NASDAQ: CREG

We are headquartered in China. Our principal executive
offices are located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, China,
and our telephone number at this location is +86-29-8765-1097.

1

Company Overview and History

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 China Recycling Energy Corporation, and most recently to Smart Powerr
Corp. in March of 2022. 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”).

Our business is primarily conducted through our
wholly-owned subsidiaries, Yinghua and Sifeng, Sifeng’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.

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 smart energy cities with multi-energy supplies.

Legal and Operational Risks of Operating in
the PRC

Smart Powerr Corp., or the Company or CREG, is
a holding company incorporated in the state of Nevada. As a holding company with no material operations, CREG conducts a substantial majority
of its operations through its subsidiaries established in the People’s Republic of China, or the PRC or China. However, neither
the holding company nor any of the Company’s Chinese subsidiaries conduct any operations through contractual arrangements with a
variable interest entity based in China. Investors in our common stock should be aware that they may never directly hold equity interests
in the PRC operating entities, but rather purchasing equity solely in CREG, our Nevada holding company. Furthermore, shareholders may
face difficulties enforcing their legal rights under United States securities laws against our directors and officers who are located
outside of the United States. See “Risk Factors - Risks Related to Doing Business in China - Uncertainties with respect to the
PRC legal system could adversely affect us” on page 41 of this annual report.

Our equity structure is a direct holding structure.
Within our direct holding structure, the cross-border transfer of funds within our corporate entities is legal and compliant with the
laws and regulations of the PRC. After the foreign investors’ funds enter CREG, the funds can be directly transferred to the PRC
operating companies through its subsidiaries. Specifically, CREG is permitted under the Nevada laws to provide funding to our subsidiary
in Cayman Islands through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable
government registration, approval and filing requirements. Our subsidiary in Cayman Islands is also permitted under the laws of Cayman
Islands to provide funding to CREG through dividend distribution without restrictions on the amount of the funds. Current PRC regulations
permit our PRC subsidiaries to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with
Chinese accounting standards and regulations. As of the date hereof, there have not been any transfers, dividends or distributions made
between the holding company, its subsidiaries, and to investors. Furthermore, as of the date hereof, no cash generated from one subsidiary
is used to fund another subsidiary’s operations and we do not anticipate any difficulties or limitations on our ability to transfer
cash between subsidiaries. We have also not installed any cash management policies that dictate the amount of such funds and how such
funds are transferred. For the foreseeable future, we intend to use the earnings for our business operations and as a result, we do not
intend to distribute earnings or pay any cash dividends. See “Transfers of Cash to and from Our Subsidiaries” on page 55 of
this annual report.

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Because our operations are primarily located in
the PRC through our subsidiaries, we are subject to certain legal and operational risks associated with our operations in China, including
changes in the legal, political and economic policies of the Chinese government, the relations between China and the U.S, or Chinese or
U.S regulations may materially and adversely affect our business, financial condition and results of operations. PRC laws and regulations
governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change
in our operations and the value of our common stock, or could significantly limit or completely hinder our ability to offer or continue
to offer our securities to investors and cause the value of such securities to significantly decline or be worthless. Recently, the PRC
government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice,
including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas
using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts
in anti-monopoly enforcement. As confirmed by our PRC counsel, Shaanxi Yan Tan Law Firm, we will not be subject to cybersecurity review
with the Cyberspace Administration of China, or the “CAC,” after the Cybersecurity Review Measures became effective on February
15, 2022, since we currently do not have over one million users’ personal information and do not anticipate that we will be collecting
over one million users’ personal information in the foreseeable future, which we understand might otherwise subject us to the Cybersecurity
Review Measures. We do not believe that our subsidiaries are directly subject to these regulatory actions or statements, as we have not
implemented any monopolistic behavior and our business does not involve the collection of user data or implicate cybersecurity. As of
the date hereof, no relevant laws or regulations in the PRC explicitly require us to seek approval from the China Securities Regulatory
Commission, or the CSRC, or any other PRC governmental authorities for future offerings, nor has our Nevada holding company or any of
our subsidiaries received any inquiry, notice, warning or sanctions regarding previous offerings from the CSRC or any other PRC governmental
authorities. However, on February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities Offering and
Listing by Domestic Companies (the “Overseas Listing Trial Measures”) and five relevant guidelines, which became effective
on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in
overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information.
The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following: (1)
such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules;
(2) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under
the State Council in accordance with law; (3) the domestic company intending to make the securities offering and listing, or its controlling
shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of
property or undermining the order of the socialist market economy during the latest three years; (4) the domestic company intending to
make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws
and regulations, and no conclusion has yet been made thereof; or (5) there are material ownership disputes over equity held by the domestic
company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual
controller.

The Overseas Listing Trial Measures also provides
that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed
as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer’s operating revenue, total profit,
total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted
for by domestic companies; and (2) the issuer’s main business activities are conducted in China, or its main place(s) of business
are located in China, or the majority of senior management staff in charge of its business operations and management are PRC citizens
or have their usual place(s) of residence located in China. Where an issuer submits an application for initial public offering to competent
overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. In addition,
the Overseas Listing Trial Measures provide that the direct or indirect overseas listings of the assets of domestic companies through
one or more acquisitions, share swaps, transfers or other transaction arrangements shall be subject to filing procedures in accordance
with the Overseas Listing Trial Measures. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC
on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings
and listings.

