GURE 8-K
Gulf Resources, Inc. (GURE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Item 2.02 | Results of Operations and Financial Condition. |
On August 15, 2022, Gulf Resources, Inc. (the “Company”) issued a press release announcing its six and three months ended June 30, 2022 financial results. The full text of the press release is set forth in Exhibit 99.1 attached hereto.
As provided in General Instruction B.2 of SEC Form 8-K, such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and it shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or under the Exchange Act, whether made before or after the date hereof, except as expressly set forth by specific reference in such filing to this Current Report on Form 8-K.
| Item 9.01 | Financial Statements and Exhibits. |
Exhibits
| 99.1 | Press Release of Gulf Resources, Inc. dated August 15, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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 hereunto duly authorized.
| GULF RESOURCES, INC. | |||
| By: | /s/ Min Li | ||
| Name: | Min Li | ||
| Title: | Chief Financial Officer | ||
Dated: August 15, 2022
Gulf Resources Announces Results for the Second Quarter and Six Months Ended June 30, 2022
SHOUGUANG, China, Aug. 15, 2022 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (Nasdaq: GURE) ("Gulf Resources", “we,” or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced financial results for the six and three months ended June 30, 2022
Gulf Resources is pleased to report a second quarter with revenues up 41% and earnings per share of $0.37 despite the interruptions in production caused by COVID-19 circumstances, the overall weakness in the Chinese economy, the continuing fact that closures of bromine and crude salt factories No.2, No.8, and No.10 and the delay in opening the new chemical factory.
Bromine pricing has continued to be strong, the average selling price in the quarter was $7,740. As COVID abates and the Chinese economy begins to recover, the Company believes demand and pricing will continue to increase. Given the economics of our bromine business, this augers well for future profits. With the likelihood of one or more of our closed facilities maybe open and the future completion of our chemical factory, our company expects we will produce strong results in the remainder of 2022 and in future years.
Financial Highlights
For the three-month period ending June 30,2022
| · | Revenues increased 41% to $15,711,714 |
| · | Gross Profit increased 80% to $7,610,594 |
| · | Income from operations was $5,109,163 compared to a loss of ($2,382,809) |
| · | Net income was $3,901,794 compared to a loss of ($2,703,220). |
| · | Earnings per share were $0.37 compared to a loss of $0.26. |
For the six-month period ending June 30,2022
| · | Net revenues increased 50% to $24,642,451 |
| · | Gross profit increased 126% to $11,991,363 |
| · | Income from operations was $5,044,076 compared to a loss of ($5,664,233) |
| · | Net income was $3,781,848 compared to a loss of ($5,205,344) |
| · | Earnings per share were $0.36 compared with a loss per share of ($0.50). |
Balance Sheet
| · | As of June 30, we had cash of $79,115,431. |
| · | Total assets were $298,613,109. Total liabilities were $23,036,454. |
| · | Shareholders’ Equity was $275,576,655. |
| · | Based on 10,471,924 shares issued and outstanding, book value for Shareholders’ Equity per share was $26.32*. |
For the Three Months Ending June 30, 2022.
Bromine Segment
Bromine revenues increased 38% to $13,893,809. The primary contributor to the higher revenues was the increase in the selling price of
bromine. During the quarter the average selling price was $7,740 compared to $5,556 in the same quarter of the previous year. There is
always a lag in the average selling price compared to the market price as the Company fulfills orders based on when they are received.
During the quarter the Company sold 1,795 tonnes of bromine slightly below the 1,805 in the previous year. During the second quarter of 2022, in order to control COVID, the government made a series of unannounced inspections of our bromine and crude salt facilities, that caused the Company to shut and then reopen its facilities. During the second quarter of 2021, there was one full inspection. The Company believes the inspections in 2022 had a more significant impact on production than did the inspections in 2021.
The cost of revenues in bromine was $6,865,832 representing an increase of $1,312,339 from the same quarter of the previous year.
In this quarter, to comply with new government directives, the Company separated bromine and crude salt into two separate legal entities. With this separation, bromine assets increased to $172.1 million from $138.9 million, while crude salt assets shrank to $10 million from $32.8 million. This caused bromine to receive a higher allocation of expenses than in previous years.
