UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 29, 2020

 

CHINA RECYCLING ENERGY CORPORATION

(Exact name of registrant as specified in charter)

 

Nevada   001-34625   90-0093373

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

4/F, Tower C

Rong Cheng Yun Gu Building

Keji 3rd Road, Yanta District

Xi’an City, Shaanix Providence, China

  710075
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (86-29) 8765-1097

 

N/A
(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001 per share   CREG   Nasdaq Stock Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

Section 1 – Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

 

On May 29, 2020, China Recycling Energy Corporation, a Nevada corporation (the “Company”), entered into an Exchange Agreement (the “Exchange Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Lender”).

 

Pursuant to the Exchange Agreement, the Company and the Lender agreed to partition a new Promissory Note in the original principal amount of $150,000 (the “Partitioned Note”) from a Convertible Promissory Note dated February 27, 2019 which was exchanged for a new Promissory Note in the original principal amount of $1,165,379.18 on April 14, 2019 (the “Note”). The Company and the Lender agreed to exchange the Partitioned Note for 65,674 shares of common stock of the Company, and then the amount of the outstanding balance of the Note will be reduced by an amount equal to the Partitioned Note. The shares of common stock were issued without any restrictions.

 

The foregoing description of the Exchange Agreement is not complete and is qualified in its entirety by reference to the full text of the Exchange Agreement, a copy of which is attached hereto as Exhibit 10.41.

 

Section 3 – Securities and Trading Markets

Item. 3.02.  Unregistered Sales of Equity Securities.

 

Reference is made to the disclosure set forth under Item 1.01 above, which disclosure is incorporated herein by reference.

 

The issuance of the shares of common stock was made pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended. 

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.   Description
     
10.41   Exchange Agreement dated as of May 29, 2020 by and between Iliad Research and Trading, L.P. and China Recycling Energy Corporation

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  CHINA RECYCLING ENERGY CORPORATION
     
 Date: June 4, 2020 By: /s/ Yongjiang Shi
    Yongjiang Shi
    Chief Financial Officer

 

 

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Exhibit 10.41

 

THE EXCHANGE CONTEMPLATED HEREIN IS INTENDED TO COMPORT WITH THE REQUIREMENTS OF SECTION 3(a)(9) OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (this “Agreement”) is entered into as of May 29, 2020 by and between Iliad Research and Trading, L.P., a Utah limited partnership (“Lender”), and China Recycling Energy Corporation, a Nevada corporation (“Borrower”). Capitalized terms used in this Agreement without definition shall have the meanings given to them in the Exchange Note (defined below).

 

A. Borrower previously sold and issued to Lender that certain Convertible Promissory Note dated February 27, 2019 in the original principal amount of $1,050,000.00 (the “Original Note”) pursuant to that certain Securities Purchase Agreement dated February 27, 2019 by and between Lender and Borrower (the “Purchase Agreement”).

 

B. Pursuant to an Exchange Agreement dated April 14, 2019 (the “Exchange Agreement”), Borrower and Lender exchanged the Original Note for a new Promissory Note in the original principal amount of $1,165,379.18 (the “Exchange Note,” and together with the Exchange Agreement and all other documents entered into in conjunction therewith, the “Exchange Documents”).

 

C. Subject to the terms of this Agreement, Borrower and Lender desire to partition a new Promissory Note in the original principal amount of $150,000.00 (the “Partitioned Note”) from the Exchange Note and then cause the outstanding balance of the Exchange Note to be reduced by an amount equal to the initial outstanding balance of the Partitioned Note.

 

D. Borrower and Lender further desire to exchange (such exchange is referred to as the “Note Exchange”) the Partitioned Note for the delivery of 65,674 shares of the Company’s Common Stock, par value $0.001 (the “Common Stock,” and such 65,674 shares of Common Stock, the “Exchange Shares”), according to the terms and conditions of this Agreement.

 

E. The Note Exchange will consist of Lender surrendering the Partitioned Note in exchange for the Exchange Shares, which will be issued free of any restrictive securities legend pursuant to Rule 144. Other than the surrender of the Partitioned Note, no consideration of any kind whatsoever shall be given by Lender to Borrower in connection with this Agreement.