At a press conference held for these new regulations
(“Press Conference”), officials from the CSRC clarified that the domestic companies that have already been listed overseas
on or before March 31, 2023 shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required
to complete the filling procedures immediately, and they shall be required to file with the CSRC upon occurrences of certain subsequent
matters such as follow-on offerings of securities. According to the Overseas Listing Trial Measures and the Press Conference, the existing
domestic companies that have completed overseas offering and listing before March 31, 2023, such as us, shall not be required to perform
filing procedures for the completed overseas securities issuance and listing. However, from the effective date of the regulation, any
of our subsequent securities offering in the same overseas market or subsequent securities offering and listing in other overseas markets
shall be subject to the filing requirement with the CSRC within three working days after the offering is completed or after the relevant
application is submitted to the relevant overseas authorities, respectively. If it is determined that any approval, filing or other administrative
procedures from other PRC governmental authorities is required for any future offering or listing, we cannot assure you that we can obtain
the required approval or accomplish the required filings or other regulatory procedures in a timely manner, or at all. If we fail to fulfill
filing procedure as stipulated by the Trial Measures or offer and list securities in an overseas market in violation of the Trial Measures,
the CSRC may order rectification, issue warnings to us, and impose a fine of between RMB1,000,000 and RMB10,000,000. Persons-in-charge
and other persons that are directly liable for such failure shall be warned and each imposed a fine from RMB500,000 to RMB5,000,000. Controlling
shareholders and actual controlling persons of us that organize or instruct such violations shall be imposed a fine from RMB1,000,000
and RMB10,000,000.

3

On February 24, 2023, the CSRC published the Provisions
on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises
(the “Provisions on Confidentiality and Archives Administration”), which came into effect on March 31, 2023. The Provisions
on Confidentiality and Archives Administration requires that, in the process of overseas issuance and listing of securities by domestic
entities, the domestic entities, and securities companies and securities service institutions that provide relevant securities service
shall strictly implement the provisions of relevant laws and regulations and the requirements of these provisions, establish and improve
rules on confidentiality and archives administration. Where the domestic entities provide with or publicly disclose documents, materials
or other items related to the state secrets and government work secrets to the relevant securities companies, securities service institutions,
overseas regulatory authorities, or other entities or individuals, the companies shall apply for approval of competent departments with
the authority of examination and approval in accordance with law and report the matter to the secrecy administrative departments at the
same level for record filing. Where there is unclear or controversial whether or not the concerned materials are related to state secrets,
the materials shall be reported to the relevant secrecy administrative departments for determination. However, there remain uncertainties
regarding the further interpretation and implementation of the Provisions on Confidentiality and Archives Administration.

As of the date of this annual report, we and our
PRC subsidiaries have obtain the requisite licenses and permits from the PRC government authorities that are material for the business
operations of our PRC subsidiaries. In addition, as of the date of this annual report, we and our PRC subsidiaries are not required to
obtain approval or permission from the CSRC or the CAC or any other entity that is required to approve our PRC subsidiaries’ operations
or required for us to offer securities to foreign investors under any currently effective PRC laws, regulations, and regulatory rules.
If it is determined that we are subject to filing requirements imposed by the CSRC under the Overseas Listing Regulations or approvals
from other PRC regulatory authorities or other procedures, including the cybersecurity review under the revised Cybersecurity Review Measures,
for our future offshore offerings, it would be uncertain whether we can or how long it will take us to complete such procedures or obtain
such approval and any such approval could be rescinded. Any failure to obtain or delay in completing such procedures or obtaining such
approval for our offshore offerings, or a rescission of any such approval if obtained by us, would subject us to sanctions by the CSRC
or other PRC regulatory authorities for failure to file with the CSRC or failure to seek approval from other government authorization
for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability
to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our
offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results
of operations, and prospects, as well as the trading price of our common stock. The CSRC or other PRC regulatory authorities also may
take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the securities
offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery,
they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate
new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for
our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established
to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect
our business, prospects, financial condition, reputation, and the trading price of our common stock.

Since these statements and regulatory actions
by the PRC government are newly published and official guidance and related implementation rules have not been issued, it is not highly
uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or
detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws
and regulations will have on our daily business operation, the ability to accept foreign investments and list on an U.S. or other foreign
exchange. The Standing Committee of the National People’s Congress, or the SCNPC, or other PRC regulatory authorities may in the
future promulgate laws, regulations or implementing rules that requires our company or any of our subsidiaries to obtain regulatory approval
from Chinese authorities before future offerings in the U.S. In other words, although the Company is currently not required to obtain
permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S.
exchange, our operations could be adversely affected, directly or indirectly; our ability to offer, or continue to offer, securities to
investors would be potentially hindered and the value of our securities might significantly decline or be worthless, by existing or future
laws and regulations relating to its business or industry or by intervene or interruption by PRC governmental authorities, if we or our
subsidiaries (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions or approvals
are not required, (iii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals
in the future, or (iv) any intervention or interruption by PRC governmental with little advance notice

4

Summary of Risk Factors

Investing in our common stock involves significant
risks. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed more fully
under “