevada Secretary of State Amend Profit-After | |
| Reset | Revised: 1-5-15 |
A-1
Exhibit 1
Shanghai TCH Energy Technology Co., Ltd.
And
Jihua Wang
Equity Purchase Agreement
Date: September 30, 2018
Ex.1-1
This Agreement is signed on September 30, 2018 in Xi’an by two parties below.
Party A: Shanghai TCH Energy Technology Co., Ltd. (“Party A”)
Legal Representative:Geyun Wang
Address:No. 88 Century Avenue, Pudong New District, Shanghai
Party B:Jihua Wang
Address:Yanta District, Xi’an
Whereas:
(1) Party A is a legally established and validly existing domestic limited liability company. Party A is a wholly-owned subsidiary of China Recycling Energy Corporation, a Nasdaq listed company (trading symbol: CREG). Party A has the authority to sign this agreement and perform its obligations hereunder.
(2) Party B is an Chinese citizen and resident who holds 20% equity ownership of the target company as of the date of the Agreement.
(3) The target company is Xi ‘an Xinhuan Energy co., Ltd. It has been engaged in the research and development, production and manufacturing, engineering design and general project contracting of complete sets of engineering equipment for new energy power generation for many years. Its controlling shareholder is a legally existing NEEQ listed company in China.
According to the “Company Law of the People’s Republic of China”, the “Contract Law of the People’s Republic of China”, the “Regulations of Administration Measures for Material Assets Reorganization of Non-listed Public Company”, after friendly negotiation, the two parties reached the following agreement to confirm both parties’ rights and obligations:
Ex.1-2
1. Definition
Unless otherwise provided in this Agreement, the following words and expressions shall have the following definite meanings:
Ex.1-3
2. Transferred Asset, Transaction Price and Payment Method
2.1. The Transferred Asset of the transaction is the 20% equity ownership of the target company owned by Party B.
2.2. According to the Appraisal Report of Shareholders’ Equity Interest of Xi’an Xinhuan Energy Co., Ltd. issued by Tongzhi Xinde (Beijing) Assets Appraisal Co., Ltd., taking June 30, 2018 as the base date, the total value of shareholders’ equity interest of the Target Company is RMB 1,636,920,600. Reference to the above assessment results, both parties eventually determined the total value of the target company is RMB 1.6 billion and accordingly determined the Transaction Price of Transferred Asset is RMB 320 million.
2.3. Payment Method
2.3.1 Party A purchases the Transferred Asset by paying in cash and issuance of CREG shares to Party B. The cash payment is RMB 60 million. The shares payment is for RMB 260 million. CREG will issue 2,600,000 shares of common stock and 17,376,950 preferred shares of CREG using a value of $1.90 per share for both common stock and preferred shares.
2.3.2 The issuance of CREG shares as provided in section 2.3.1 shall be subject to the approval by CREG Shareholders Meeting for increase of authorized common shares, establishment of preferred shares and issuance of these shares pursuant to the Agreement. The shares of CREG stipulated in section 2.3.1 shall be issued within 15 business days after the approval by CREG Shareholders Meeting. If the CREG Shareholders Meeting fails to approve the issuance of the above shares, the parties hereto shall negotiate other payment methods to pay the consideration of RMB 260 million.
2.4 Payment Schedule
2.4.1 Party A will pay RMB 60 million to Party B within ten business days after Party B completes the change of registration of Xinhua at Xi’an Industrial and Commercial Administrative Department.
2.4.2. CREG shall issue the shares according to the section 2.3.1 of the Agreement within 15 business days after the Agreement is approved at the Shareholder Meeting of CREG.
3. Shares Issuance and Subscription
3.1 Shares Issuance and Receiving Party
CREG shall issue shares to Party B in a non-public offering.
3.2 The Type of Shares, Par Value and Issuance Price of the Shares
CREG common stock, par value of $0.001, issuance price of $1.9 per share
CREG preferred shares, par value of $0.001, issuance price of $1.9 per share
3.3. Number of Shares to Be Issued
The total shares to be issued to Party B is 19,976,950 shares including 2,600,000 shares of common stock and 17,376,950 preferred shares.