 

F. Lender and Borrower now desire to exchange the Partitioned Note for the Exchange Shares on the terms and conditions set forth herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. Recitals and Definitions. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Agreement are true and accurate, are contractual in nature, and are hereby incorporated into and made a part of this Agreement.

 

2. Partition. Effective as of the date hereof, Borrower and Lender agree that the Partitioned Note is hereby partitioned from the Exchange Note. Following such partition of the Exchange Note, Borrower and Lender agree that the Exchange Note shall remain in full force and effect, provided that the outstanding balance of the Exchange Note shall be reduced by an amount equal to the initial outstanding balance of the Partitioned Note.

 

 

 

3. Issuance of Shares. Pursuant to the terms and conditions of this Agreement, the Exchange Shares shall be delivered to Lender on or before June 3, 2020 and the Note Exchange shall occur with Lender surrendering the Partitioned Note to Borrower on the Free Trading Date (as defined below). On the Free Trading Date, the Partitioned Note shall be cancelled and all obligations of Borrower under the Partitioned Note shall be deemed fulfilled. All Exchange Shares delivered hereunder shall be delivered via DWAC to Lender’s designated brokerage account. Subject to the securities laws and regulations, Borrower agrees to provide all necessary cooperation or assistance that may be required to cause all Exchange Shares delivered hereunder to become Free Trading (the first date such occurs, the “Free Trading Date”). For purposes hereof, the term “Free Trading” means that (a) the Exchange Shares have been cleared and approved for public resale by the compliance departments of Lender’s brokerage firm and the clearing firm servicing such brokerage, and (b) such shares are held in the name of the clearing firm servicing Lender’s brokerage firm and have been deposited into such clearing firm’s account for the benefit of Lender.

 

4. Closing. The closing of the transaction contemplated hereby (the “Closing”) along with the delivery of the Exchange Shares to Lender shall occur on the date that is mutually agreed to by Borrower and Lender by means of the exchange by email of ..pdf documents, but shall be deemed to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.

 

5. Holding Period, Tacking and Legal Opinion. Lender and Borrower agree that for the purposes of Rule 144 (“Rule 144”) of the Securities Act of 1933, as amended (the “Securities Act”), the holding period of the Partitioned Note and the Exchange Shares will include Lender’s holding period of the Exchange Note from February 27, 2019, which date is the date that the Original Note was originally issued. Borrower agrees not to take a position contrary to this Section 5 in any document, statement, setting, or situation. Borrower agrees to take all action necessary to issue the Exchange Shares without restriction, and not containing any restrictive legend without the need for any action by Lender; provided that the applicable holding period has been met. In furtherance thereof, prior to the Closing, counsel to Lender may, in its sole discretion, provide an opinion that: (a) the Exchange Shares may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements; and (b) the transactions contemplated hereby and all other documents associated with this transaction comport with the requirements of Section 3(a)(9) of the Securities Act. Borrower represents that it is in full compliance with the tests and standards set forth in Rule 144(i)(2) as of the date of this Agreement. The Exchange Shares are being issued in substitution of and exchange for and not in satisfaction of the Partitioned Note. The Exchange Shares shall not constitute a novation or satisfaction and accord of the Partitioned Note. Borrower acknowledges and understands that the representations and agreements of Borrower in this Section 5 are a material inducement to Lender’s decision to consummate the transactions contemplated herein.

 

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6. Representations, Warranties and Agreements of Borrower. In order to induce Lender to enter into this Agreement, Borrower, for itself, and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows: (a) Borrower has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all of which have been duly authorized by all proper and necessary action, (b) no consent, approval, filing or registration with or notice to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations of Borrower hereunder, (c) except as specifically set forth herein, nothing herein shall in any manner release, lessen, modify or otherwise affect Borrower’s obligations under the Exchange Note, (d) the issuance of the Exchange Shares is duly authorized by all necessary corporate action and the Exchange Shares are validly issued, fully paid and non-assessable, free and clear of all taxes, liens, claims, pledges, mortgages, restrictions, obligations, security interests and encumbrances of any kind, nature and description, (e) Borrower has not received any consideration in any form whatsoever for entering into this Agreement, other than the surrender of the Partitioned Note, and (f) Borrower has taken no action which would give rise to any claim by any person for a brokerage commission, placement agent or finder’s fee or other similar payment by Borrower related to this Agreement.

