This quarterly report on Form 10-Q and other reports filed by the Company from
time to time with the SEC (collectively the "Filings") contain or may contain
forward-looking statements and information that are based upon beliefs of, and
information currently available to, Company's management as well as estimates
and assumptions made by Company's management. Readers are cautioned not to place
undue reliance on these forward-looking statements, which are only predictions
and speak only as of the date hereof. When used in the filings, the words "may",
"will", "should", "would", "anticipate", "believe", "estimate", "expect",
"future", "intend", "plan", or the negative of these terms and similar
expressions as they relate to Company or Company's management identify
forward-looking statements. Such statements reflect the current view of Company
with respect to future events and are subject to risks, uncertainties,
assumptions, and other factors (including the statements in the section "results
of operations" below), and any businesses that Company may acquire. Should one
or more of these risks or uncertainties materialize, or should the underlying
assumptions prove incorrect, actual results may differ significantly from those
anticipated, believed, estimated, expected, intended, or planned.



Although the Company believes the expectations reflected in the forward-looking
statements are based on reasonable assumptions, the Company cannot guarantee
future results, levels of activity, performance, or achievements. Except as
required by applicable law, including the securities laws of the United States,
the Company does not intend to update any of the forward-looking statements to
conform these statements to actual results. Readers are urged to carefully
review and consider the various disclosures made throughout the entirety of
annual report, which attempts to advise interested parties of the risks and
factors that may affect our business, financial condition, results of
operations, and prospects.

Our financial statements are prepared in US Dollars and in accordance with accounting principles generally accepted in the United States. See "Foreign Currency Translation and Comprehensive Income (Loss)" below for information concerning the exchange rates at which Renminbi ("RMB") were translated into US Dollars ("USD") at various pertinent dates and for pertinent periods.





OVERVIEW



The Company was incorporated on May 8, 1980 as Boulder Brewing Company under the
laws of the State of Colorado. On September 6, 2001, the Company changed its
state of incorporation to the State of Nevada. In 2004, the Company changed its
name from Boulder Brewing Company to China Digital Wireless, Inc. and on March
8, 2007, again changed its name from China Digital Wireless, Inc. to its current
name, China Recycling Energy Corporation. On March 3, 2022, the Company changed
its name to Smart Powerr Corp. The Company, through its subsidiaries, provides
energy saving solutions and services, including selling and leasing energy
saving systems and equipment to customers, project investment, investment
management, economic information consulting, technical services, financial
leasing, purchase of financial leasing assets, disposal and repair of financial
leasing assets, consulting and ensuring of financial leasing transactions in the
Peoples Republic of China ("PRC").



The Company is 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 we currently do not serve. We actively
seek and explore 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 cities with multi-energy
supplies.



In December 2019, a novel strain of coronavirus (COVID-19) was reported, and the
World Health Organization declared the outbreak to constitute a "Public Health
Emergency of International Concern." This contagious disease outbreak, which
continues to spread to additional countries, and disrupts supply chains and
affecting production and sales across a range of industries as a result of
quarantines, facility closures, and travel and logistics restrictions in
connection with the outbreak. The COVID-19 outbreak impacted the Company's
operations for the first quarter of 2020. However, as a result of PRC
government's effort on disease control, most cities in China were reopened in
April 2020, the outbreak in China is under the control. Since April 2020 to the
end of 2021, there were some new COVID-19 cases discovered in a few provinces of
China, however, the number of new cases is not significant due to PRC
government's strict control. From January 2022 to date, COVID-19 cases
fluctuated and increased again in many cities of China including Xi'an Province
where the Company is located. As a result of such increases, there have been
periodic short-term lockdowns and restrictions on travel in Xi'an Province and
other areas of China, the Company's operations have been adversely impacted by
the travel and work restrictions imposed on a temporary basis in China to limit
the spread of COVID-19.



                                       25






For the nine months ended September 30, 2022 and 2021, the Company had net loss
of $1,113,906 and net income of $1,386,773, respectively. For the three months
ended September 30, 2022 and 2021, the Company had net loss of $447,637 and
$556,574, respectively. The Company has an accumulated deficit of $56.38 million
as of September 30, 2022.