Even with the higher allocation of costs, income from the bromine segment increased 98.5% to $5,325,541 from $2,682,233.
In the quarter, the Company spent $32,822,927mainly in bromine wells, aqueducts and the installation of high and low voltage lines for bromide Wells.
The Company continues to believe it will receive permission to open one of these factories in 2022 and perhaps try its best effort to get another in early 2023.
During the quarter, the Company incurred capital expenditures of $32,822,927 for its bromine segment, which mainly include the cost for bromine wells, aqueducts and the installation of high and low voltage lines for bromide Wells. The Company believes these expenditures may enable it to maintain or slightly increase its utilization in the bromine segment in future quarters.
On August 3,2022, Albemarle, one of the world’s largest producers of bromine stated a press release, “Tight market conditions continue to drive strong demand and favorable pricing” (https://investors.albemarle.com/news-releases/news-release-details/albemarle-reports-strong-second-quarter-sales-growth-raising). Gulf Resources believes the same conditions apply to its business in China.
Crude Salt
Crude salt revenues increased 62% to $1,817,904. There was a 10% increase in production in tonnes and a 47% increase in average selling
price. The cost of net revenue decreased by 9% to $1,235,288, largely as a result of the reallocation of costs. Crude salt reported income
from operations of $142,968 compared to a loss of $578,435.
Chemicals
Revenues in chemicals were $0. The net loss was ($475,201) vs. a net loss of ($741,312) in the same period of the previous year.
During the quarter, COVID restrictions as well as supply chain issues caused delays in receiving some of the previously ordered machinery and equipment including the waste water treatment and solid waste treatment equipment. The Company is working with its existing suppliers and may identify new suppliers so that it can complete construction of its factory based on the delivery.
To date, the Company has spent $45,584,344 on its new factory. It believes the total cost will approximate $69 million. The Company cannot currently project when construction will be completed and production will begin, but it does not believe the delays will impact the cost of the project or the long-term profitability. The Company will update investors as soon as the waste- water treatment and solid waste treatment equipment is delivered.
Natural Gas Segment
The natural gas segment had $0 revenues and a net loss of ($61,699) roughly equal to the loss in the previous year. Pursuant to the
Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of Mineral Resources Management (Trial) promulgated
by the Ministry of Natural Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are
allowed to participate in the natural gas production. The Company plans to proceed with its applications for the natural gas and brine
project approvals with related government departments until the governmental planning has been finalized.
Other Costs
Direct factory and overhead costs for closed factories were $1,927,297 vs. $1,394,717 in the same period of the previous year.
Corporate costs declined to $67,987 from $3,193,107. In the second quarter of 2021, the Company incurred $3,113,140 in charges for stock grants to management. There were no stock grants in the second quarter of 2022.
Profit & Loss
Net income was $3,901,794 compared to a loss of $2,703,220 in the same quarter of the previous year.
Net income per share was $0.37 compared to a loss of ($0.26).
Foreign Currency Translation Adjustment
For the quarter, the Company had a negative foreign translation adjustment of $16,393,444 versus a positive adjustment of $5,334,236 in
the previous year. This adjustment was caused by an approximate 6.1% decline of the RMB vs. the USD. The adjustment impacts all balance
sheet translations into U.S. dollars.
Six Months Ending June 30, 2022
Net revenues increased 50% to $24,642,451. Gross profits increased 126% to $11,991,363. General and administration expenses declined 60%
to $2,799,590. A major factor impacting results in 2021 was the charge of $3,113,140 for stock grants. Income before taxes was $5,127,164
versus a loss of ($5,592,573). Net income was $3,781,848 vs. a loss of ($5,205,344). Earnings per share were $0.36 vs. a loss of ($0.50).
In Bromine, revenues increased 48% to $22,019,825. Net selling prices increased 39%. Costs increased 19% to $10,786,157. Income from operations increased 376% to $6,674,375 despite the higher allocation of costs as a result of separating salt from bromine. The loss from operations in crude salt was $378,953 vs. a loss of $1,588,020 in the same period of the previous year. Chemical products lost $988,483 and natural gas lost $88,438 as neither business had revenues in the six months.