Ex.1-4
3.4 Arrangement for the Preferred Shares
3.4.1. Preferred shares shall receive a 15% premium on a per share basis for any dividends declared and paid by CREG on its common stock if CREG has distributable profits and the Board of Directors of CREG (the “Board”) approves the dividend distribution. The Board of Directors of CREG has the sole discretion to decide whether CREG will pay any dividends or reserve its profits for the company’s future development. The specific dividend distribution plan and related matters shall be determined by the Board.
3.4.2. Preferred shares have no voting rights;
3.4.3. The issuing price of preferred share is the same as common stock;
3.4.4. Preferred shares have convertible right and can be converted to common stock on an 1:1 basis after the 6 month anniversary of the issuance of the preferred shares. However, the conversion rights can only be exercised to the extent that, after giving effect to the issuance of common stock after such conversion, the Party B would beneficially own less than 20% of the Company’s issued and outstanding common stock.
3.4.5. In event of liquidation or dissolution/cancellation of CREG, the preferred shares shall have the priority over common stock.
4. Lock-up of the Shares
4.1. Upon completion of the Insurance pursuant to the Agreement, the shares acquired by Party B should in compliance with following lock-up requirements:
4.2 Lock-ups required by the laws, regulations, rules related to share lock-ups and related requirements by the U.S. Securities Regulations.
4.3 The shares may not be transferred before the lock-up period expires. Any transfers after the lock-up period shall be conducted according to valid laws and regulations and rules of NASDAQ Stock Exchange.
4.4 Party A and Party B shall timely cooperate to handle relevant legal procedures for share lock up and unlock according to laws and regulations.
5. Implementation and Completion of the Transaction
5.1. Party A and Party B shall complete the transaction within 60 working days after the Agreement comes into effect or upon the approval by the shareholders of CREG in section 2.3.2, which ever come later. The specific effective conditions shall be subject to provisions of section 13 hereof.
5.2. Party B shall cooperate with Party A to complete the relevant procedures for the registration changes with the industrial and commercial administrative department after the closing of the Transferred Asset.
5.3. After this Agreement is signed, Party B shall cooperate with Party A and CREG’s auditors to complete the relevant auditing and reporting procedures and assist Party A and CREG to fulfill the disclosure requirements of the U.S. listed company.
5.4. Party A and CREG shall be responsible for completing all the relevant listing procedures of the shares issued to Party B on the NASDAQ stock exchange. The shares shall be registered under Party B’s name. Party B shall cooperate with Party A to complete the listing procedures at the stock exchanges and provide necessary documents.
Ex.1-5
6. Arrangement of Profit and Loss During Transition Period
6.1. During the Transition Period, Party B shall urge the Target Company to conduct its business and operation as usual.
6.2. During the Transition Period, within his shareholder’s rights, Party B shall object to the decision of the Target Company which will have material adverse effect on its continuous operation.
6.3. During the Transition Period, if the Target Company intends to carry out major asset disposal, Party B shall solicit written opinions from Party A before exercising its rights of shareholders. If Party A does not agree, Party B shall object to such matters within his shareholder’s rights that he may exercise.
6.4. During the Transition Period, if the Target Company intends to make profit distribution, Party B shall solicit written opinions from Party A before exercising his rights of shareholders. If Party A does not agree, Party B shall object to such matters within his shareholder’s rights that it may exercise. If the Target Company makes profit distribution in cash during the Transition Period, both parties agree to adjust the Transaction Price accordingly.
6.5. Party A may request an audit of the Target Company in suitable time to determine the profit and loss of the Transferred Asset for the period between the Base Date of Appraisal and the Closing Date. From Base Date of Appraisal to the Closing Date, if the Target Company generates profits or its net assets increase due to other reasons, such profits/increases shall belong to Party A; If the Target Company suffers a loss or reduces its net assets due to other reasons, Party B shall pay Party A in cash to make up for such loss or reduces of net assets in proportion to the percentage of equity ownership of Party B in the Target Company before the Closing Date, within 10 working days after the issuance of the audit report.
7. Credit and Debt and Personnel
7.1. This transaction is to acquire equity interest of the Target Company owned by Party B, which does not involve the settlement of debt and credit. The debt and credit that are owned and assumed by the Target Company shall still be owned and assumed by the Target Company after the Closing Date.