The Company had $136.22 million cash on hand on September 30, 2022 and this
satisfies the Company's estimated liquidity needs for 12 months from the
issuance of the financial statements. The Company believes the business
transformation and expansion discussed above are probable of occurring and the
occurrence, as well as the cash flow discussed, mitigate the substantial doubt
raised by the Company's historical operating results.



Management also intends to raise additional funds by way of a private or public
offering, or by obtaining loans from banks or others. While the Company believes
in the viability of its strategy to generate sufficient revenue and in its
ability to raise additional funds on reasonable terms and conditions, there can
be no assurances to that effect. The ability of the Company to continue as a
going concern depends upon the Company's ability to further implement its
business plan and generate sufficient revenue and its ability to raise
additional funds by way of a public or private offering, or debt financing

including bank loans.



Our Subsidiaries and Projects




Our business is primarily conducted through our wholly-owned subsidiaries,
Yinghua and Sifang, Sifang's wholly-owned subsidiaries, Huahong and Shanghai
TCH, Shanghai TCH's wholly-owned subsidiaries, Xi'an TCH, Xi'an TCH's
wholly-owned subsidiary Erdos TCH and Xi'an TCH's 90% owned and Shanghai TCH's
10% owned subsidiary Xi'an Zhonghong New Energy Technology Co., Ltd., and
Zhongxun. Shanghai TCH was established as a foreign investment enterprise in
Shanghai under the laws of the PRC on May 25, 2004, and currently has registered
capital of $29.80 million. 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 TCH owns 90% and
Shanghai TCH owns 10% 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.  Zhongxun will be mainly engaged in project investment, investment
management, economic information consulting, and technical services. Zhongxun
has not yet commenced operations nor has any capital contribution been made

as
of the date of this report.



Yinghua was incorporated on February 11, 2015 by the U.S. parent company.
Yinghua will be mainly engaged in financial leasing, purchase of financial
leasing assets, disposal and repair of financial leasing assets, consulting and
ensuring of financial leasing transactions, and related factoring business.
Yinghua has not yet commenced operations nor has any capital contribution been
made as of the date of this report.



The Company's organizational chart as of September 30, 2022 is as follows:




                               [[Image Removed]]



                                       26





Erdos TCH - Joint Venture




On April 14, 2009, the Company formed a joint venture (the "JV") with Erdos
Metallurgy Co., Ltd. ("Erdos") to recycle waste heat from Erdos' metal refining
plants to generate power and steam to be sold back to Erdos. The name of the JV
was Inner Mongolia Erdos TCH Energy Saving Development Co., Ltd. ("Erdos TCH")
with a term of 20 years. Erdos contributed 7% of the total investment of the
project, and Xi'an TCH Energy Technology Co., Ltd. ("Xi'an TCH")
contributed 93%. On June 15, 2013, Xi'an TCH and Erdos entered into a share
transfer agreement, pursuant to which Erdos sold its 7% ownership interest in
the JV to Xi'an TCH for $1.29 million (RMB 8 million), plus certain accumulated
profits. Xi'an TCH paid the $1.29 million in July 2013 and, as a result, became
the sole stockholder of the JV. Erdos TCH currently has two power generation
systems in Phase I with a total of 18 MW power capacity, and three power
generation systems in Phase II with a total of 27 MW power capacity. On April
28, 2016, Erdos TCH and Erdos entered into a supplemental agreement, effective
May 1, 2016, whereby Erdos TCH cancelled monthly minimum lease payments from
Erdos, and started to charge Erdos based on actual electricity sold at RMB 0.30
/ KWH. The selling price of each KWH is determined annually based on prevailing
market conditions. In May 2019, Erdos TCH ceased its operations due to
renovations and furnace safety upgrades of Erdos, and the Company initially
expected the resumption of operations in July 2020, but the resumption of
operations was further delayed due to government's mandate for Erdos to
significantly lower its energy consumption per unit of GDP by implementing a
comprehensive technical upgrade of its ferrosilicon production line to meet the
City's energy-saving targets. Erdos is currently researching the technical
rectification scheme. Once the scheme is determined, Erdos TCH will carry out
supporting technical transformation for its waste heat power station
project. During this period, Erdos will compensate Erdos TCH RMB 1 million
($145,460) per month, until operations resume. The Company has not recognized
any income due to the uncertainty of collection.