 

7. Representations, Warranties and Agreements of Lender. In order to induce Borrower to enter into this Agreement, Lender, for itself, and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows: (a) Lender has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all of which have been duly authorized by all proper and necessary action, and (b) no consent, approval, filing or registration with or notice to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations of Lender hereunder.

 

8. Arbitration. By its execution of this Agreement, each party agrees to be bound by the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement and the parties agree to submit all Claims (as defined in the Purchase Agreement) arising under this Agreement or any Transaction Document or other agreement between the parties and their affiliates to binding arbitration pursuant to the Arbitration Provisions.

 

9. Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference. BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

10. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument. The exchange of copies of this Agreement and of signature pages by facsimile transmission or other electronic transmission (including email) shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile transmission or other electronic transmission (including email) shall be deemed to be their original signatures for all purposes.

 

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11. Attorneys’ Fees. In the event of any arbitration or action at law or in equity to enforce or interpret the terms of this Agreement, the prevailing party shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the arbitration, litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expenses for frivolous or bad faith pleading.

 

12. No Reliance. Each party acknowledges and agrees that neither the other party nor any of such other party’s officers, directors, members, managers, equity holders, representatives or agents has made any representations or warranties to the party or any of its agents, representatives, officers, directors, or employees except as expressly set forth in this Agreement and the Exchange Documents and, in making its decision to enter into the transactions contemplated by this Agreement, the party is not relying on any representation, warranty, covenant or promise of the other party or such other party’s officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Agreement.

 

13. Severability. If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.

 

14. Entire Agreement. This Agreement, together with the Exchange Documents, and all other documents referred to herein, supersedes all other prior oral or written agreements between Borrower, Lender, its affiliates and persons acting on its behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Lender nor Borrower makes any representation, warranty, covenant or undertaking with respect to such matters.

 

15. Amendments. This Agreement may be amended, modified, or supplemented only by written agreement of the parties. No provision of this Agreement may be waived except in writing signed by the party against whom such waiver is sought to be enforced.

 

16. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Lender hereunder may be assigned by Lender to a third party, including its financing sources, in whole or in part. Neither party shall assign this Agreement or any of its obligations herein without the prior written consent of the other party.

 

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17. Continuing Enforceability; Conflict Between Documents. Except as otherwise modified by this Agreement, the Exchange Note and each of the other Exchange Documents shall remain in full force and effect, enforceable in accordance with all of its original terms and provisions. This Agreement shall not be effective or binding unless and until it is fully executed and delivered by Lender and Borrower. If there is any conflict between the terms of this Agreement, on the one hand, and the Exchange Note or any other Transaction Document, on the other hand, the terms of this Agreement shall prevail.

 

18. Time of Essence. Time is of the essence with respect to each and every provision of this Agreement.

 

19. Notices. Unless otherwise specifically provided for herein, all notices, demands or requests required or permitted under this Agreement to be given to Borrower or Lender shall be given as set forth in the “Notices” section of the Purchase Agreement.

 

20. Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.

 

  COMPANY:
   
  CHINA RECYCLING ENERGY CORPORATION

 

  By: /s/ Guohua Ku
  Name: Guohua Ku
  Title: Chairman & CEO

 

  LENDER:
   
  ILIAD RESEARCH AND TRADING, L.P.
     
  By: Iliad Management, LLC, its General Partner
     
    By: Fife Trading, Inc., its Manager

 

      By: /s/ John M. Fife
        John M. Fife, President

 

[Signature Page to Exchange Agreement]

 

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