Guohua Ku – CEO David Chong – CFO

So, we’ll start now. Welcome to today’s China Recycling Energy Corporation Earnings Call for the financial results of the first quarter 2014. For the first part of this call, all participants will be in listen-only mode and afterwards there will be a question-and-answer session. Mr. Ku, Please begin

(Foreign Language – Chinese)

Okay, thank you for joining us on today’s call. Before we start, I would like to remind you that management’s prepared remarks contain forward-looking statements that are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today due to such risks as but not limited to fluctuations in customer demand, management of rapid growth, intensity of competition, general economic conditions, geopolitical events and regulatory changes, and other information detailed from time-to-time in the Company’s filings and future filings with the United States Securities and Exchange Commission. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. In addition, any projections as with the company’s future performance represents management's estimate as of today May 15, 2014. The company undertakes no obligation to correct or update any forward-looking statements provided as a result of new information, future events, or event change in our expectations. Joining us on today's call are Mr. Ku, Chief Executive Officer; and Mr. Chong, Chief Financial Officer. Of course, there will be some translations during the call, we ask for your patience at that time. Mr. Ku, the Chief Executive Officer of China Recycling Energy Corporation will now deliver with the opening remarks. And Mr. Chong will translate them thereafter. Go ahead sir.

(Foreign Language – Chinese)

(Interpreted) Thank you Mr. Question. I’ll now do his speech in English. Good morning, and for those in China, good evening. We are pleased with the fact that during the quarter interest income on sales-type leases reached a record high of US$6.3 million, an increase of 65% year-over-year. Sales saw a decline year-over-year since no project under construction was completed; this is due to the nature of the business model. Here I would like to take this chance – the opportunity to give you a brief overview of our business and revenue model. We construct waste energy recycling power generating systems and lease them to our customers. On a U.S. GAAP our leases of systems to customers have treated as sales-type leases. A one-time sale of system is recognized in the inception of the lease after system completion and a interest income of the sales-type leases is recognized on a monthly cash lease payments of the cost of the lease term at a constant periodic rate for our projects commending in operation, lease terms are generally 5 to 30 years. So, a stable and recurring revenue stream from interest income and sales-type leases has become a major revenue driver and contributes strongly to the long-term sustainable growth of our business. Income from extra electricity usage in excess of the minimum lease payments for each project is accounted for as contingent rental income. In the first quarter of 2014, our current 15 waste-to-energy systems in operation ran smoothly and generated constant cash flow. Our customers continue to benefit from our one package solution to reduce pollution and emissions and generate lower cost electricity on-site. As you have known, the Chinese government has continued to invest and implement policies to curb pollution and reduce waste of energy at a fast growing economy…

Thank you, Mr. Ku. Before we start, we would like to state that all our numbers are presented in U.S. dollars and that all comparisons are between Q1 2014 and Q1 2013, except for balance sheet items. In the first quarter ended 31st March, 2014, total sales including sales of systems and continued rental income were US$0.18 million compared to US$14.34 million. Sales of Sales of systems were US$0, compared to US$14.08 million since no power generation system was completed and sold. In comparison, in the same period of 2013, the Shenqiu Phase II system was completed and sold. Contingent rental income was US$0.18 million compared with US$0.26 million. This represents income from the sale of electricity in the phase of a minimum lease payment. For sales-type leases, sales and cost of sales are recognized at the time of the lease inception; in addition to sales revenue, CREG's other major source of revenues is interest income from sales-type leases. Cost of sales was US$0.02, a decrease of US$10.88 million, as compared with US$10.9 million. This decrease is mainly due to the lack of the completion and sales of any power generation systems for the first quarter of 2014, in comparison to the same period in 2013. Gross profit was US$0.16 million, compared with US$3.44 million. The blended gross margin increased to 88%. The increase in profit margin was mainly attributable to contingent rental income; for the same period of 2013, the profit margin for project sales were lower ranging between 23% to 28%. Interest income on sales-type leases was US$6.3 million, up 64.9% from US$3.82 million. This increase was primarily due to a greater number of sales-type leases, During the quarter, interest income was derived from fifteen sales-type leases, including TRT system to Changzhi, that's for 13-year term, CHPG systems…

Operator, please begin the question and answers.

(Operator Instructions) Mr. Chong, Mr. Ku, and Lin, at this stage, we have no questions.

Okay, let’s conclude the call.

As there are no further questions, we will begin the closing comments. Please proceed.

Thank you for joining us on China Recycling Energy Corporation's first quarter 2014 results conference call. We look forward to updating you on our second quarter 2014 results. Feel free to get in touch with us at anytime if you have any further questions, concerns or comments. Have a wonderful day.

That concludes our conference call. Thank you for attending.

Okay. Thank you.