In addition, Erdos TCH has 30% ownership in DaTangShiDai (BinZhou) Energy
Savings Technology Co., Ltd. ("BinZhou Energy Savings"), 30% ownership in
DaTangShiDai DaTong Recycling Energy Technology Co., Ltd. ("DaTong Recycling
Energy"), and 40% ownership in DaTang ShiDai TianYu XuZhou Recycling Energy
Technology Co, Ltd. ("TianYu XuZhou Recycling Energy"). These companies were
incorporated in 2012 but have not had any operations since then nor has any
registered capital contribution been made.

Chengli Waste Heat Power Generation Projects





On July 19, 2013, Xi'an TCH formed a new company, "Xi'an Zhonghong New Energy
Technology Co., Ltd." ("Zhonghong"), of which it owns 90% of Zhonghong, with
HYREF owning the other 10%. Zhonghong provides energy saving solution and
services, including constructing, selling and leasing energy saving systems and
equipment to customers. On December 29, 2018, Shanghai TCH entered into a Share
Transfer Agreement with HYREF, pursuant to which HYREF transferred its 10%
ownership in Zhonghong to Shanghai TCH for RMB 3 million ($0.44 million). The
transfer was completed on January 22, 2019. The Company owns 100% of Xi'an
Zhonghong after the transaction.



On July 24, 2013, Zhonghong entered into a Cooperative Agreement of CDQ and CDQ
WHPG Project (Coke Dry Quenching Waste Heat Power Generation Project) with
Boxing County Chengli Gas Supply Co., Ltd. ("Chengli"). The parties entered into
a supplement agreement on July 26, 2013. Pursuant to these agreements, Zhonghong
will design, build and maintain a 25 MW CDQ system and a CDQ WHPG system to
supply power to Chengli, and Chengli will pay energy saving fees (the "Chengli
Project").




On December 29, 2018, Xi'an Zhonghong, Xi'an TCH, HYREF, Guohua Ku, and Mr.
Chonggong Bai entered into a CDQ WHPG Station Fixed Assets Transfer
Agreement, pursuant to which Xi'an Zhonghong transferred Chengli CDQ WHPG
station ('the Station") as the repayment for the loan of RMB 188,639,400 ($27.54
million) to HYREF. Xi'an Zhonghong, Xi'an TCH, Guohua Ku and Chonggong Bai also
agreed to a Buy Back Agreement for the Station when certain conditions are met
(see Note 8). The transfer of the Station was completed on January 22, 2019, the
Company recorded a $624,133 loss. However, because the loan was not deemed
repaid due to the buyback provision (See Note 8 for detail), the Company kept
the loan and the Chengli project recognized in its consolidated financial
statements ("CFS") until April 9, 2021. The Buy Back Agreement was terminated on
April 9, 2021, HYREF did not execute the buy-back option and did not ask for any
additional payment from the buyers other than keeping the CDQ WHPG station.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES





Our management's discussion and analysis of our financial condition and results
of operations are based on our consolidated financial statements ("CFS"), which
were prepared in accordance with accounting principles generally accepted in the
United States of America ("US GAAP"). The preparation of these financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements as well as the
reported net sales and expenses during the reporting periods. On an ongoing
basis, we evaluate our estimates and assumptions. We base our estimates on
historical experience and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.



While our significant accounting policies are more fully described in Note 2 to
our CFS, we believe the following accounting policies are the most critical to
assist you in fully understanding and evaluating this management discussion

and
analysis.



                                       27





Basis of Presentation

These accompanying CFS were prepared in accordance with US GAAP and pursuant to the rules and regulations of the SEC for financial statements.