Cash Flow
We generated $18,492,397 in cash flow from operations versus $7,025,775 in the previous year. We invested $33,217,987 in our bromine business
mainly for bromine wells, aqueducts and the installation of high and low voltage lines for bromide Wells. The change in the value of the
RMB to the USD caused a reduction in cash and cash equivalents of ($1,642,327) versus a credit of $1,912,746 in the previous year.
Balance Sheet
As of June 30,2022, we had cash of $79,115,431. Total assets were $298,613,109. Total liabilities were $23,036,454., Shareholders’
Equity was $275,576,655. Based on 10,471,924 shares issued and outstanding, book value for Shareholders’ Equity per share was $26.32*
and cash per share was $7.56*.
Commentary
“We are very pleased to have reported earnings of $0.37 per share in the second quarter despite the disruptions caused by COVID-19,”
Mr. Liu Xiaobin, the CEO of Gulf Resources stated.
“With our new wells and other bromine facilities, we should be able to increase production in the remainder of 2022,” Mr. Miao Naihui,, the Chief Operating Officer, added, Bromine prices continue be strong. Our average selling price in the quarter was $7,740.As COVID abates, we expect increases in demand. The combination of production and higher pricing should lead to improvements in profits from operation in the third quarter and beyond.”
“In addition,” Mr. Miao continued, “we are hopeful one factory will receive approval to reopen in the near future. Because we have already made a lot of work to the factory, we expect further capital expenditures will be mainly within the factory site.
“We are disappointed that COVID and supply chain disruptions have delayed the opening of our Chemical factory,” stated Mr. Liu, the CEO, “but once the waste water and solid waste treatment equipment is delivered, we will update our investors. Based on the market for pharmaceuticals and their by-products as well as the market for other chemicals using bromine, we believe our chemical factory will perform well.”
“We also expect,” Mr. Liu continued, “that we may be able to produce natural gas and bromine in Sichuan Province.”
“We appreciate the patience of our shareholders,” Mr. Liu concluded, “While we are not making projections, based on the current price of bromine, we the expect the remainder of the year will be profitable.”
(*These calculations are based on the number of shares issued and outstanding of 10,471,924 shares as of June 30, 2022)
Conference Call
Gulf Resources management will host a conference call on Monday, August 15, 2022 at 07:30 PM Eastern Time to discuss its second quarter
2022 results ended June 30, 2022.
Mr. Xiaobin Liu, CEO of Gulf Resources, will be hosting the call. The
Company management team will be available for investor questions following the prepared remarks.
To participate in this live conference call, please dial Toll Free +1（877）545-0320 five to ten minutes prior to the scheduled
conference call time. International callers should dial +1（973）-528-0002, and please reference to “Gulf Resources”
or Participant Access Code: 360812 while dial in.
The webcasting is also available then, just simply click on the link below:
http://www.gulfresourcesinc.com/news-28.html
A replay of the conference call will be available two hours after the call's completion and expired by Monday, August 22, 2022. To access
the replay, call +1 (877) 481-4010. International callers should call +1 (919) 882-2331. The Replay Passcode is 46362.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"),
ShouguangYuxin Chemical Industry Co., Limited ("SYCI"), Daying County Haoyuan Chemical Company Limited (“DCHC”)
and Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). The Company believes that it is one of the largest producers of bromine
in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the
Company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking
chemical agents, and materials for human and animal antibiotics. Through SHSI, the Company manufactures and sell crude salt. DCHC was
established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information,
visit www.gulfresourcesinc.com.