7.2. The transaction is to acquire equity interest of the Target Company owned by Party B, and therefore it does not involve any employee placement issues.
Ex.1-6
8. Representations and Warranties of the Parties
8.1. Representation and Warranties of Party A.
8.1.1. Party A is a legally established and valid existing enterprise, has the legal qualification to sign and perform the obligations under this Agreement, and has obtained the authorization or approval required at this stage. The shares of CREG, a NASDAQ-listed company will be issued only after approval by the shareholders of CREG. This Agreement reflects the true intent and desires of Party A.
8.1.2. The execution and performance of this Agreement by Party A will not result in Party A’s violation of relevant laws, regulations, rules and Party A’s organizational documents, nor will it conflict to Party A’s previously signed agreements or any representations, statements, promises or guarantees made by Party A to any third parties.
8.1.3. Party A has not committed any major illegal acts in the past three years, nor it has any major litigation, arbitration or administrative penalty and contingent liabilities, which may hinder or affect the transaction.
8.1.4. Party A shall properly handle with Party B any matters not covered in this Agreement in accordance with relevant laws, regulations and rules during the execution and performance of this Agreement.
8.1.5. After the Agreement takes effect, Party A shall pay the Transaction Price to Party B pursuant to the section 3 of this Agreement.
8.2. Representation and Warranties of Party B
8.2.1. Party B is a natural person, has the legal qualification to sign and perform the obligations under this Agreement, and has obtained the necessary authorization or approval at this stage. This Agreement reflects the true intent and desires of Party B.
8.2.2. The execution and performance of this Agreement by Party B will not result in Party B’s violation of relevant laws, regulations, rules and Party B’s organizational documents, nor will it conflict to Party B’s previously signed agreements or any representations, statements, promises or guarantees made by Party B to any third parties.
8.2.3. Party B has made his capital contribution to the Target Company according to the organizational documents of the Target Company. Party B warrants that it has lawful and complete ownership of the Transferred Asset, which does not have any pledge, guarantee, trust or other third party interests.
8.2.4. Party B does not have any major illegal act, lawsuit, arbitration, administrative penalty or liabilities which may impede or affect the transaction.
8.2.5. If any third party raises any objection or claim on the ownership or right of disposal of the Transferred Asset due to the facts before the Closing Date, Party B shall assume and be responsible for the claims. If Party A suffers any loss due to any objection or claim, Party B shall compensate Party A in full amount after determination of such losses according to law.
8.2.6. The Target Company is a company legally established and validly existing in accordance with the laws of China, which has the qualification to engage in the business as described in its business license and articles of incorporation, and is now in the normal operation.
Ex.1-7
8.2.7. The financial statements of the Target Company objectively, impartially and truthfully reflect its operating performance and assets and liabilities. In addition to the liabilities disclosed to Party A before signing this agreement, Target Company does not have any other major unknown liabilities, contingent liabilities, undisclosed lawsuit or litigation or other issues which may injure shareholders interests of the Target Company. If there is any such contingent liabilities, Party B shall assume the joint liabilities to Party A in proportion to his ownership of the Target Company and Transaction Price.
8.2.8 The Target Company has paid social security for its employees according to national regulations. If any employee claims to the Target Company due to existing labor disputes before the Closing Date, Party B shall assume the joint liabilities to Party A in proportion to his ownership of the Target Company.
8.2.9. During the Transition Period, Party B guarantees that in normal business activities, the Target Company will operate and manage in accordance with the usual and legal methods.
8.2.10. Party B has provided Party A with true written documents or materials required for signing this Agreement, which are free from any form of false and misleading statements and material omissions.
8.2.11. Party B shall, in accordance with relevant laws, regulations and rules, properly handle with Party A any matters not covered in this Agreement during the execution and performance of this Agreement.
8.2.12. Party B confirms he is a Chinese citizen and resident of China and he understands and confirms that the CREG shares that he acquires are not registered with the SEC but are issued under the relevant exemption as a foreign investor under the securities law, and Party B undertakes to hold and transfer CREG shares in accordance with the Securities Regulations. Party B confirms that he invests in CREG shares for himself, not for or on behalf of any third party.