Basis of Consolidation



The CFS include the accounts of CREG and, its subsidiary, Sifang Holdings and
Yinghua; Sifang Holdings' wholly-owned subsidiaries, Huahong and Shanghai TCH;
Shanghai TCH's wholly-owned subsidiary Xi'an TCH; and Xi'an TCH's subsidiaries,
Erdos TCH, Zhonghong, and Zhongxun. Substantially all of the Company's revenues
are derived from the operations of Shanghai TCH and its subsidiaries, which
represent substantially all of the Company's consolidated assets and liabilities
as of September 30, 2022. All significant inter-company accounts and
transactions were eliminated in consolidation.



Use of Estimates



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

Concentration of Credit Risk

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





Certain other financial instruments, which subject the Company to concentration
of credit risk, consist of accounts and other receivables. The Company does not
require collateral or other security to support these receivables. The Company
conducts periodic reviews of its customers' financial condition and customer
payment practices to minimize collection risk on accounts receivable.



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



Revenue Recognition

Sales-type Leasing and Related Revenue Recognition





The Company follows Financial Accounting Standards Board ("FASB") Accounting
Standards Codification ("ASC") Topic 842. Results and disclosure requirements
for reporting periods beginning after January 1, 2019 are presented under ASC
Topic 842 (See Operating lease below as relates to the Company as a lessee). The
Company's sales type lease contracts for revenue recognition fall under ASC 842.

The Company constructs and leases waste energy recycling power generating projects to its customers. The Company typically transfers ownership of the waste energy recycling power generating projects to its customers at the end of the lease.





The Company finances construction of waste energy recycling power generating
projects. The sales and cost of sales are recognized at the inception of the
lease, which is when the control is transferred to the lessee. The Company
accounts for the transfer of control as a sales type lease in accordance with
ASC 842-10-25-2. The underlying asset is derecognized, and revenue is recorded
when collection of payments is probable. This is in accordance with the revenue
recognition principle in ASC 606 -Revenue from contracts with customers. The
investment in sales-type leases consists of the sum of the minimum lease
payments receivable less unearned interest income and estimated executory cost.
Minimum lease payments are part of the lease agreement between the Company (as
the lessor) and the customer (as the lessee). The discount rate implicit in the
lease is used to calculate the present value of minimum lease payments. The
minimum lease payments consist of the gross lease payments net of executory
costs and contingent rentals, if any. Unearned interest is amortized to income
over the lease term to produce a constant periodic rate of return on net
investment in the lease. While revenue is recognized at the inception of the
lease, the cash flow from the sales-type lease occurs over the course of the
lease, which results in interest income and reduction of receivables. Revenue is
recognized net of value-added tax.



                                       28





Contingent Rental Income



The Company records income from actual electricity generated of each project in
the period the income is earned, which is when the electricity is generated.
Contingent rent is not part of minimum lease payments.

Foreign Currency Translation and Comprehensive Income (Loss)


The Company's functional currency is RMB. For financial reporting purposes, RMB
figures were translated into USD as the reporting currency. Assets and
liabilities are translated at the exchange rate in effect on the balance sheet
date. Revenues and expenses are translated at the average rate of exchange
prevailing during the reporting period. Translation adjustments arising from the
use of different exchange rates from period to period are included as a
component of stockholders' equity as "Accumulated other comprehensive income."
Gains and losses from foreign currency transactions are included in income.
There has been no significant fluctuation in exchange rate for the conversion of
RMB to USD after the balance sheet date.



The Company uses "Reporting Comprehensive Income" (codified in FASB ASC Topic
220). Comprehensive income is comprised of net income and all changes to the
statements of stockholders' equity, except those due to investments by
stockholders, changes in paid-in capital and distributions to stockholders.