Forward-Looking Statements
Certain statements in this news release contain forward-looking information about Gulf Resources and its subsidiaries business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. The actual results may differ materially depending on a number of risk factors including, but not limited to, the general economic and business conditions in the PRC, the risks associated with the COVID-19 pandemic outbreak, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competitors for bromine and other oilfield and power production chemicals, changes in technology, the ability to make future bromine asset purchases, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company's reports filed with the Securities and Exchange Commission. Gulf Resources undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
| GULF RESOURCES, INC. | ||||||||
| AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Expressed in U.S. dollars) | ||||||||
| June 30, 2022 Unaudited | December 31, 2021 Audited | |||||||
| Current Assets | ||||||||
| Cash | $ | 79,115,431 | $ | 95,767,263 | ||||
| Accounts receivable | 9,302,402 | 14,525,807 | ||||||
| Inventories, net | 571,708 | 691,111 | ||||||
| Prepayments and deposits | 6,563,364 | 4,450,037 | ||||||
| Other receivable | 639 | 644 | ||||||
| Total Current Assets | 95,553,544 | 115,434,862 | ||||||
| Non-Current Assets | ||||||||
| Property, plant and equipment, net | 173,562,592 | 162,657,546 | ||||||
| Finance lease right-of use assets | 172,814 | 184,824 | ||||||
| Operating lease right-of-use assets | 8,886,582 | 8,311,127 | ||||||
| Prepaid land leases, net of current portion | 9,862,218 | 10,368,469 | ||||||
| Deferred tax assets | 10,575,359 | 12,900,034 | ||||||
| Total non-current assets | 203,059,565 | 194,422,000 | ||||||
| Total Assets | $ | 298,613,109 | $ | 309,856,862 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Payable and accrued expenses | $ | 11,004,823 | $ | 10,530,776 | ||||
| Taxes payable-current | 209,817 | 775,708 | ||||||
| Amount due to a related party | 1,786,519 | 1,849,044 | ||||||
| Finance lease liability, current portion | 165,016 | 227,429 | ||||||
| Operating lease liabilities, current portion | 440,845 | 506,579 | ||||||
| Total Current Liabilities | 13,607,020 | 13,889,536 | ||||||
| Non-Current Liabilities | ||||||||
| Finance lease liability, net of current portion | 1,516,899 | 1,770,526 | ||||||
| Operating lease liabilities, net of current portion | 7,912,535 | 7,557,583 | ||||||
| Total Non-Current Liabilities | 9,429,434 | 9,328,109 | ||||||
| Total Liabilities | $ | 23,036,454 | $ | 23,217,645 | ||||
| Commitment and Loss Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; none outstanding | $ | — | $ | — | ||||
| COMMON STOCK; $0.0005 par value; 80,000,000 shares authorized; 10,517,754 shares issued; and 10,471,924 shares outstanding as of June 30, 2022 and December 31, 2021, respectively | 24,376 | 24,376 | ||||||
| Treasury stock; 45,830 and 45,830 shares as of June 30, 2022 and December 31, 2021 at cost | (510,329 | ) | (510,329 | ) | ||||
| Additional paid-in capital | 100,569,159 | 100,569,159 | ||||||
| Retained earnings unappropriated | 154,245,486 | 150,463,638 | ||||||
| Retained earnings appropriated | 24,233,544 | 24,233,544 | ||||||
| Accumulated other comprehensive loss | (2,985,581 | ) | 11,858,829 | |||||
| Total Stockholders’ Equity | 275,576,655 | 286,639,217 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 298,613,109 | $ | 309,856,862 | ||||
| GULF RESOURCES, INC. | ||||||||||||||||
| AND SUBSIDIARIES | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS | ||||||||||||||||
| (Expressed in U.S. dollars) | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Three-Month Period Ended June 30, | Six-Month Period Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| NET REVENUE | ||||||||||||||||
| Net revenue | $ | 15,711,714 | $ | 11,148,008 | $ | 24,642,451 | $ | 16,407,251 | ||||||||
| OPERATING INCOME (EXPENSE) | ||||||||||||||||
| Cost of net revenue | (8,101,120 | ) | (6,915,774 | ) | (12,651,088 | ) | (11,097,163 | ) | ||||||||
| Sales, marketing and other operating expenses | (17,045 | ) | (15,625 | ) | (27,405 | ) | (25,170 | ) | ||||||||
