Item 1.01 Entry into a Material Definitive Agreement.
On April 15, 2019, China Recycling Energy
Corporation (the “
Company
”) entered into a Securities Purchase Agreement (the “
Purchase Agreement
”)
with certain purchasers identified on the signature pages thereto (the “
Purchasers
”), pursuant to which the
Company will offer to the Purchasers, in a registered direct offering, an aggregate of 2,359,272 shares (the “
Shares
”)
of common stock, par value $0.001 per share (“
Common Stock
”). The Shares will be sold to the Purchasers
at a negotiated purchase price of $0.80 per share, for aggregate gross proceeds to the Company of $1,887,417.60,
before
deducting placement agent fees and other estimated offering expenses payable by the Company
. T
he
Shares are being offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was originally
filed with the Securities and Exchange Commission on December 1, 2017, and was declared effective on December 8, 2017 (File No.
333-221868) (the “
Registration Statement
”).
In a concurrent private placement, the
Company is also issuing to the each of the Purchasers a warrant to purchase 0.75 of a share of the Company’s Common Stock
for each share purchased under the Purchase Agreement, or 1,769,454 warrants in the aggregate (each, a “
Warrant
”,
and collectively, the “
Warrants
”). The Warrants will be exercisable beginning on the six month anniversary
of the date of issuance at an initial exercise price of $0.9365 per share and will expire on the five and one-half year anniversary
of the date of issuance.
The Warrants and the shares of the Company’s
Common Stock issuable upon the exercise of the Warrants (the “
Warrant Shares
”) are not being registered under
the Securities Act of 1933, as amended (the “
Securities Act
”), pursuant to the Company’s Registration
Statement, and are instead being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act. Each
Purchaser is either (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Each
Purchaser, either alone or together with its representatives, has sufficient knowledge and experience to be considered a sophisticated
investor, has access to the type of information normally provided in a prospectus for a registered securities offering, and has
agreed not to resell or distribute the Warrants or the Warrant Shares to the public except pursuant to sales registered or exempted
under the Securities Act. The offerings are expected to close on or about April 16, 2019, subject to customary closing conditions.
Per the terms of the Purchase Agreement,
the Company has agreed with the Purchasers to the following: (i) that subject to certain exceptions, the Company will not, within
the ninety day period immediately following the closing of the offering, enter into any agreement to issue or announce the issuance
or proposed issuance of any securities; (ii) the Company will not, during the period in which the Warrants are outstanding, enter
into an agreement to effect a “Variable Rate Transaction,” as that term is defined in the Purchase Agreement; and (iii)
until the one-year
anniversary of the closing of the offering, the Company will not undertake a reverse or forward
stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in interest
of the Shares then outstanding and still held by them, subject to certain exceptions.
The Company also agreed to indemnify the
placement agent and each of the Purchasers against certain losses resulting from its breach of any representations, warranties
or covenants under agreements with each of the Purchasers, as well as under certain other circumstances described in the Purchase
Agreement.
H.C.
Wainwright & Co., LLC is acting as the Company’s exclusive placement agent in connection with the offerings under the
Purchase Agreement and will
receive an aggregate cash fee equal to 7.0% of the gross proceeds received by the Company
from the offerings, an aggregate of up to $75,000 for certain expenses, $10,000 for clearing expenses and warrants to purchase
our Common Stock in an amount equal to 7% of our Shares sold to the Purchasers in the offerings, or 165,149 shares of Common Stock
(the “
Placement Agent Warrants
”), on substantially the same terms as the Warrants, except that the Placement
Agent Warrants shall have an initial exercise price of $1.00 per share, shall be exercisable commencing on the later of (i) six
months of the issuance date or (ii) the date on which the Company increases the number of its authorized shares, and shall expire
on April 15, 2024.
The representations,
warranties and covenants contained in the Purchase Agreement and Warrants were made solely for the benefit of the parties to the
Purchase Agreement and Warrants. In addition, such representations, warranties and covenants (i) are intended as a way of
allocating the risk between the parties to the Purchase Agreement and Warrants and not as statements of fact, and (ii) may
apply standards of materiality in a way that is different from what may be viewed as material by shareholders of, or other investors
in, the Company. Accordingly, the form of Purchase Agreement and form of Warrant are filed with this report only to provide investors
with information regarding the terms of transaction, and not to provide investors with any other factual information regarding
the Company. Shareholders should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations
of the actual state of facts or condition of the Company. Moreover, information concerning the subject matter of the representations
and warranties may change after the date of the Purchase Agreement and Warrants, which subsequent information may or may not be
fully reflected in public disclosures.
The form of Purchase
Agreement and form of Warrant are filed as Exhibits 10.1 and 4.1, respectively, to this Current Report on Form 8-K. The
foregoing summary of the terms of the Purchase Agreement and Warrants is subject to, and qualified in its entirety by, the form
of Purchase Agreement and form of Warrant, which are incorporated herein by reference.