RESULTS OF OPERATIONS

Comparison of Results of Operations for the nine months ended September 30, 2022 and 2021





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



                                                 2022          %  of Sales         2021          %  of Sales
Sales                                        $          -                 - %   $         -                 - %
Cost of sales                                           -                 - %             -                 - %
Gross profit                                            -                 - %             -                 - %

Interest income on sales-type leases                    -                 -

%             -                 - %
Total operating expenses                          552,264                 - %       764,192                 - %
Loss from operations                             (552,264 )               - %      (764,192 )               - %

Total non-operating income (expenses), net       (525,131 )               - %     2,063,914                 - %
Income (loss) before income tax                (1,077,395 )               -

%     1,299,722                 - %
Income tax expense (benefit)                       36,511                 - %       (87,051 )               - %
Net income (loss)                            $ (1,113,906 )               - %   $ 1,386,773                 - %

SALES. Total sales for the nine months ended September 30, 2022 and 2021 were $0.

COST OF SALES. Cost of sales ("COS") for the nine months ended September 30, 2022 and 2021 were $0.

GROSS PROFIT. Gross income for the nine months ended September 30, 2022 and 2021 were $0 with gross margin of 0%.





OPERATING EXPENSES. Operating expenses consisted of general and administrative
expenses ("G&A") totaling $552,264 for the nine months ended September 30, 2022,
compared to $764,192 for the nine months ended September 30, 2021, a decrease of
$211,928 or 27.7%. The decrease in operating expenses was mainly due to
decreased service fee by $217,800 which was partly offset by increased other G&A
expense by $5,870.



NET NON-OPERATING INCOME (EXPENSES). Net non-operating income (expenses)
consisted of loss on note conversion, interest income, interest expenses,
Impairment loss on long term equity investment of Xi'an TCH's investment into
the HYREF fund, and miscellaneous expenses. For the nine months ended September
30, 2022, net non-operating expense was $525,131 compared to non-operating
income of $2,063,914 for the nine months ended September 30, 2021. For the nine
months ended September 30, 2022, we had $329,576 interest income which was
offset by $570,984 interest expense on note payable, loss on note conversion of
$121,121, and other expenses of $162,536. For the nine months ended September
30, 2021, we had $302,426 interest income and gain on termination of buy-back
agreement of Chengli project of $3,156,138 (see Note 8), which was offset by
$393,555 interest expense on note payable, interest expense on failure of note
redemption on time of $818,914, loss on note conversion of $61,155 and other
expenses of $121,026.



                                       29





INCOME TAX EXPENSE (BENEFIT). Income tax expense was $36,511 for the nine months
ended September 30, 2022, compared with income tax benefit of $87,051 for the
nine months ended September 30, 2021. The consolidated effective income tax
(benefit) rates for the nine months ended September 30, 2022 and 2021 were

3.4%
and (6.7)%, respectively.



NET INCOME (LOSS). Net loss for the nine months ended September 30, 2022 was
$1,113,906 compared to net income of $1,386,773 for the nine months ended
September 30, 2021, an increase of net loss of $2,500,679. This increase in net
loss was mainly due to increased loss on note conversion by $59,966, increased
income tax expense by $123,562 and no gain from project termination (while in
2021, we had gain on termination of buy-back agreement of Chengli project of
$3,155,959), which was partly offset by decreased interest expense by $641,419.

Comparison of Results of Operations for the three months ended September 30, 2022 and 2021





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



                                                2022         %  of Sales         2021         %  of Sales
Sales                                        $        -                 - %   $        -                 - %
Cost of sales                                         -                 - %            -                 - %
Gross profit                                          -                 - %            -                 - %

Interest income on sales-type leases                  -                 - %

           -                 - %
Total operating expenses                        168,758                 - %      380,040                 - %
Loss from operations                           (168,758 )               - %     (380,040 )               - %

Total non-operating income (expenses), net     (265,925 )               - %     (165,632 )               - %
Income (loss) before income tax                (434,683 )               - %

    (545,672 )               - %
Income tax expense                               12,954                 - %       10,902                 - %
Net income (loss)                            $ (447,637 )               - %   $ (556,574 )               - %

SALES. Total sales for the three months ended September 30, 2022 and 2021 were $0.

COST OF SALES. COS for the three months ended September 30, 2022 and 2021 were $0.

GROSS PROFIT. Gross income for the three months ended September 30, 2022 and 2021 were $0 with gross margin of 0%.