| Direct labor and factory overheads incurred during plant shutdown | (1,927,297 | ) | (1,394,717 | ) | (4,111,888 | ) | (4,008,200 | ) | ||||||||
| General and administrative expenses | (557,089 | ) | (5,204,701 | ) | (2,799,590 | ) | (6,940,951 | ) | ||||||||
| Other operating expense | — | — | (8,404 | ) | — | |||||||||||
| (10,602,551 | ) | (13,530,817 | ) | (19,598,375 | ) | (22,071,484 | ) | |||||||||
| PROFIT (LOSS) FROM OPERATIONS | 5,109,163 | (2,382,809 | ) | 5,044,076 | (5,664,233 | ) | ||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest expense | (32,296 | ) | (39,368 | ) | (66,988 | ) | (76,230 | ) | ||||||||
| Interest income | 74,548 | 75,437 | 150,076 | 147,890 | ||||||||||||
| Income (Loss) BEFORE TAXES | 5,151,415 | (2,346,740 | ) | 5,127,164 | (5,592,573 | ) | ||||||||||
| INCOME TAX | (1,249,621 | ) | (356,480 | ) | (1,345,316 | ) | 387,229 | |||||||||
| NET PROFIT (LOSS) | $ | 3,901,794 | $ | (2,703,220 | ) | $ | 3,781,848 | $ | (5,205,344 | ) | ||||||
| COMPREHENSIVE Profit (LOSS) | ||||||||||||||||
| NET Profit (LOSS) | $ | 3,901,794 | $ | (2,703,220 | ) | $ | 3,781,848 | $ | (5,205,344 | ) | ||||||
| - Foreign currency translation adjustments | (16,393,444 | ) | 5,334,236 | (14,844,410 | ) | 3,149,546 | ||||||||||
| COMPREHENSIVE Profit (LOSS) | $ | (12,491,650 | ) | $ | 2,631,016 | $ | (11,062,562 | ) | $ | (2,055,798 | ) | |||||
| Earnings (LOSS) PER SHARE: | ||||||||||||||||
| BASIC AND DILUTED | $ | 0.37 | $ | (0.26 | ) | $ | 0.36 | $ | (0.50 | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF SHARES: | ||||||||||||||||
| BASIC AND DILUTED | 10,471,924 | 10,469,477 | 10,471,924 | 10,469,477 | ||||||||||||
| GULF RESOURCES, INC. | ||||||||
| AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Expressed in U.S. dollars) | ||||||||
| (UNAUDITED) | ||||||||
| Six-Month Period Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Income (Loss) | $ | 3,781,848 | $ | (5,205,344 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Interest on finance lease obligation | 69,696 | 71,197 | ||||||
| Depreciation and amortization | 10,275,874 | 8,224,864 | ||||||
| Unrealized exchange gain on translation of inter-company balances | 38,248 | 594,150 | ||||||
| Deferred tax asset | 1,249,763 | (387,230 | ) | |||||
| Common stock issued for services | — | 3,134,080 | ||||||
| Issuance of stock options to employee | — | — | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | 4,683,856 | 1,839,939 | ||||||
| Inventories | 94,412 | (252,995 | ) | |||||
| Prepayments and deposits | (2,790,331 | ) | (98,992 | ) | ||||
| Other receivables | — | — | ||||||
| Accounts and Other payable and accrued expenses | 2,219,224 | (785,889 | ) | |||||
| Retention payable | — | — | ||||||
| Taxes payable | (56,516 | ) | 190,892 | |||||
| Prepaid land leases | — | — | ||||||
| Operating lease | (1,073,677 | ) | (298,897 | ) | ||||
| Net cash provided by (used in) by operating activities | 18,492,397 | 7,025,775 | ||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | ||||||||
| Purchase of property, plant and equipment | (33,217,987 | ) | (5,806,435 | ) | ||||
| Net cash used in investing activities | (33,217,987 | ) | (5,806,435 | ) | ||||
| CASH FLOWS USED IN FINANCING ACTIVITIES | ||||||||
| Repayment of finance lease obligation | (283,915 | ) | (296,597 | ) | ||||
| Net cash used in financing activities | (283,915 | ) | (296,597 | ) | ||||
| EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (1,642,327 | ) | 1,912,746 | |||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (16,651,832 | ) | 2,835,489 | |||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 95,767,263 | 94,222,538 | ||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 79,115,431 | $ | 97,058,027 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the periods for: | ||||||||
| Income taxes | $ | — | $ | — | ||||
| Operating right-of-use assets obtained in exchange for lease obligations | $ | — | $ | — | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
CONTACT: Gulf Resources, Inc.
Web: http://www.gulfresourcesinc.com
Director of Investor Relations
Helen Xu (Haiyan Xu)