Item 8.01 - Other Events

On August 18, 2009, a subsidiary of China Energy Recovery, Inc. ("CER"), CER (Hong Kong) Holdings Limited, entered into a series of understandings with Yangzhou (Yizheng) Automobile Industrial Park Administration Committee, a government entity of the City of Yangzhou, Jiangsu Province, China, to acquire a tract of land on which CER plans to build a new manufacturing facility. The new plant will be planned as a world-class, state-of-the-art facility and will be dedicated to developing and manufacturing large-sized and sophisticated waste heat recovery systems and other related energy efficiency equipment. The planned facility is part of the CER business plan for expanding production capacity for its sustained growth and to develop additional demand for its products within China and from overseas. At completion, the proposed new facility could provide the company with production capacity equivalent to about $100 million in sales for future growth, based on the company's current historical contract values and sales.

The land is located in an industrial park, near rail, river and road transport facilities. The industrial park authority is responsible for providing certain preparatory work relating to the access road, the utilities, an in-plant rail line and other site preparation. Additionally to support CER's waste heat recovery system development, the government will provide various preferential policies, including a government research and development grant estimated at $2.23 million, to be available to CER over time. The proposed term of the land rights is 50 years, and the land price has been determined. CER is obligated to establish a foreign investment enterprise for its investment, to meet certain minimum capital levels, to make certain minimum levels of investment in the proposed plant, and to satisfy established construction schedules. The capital and investment amounts are substantial, and CER will have to obtain new financings to satisfy the financial requirements for the project. There can be no assurance that the Company will be able to obtain additional financings on acceptable terms or at all, in which case the proposal with the industrial park authority may not be consummated. The aggregate investment amount for the initial phase of development is expected to be about US$20 million, which will be required over a two-year period, as extended when necessary. The scheduled commencement date for construction is around November 2009 and completion is anticipated to be in late 2010.

CER will also have an option on the second tract of land on the banks of the Yangtze River, with direct access to river transportation, at the currently determined price. The second site is planned for future expansion if the requirements and the operating results for the first facility are met and satisfactory and certain additional financial criteria are met. It is currently anticipated that the second facility will require in excess of US$20 million which will be sought through additional financings in the future, as needed.

Consummation of the land acquisition transactions and qualifying for the grant is subject to stated pre-conditions being achieved by both parties and finalizing documentation concerning the details of all aspects of the transaction.