OPERATING EXPENSES. Operating expenses consisted of G&A expenses totaling
$168,758 for the three months ended September 30, 2022, compared to $380,040 for
the three months ended September 30, 2021, a decrease of $211,282 or 55.6%. The
decrease in operating expenses was mainly due to decreased service fee by
$223,440, which was partly offset by increased other G&A expense by $12,160.



NET NON-OPERATING INCOME (EXPENSES). Net non-operating income (expenses)
consisted of loss on note conversion, interest income, interest expenses,
Impairment loss on long term equity investment of Xi'an TCH's investment into
the HYREF fund, and miscellaneous expenses. For the three months ended September
30, 2022, net non-operating expense was $265,925 compared to $165,632 for the
three months ended September 30, 2021. For the three months ended September 30,
2022, we had $105,661 interest income which was offset by $340,732 interest
expense on note payable, and other expenses of $30,854. For the three months
ended September 30, 2021, we had $109,269 interest income which was offset by
$165,854 interest expense on note payable, loss on note conversion of $58,436,
and other expenses of $50,790.

INCOME TAX EXPENSE (BENEFIT). Income tax expense was $12,954 for the three months ended September 30, 2022, compared with $10,902 for the three months ended September 30, 2021. The consolidated effective income tax (benefit) rates for the three months ended September 30, 2022 and 2021 were 3.0% and 2.0%, respectively.





NET LOSS. Net loss for the three months ended September 30, 2022 was $447,637
compared to $556,574 for the three months ended September 30, 2021, a decrease
of net loss of $108,937. This decrease in net loss was mainly due to decreased
operating expense by $211,282 and decreased loss on note conversion by $58,436,
which was partly offset by increased interest expense by $174,878 as described
above.



                                       30

LIQUIDITY AND CAPITAL RESOURCES

Comparison of Nine Months Ended September 30, 2022 and 2021





As of September 30, 2022, the Company had cash and equivalents of $136.22
million, other current assets of $1.08 million, current liabilities of $21.30
million, working capital of $116.00 million, a current ratio of 6.45:1 and a
liability-to-equity ratio of 0.23:1.



The following is a summary of cash provided by or used in each of the indicated
types of activities during the nine months ended September 30, 2022 and 2021:



                                 2022            2021
Cash provided by (used in):
Operating Activities          $ (309,125 )   $ (1,583,918 )
Investing Activities                   -                -
Financing Activities          $        -     $ 42,561,721




Net cash used in operating activities was $309,125 during the nine months ended
September 30, 2022, compared to $1,583,918 for the nine months ended September
30, 2021. The decrease in net cash outflow for the nine months ended September
30, 2022 was mainly due to decreased cash outflow on advance to suppliers by
$850,000, decreased cash outflow on taxes payable by $688,016, which was partly
offset by decreased cash inflow from accounts receivable by $345,808.



On August 2, 2021, the Company entered a Research and Development Cooperation
Agreement with a software development company to design, establish, upgrade and
maintenance of Smart Energy Management Cloud Platform for energy storage and
remote-site monitoring; upon completion, the Company will provide such platform
to its customers at a fee. Total contracted research and development cost is
$1,000,000, the Company prepaid $200,000 in 2021.



On August 23, 2021, the Company entered a Market Research and Project
Development Service Agreement with a consulting company in Xi'an for a service
period of 12 months. The consulting company will perform the market research for
new energy industry including photovoltaic and energy storage, develop potential
new customers and due diligence check, assisting the Company for business
cooperation negotiation and relevant agreements preparation. Total contract
amount is $1,150,000, and the Company prepaid $650,000 at commencement of the
service; the Company will pay $200,000 upon issuance of the research report, and
pay the remaining of $300,000 upon completion all the services.

Net cash used in investing activities was $0 and $0, respectively, for the nine months ended September30, 2022 and 2021.


Net cash provided by financing activities was $0 for the nine months ended
September 30, 2022 compared to net cash provided by financing activities of
$42,561,721 for the nine months ended September 30, 2021. The cash inflow for
the nine months ended September 30, 2021 was proceeds from a private placement
of $37,561,721 and issuance of notes payable of $5,000,000.