8.2.13. Party B confirms that he has reviewed the report and filings of CREG to the SEC and has the opportunity to review other relevant information and materials of CREG. Party B confirms that it has voluntarily invested in the shares of CREG and bears the risk of all relevant investment into such stock.
9. Confidentiality
Any party shall not disclose the content of this Agreement to any third party without the consent of the other party and each party should keep the business information of the other party confidential, unless required for disclosure to comply with Chinese or U.S. laws and regulations, or disclosed to the respective consultants of each party (such party shall ensure that its consultants will perform the same confidentiality obligations to the confidential information) or the contents of which have been public knowledge not due to violation of this Agreement.
Ex.1-8
10. Assumption of Taxes and Fees
All costs and expenses incurred as a result of this Agreement and the transaction (including but not limited to services and expenses of counsel and financial advisors) shall be borne by the party that incurred them, whether or not the transaction is completed.
All taxes arising from the transaction shall be dealt with in accordance with laws and regulations. In cases that regulation is not clear, the parties shall assume the tax equally.
11. Responsibility for Breach of the Agreement
11.1. The parties shall voluntarily perform this Agreement in good faith.
11.2. Either party shall indemnify the other party for all losses, claims and expenses incurred by the other party as a result of its breach of this Agreement or any representations or warranties hereunder.
12. Applicable Law and Dispute Resolution
12.1. This Agreement shall be governed by and construed in accordance with the relevant laws and regulations of the People’s Republic of China.
12.2. All disputes between the parties in the performance of this Agreement shall be settled through friendly negotiation. If no agreement can be reached through negotiation, each party has the right to file a lawsuit with the people’s court in the place where the defendant is located.
13. Effectiveness and Termination of the Agreement
13.1. This Agreement shall come into force upon meeting all of the following conditions:
13.1.1 The board of directors of Party A and the Board and Shareholders of CREG approve the transaction in accordance with law;
13.1.2. NASDAQ Stock Exchange has approved the issuance of CREG shares;
13.2. This Agreement shall terminate or be terminated for the following reasons:
13.2.1. If any force majeure, such as government expropriation, requisition, strike, riot, earthquake and other natural disasters, the unforeseeable, unavoidable and insurmountable objective circumstance, caused the failure of the performance of this Agreement, this agreement shall be terminated upon written confirmation by the parties.
Ex.1-9
13.2.2. The parties terminate this Agreement by consensus.
13.3 The termination of this Agreement shall not affect the non-breaching party’s rights to pursue breaching party’s liabilities for breach of contract.
14. Others
14.1. The parties hereto shall, in strict accordance with the relevant Chinese laws, regulations and rules, perform the relevant information disclosure obligations hereunder.
14.2. Neither party shall assign this Agreement or any of its rights and obligations hereunder without the prior written consent of the other party.
14.3. If any provision or part of the provisions of this Agreement is deemed to be invalid by the court or arbitration institution or any institution with jurisdiction, the other provisions and contents of this Agreement are still valid. The parties should still fulfill the Agreement according to the general principles of this Agreement. Any invalid or without effect terms of the Agreement may be replaced by effective alternatives which can most reflect the parties’ intentions when the Agreement is signed by the parties or the parties can sign supplement agreement.
14.4. This Agreement may be amended or modified in a signed document by the parties.
14.5. The term “this Agreement” shall mean the whole of this Agreement and not any particular clause, annex or other part of this Agreement. The headings of the terms and annexes are for convenience of reference only and shall not affect or limit the meaning or interpretation of the terms of this Agreement.
14.6. Any reference to “party” shall mean either party hereto; when referring to “parties”, means the each party of this Agreement.
14.7. This Agreement is made in fourteen counterparts, each party shall hold two counterparts, and the remaining copies shall be reserved for the purpose of reporting the approval and registration authorities related to this transaction, each of which shall have the same legal effect.
(No Text Below)
Party A: Shanghai TCH Energy Technology Co., Ltd.
Legal Representative/Authorized Representative:/s/ Geyun Wang
Party B: Jihua Wang
Authorized Representative:/s/ Jihua Wang
Ex.1-10