                                       31





On February 23, 2021, the Company entered into securities purchase agreements
with several non-U.S. investors (the "Purchasers"), pursuant to which the
Company agreed to sell to the Purchasers, up to 3,320,000 shares of common stock
of the Company, at $11.522 per share, which was the five-day average closing
price immediately prior to signing the Purchase Agreements. One of the
purchasers was the Company's CEO (also is the Company's Chairman), he purchased
1,000,000 common shares of the Company. On March 11, 2021, the Company received
approximately $38.25 million proceeds from the issuance of 3,320,000 shares
under the securities purchase agreements, there was no any fees paid in
connection with this financing. In April 2021, the Company's CEO amended the
number of shares that he would purchase from 1,000,000 shares to 940,000 shares;
accordingly, the number of shares sold in this offering became 3,260,000. The
Company returned $691,320 extra proceeds that were received earlier to the
Company's CEO in April 2021.

We do not believe inflation has had or will have a significant negative impact on our results of operations in 2022.

Transfers of Cash to and from Our Subsidiaries





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



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

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

1. PRC regulations currently permit the payment of dividends only out of

accumulated profits, as determined in accordance with accounting standards and

PRC regulations (an in-depth description of the PRC regulations is set forth

below);

2. Our PRC subsidiaries are required to set aside, at a minimum, 10% of their net

income after taxes, based on PRC accounting standards, each year as statutory

surplus reserves until the cumulative amount of such reserves reaches 50% of

their registered capital;

3. Such reserves may not be distributed as cash dividends;

4. Our PRC subsidiaries may also allocate a portion of their after-tax profits to

fund their staff welfare and bonus funds; except in the event of a

liquidation, these funds may also not be distributed to stockholders; the

Company does not participate in a Common Welfare Fund;

5. The incurrence of debt, specifically the instruments governing such debt, may

restrict a subsidiary's ability to pay stockholder dividends or make other

cash distributions; and

6. The Company is subject to covenants and consent requirements.






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

PRC.



                                       32





PRC Regulations



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



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



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

Chart of the Company's Statutory Reserve





Pursuant to PRC corporate law, effective January 1, 2006, the Company is
required to maintain a statutory reserve by appropriating from its after-tax
profit before declaration or payment of dividends. The statutory reserve is
restricted retained earnings. Our restricted and unrestricted retained earnings
under US GAAP are set forth below:



                                                                            As of
                                                               September 30,      December 31,
                                                                    2022              2021
Unrestricted accumulated deficit                               $  (56,382,103 )   $ (55,281,680 )
Restricted retained earnings (surplus reserve fund)                15,166,584        15,180,067
Total accumulated deficit                                      $  (41,215,519 )   $ (40,101,613 )

OFF-BALANCE SHEET ARRANGEMENTS





We have not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholders' equity or that are not reflected in our CFS. Furthermore, we do
not have any retained or contingent interest in assets transferred to an
unconsolidated entity that serves as credit, liquidity or market risk support to
such entity. We do not have any variable interest in any unconsolidated entity
that provides financing, liquidity, market risk or credit support to us or
engages in leasing, hedging or research and development services with us.



CONTRACTUAL OBLIGATIONS



The Company's contractual obligations as of September 30, 2022 are as follows:



                                                      1 year or        More than         See Note
Contractual Obligation                                   less           1 year         (for details)
Notes payable including accrued interest of
$245,514, net of unamortized OID of $62,500          $  5,911,991     $         -                  10
Entrusted loan including interest payable of
$340,636                                             $ 11,186,012     $         -                   8
Total                                                $ 17,098,003     $         -




The Company believes it has sufficient cash in bank of $136.22 million as of
September 30, 2022, and a sufficient channel to commercial institutions to
obtain any loans that may be necessary to meet its working capital needs.
Historically, we have been able to obtain loans or otherwise achieve our
financing objectives due to the Chinese government's support for energy-saving
businesses with stable cash inflows, good credit ratings and history.



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