Gulf Resources, Inc 8-K, filed May 21, 2020
Gulf Resources, Inc. (GURE)
About this 8-K
Gulf Resources, Inc filed this 8-K on May 21, 2020, reporting on events of May 20, 2020.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
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 1934
Date of Report (date of earliest event reported): May 20, 2020
Gulf Resources, Inc.
(Exact name of registrant as specified in charter)
Nevada
(State or other jurisdiction of incorporation)
|
000-20936 (Commission File Number) |
13-3637458 (IRS Employer Identification No.) |
Level 11,Vegetable Building, Industrial Park of the East City,
Shouguang City, Shandong, China
(Address of principal executive offices and zip code)
+86 (536) 567 0008
(Registrant's telephone number including area code)
(Registrant's 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 registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b)) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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. ☐
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, $0.0005 par value | GURE | NASDAQ Global Select Market |
| Item 2.02 | Results of Operations and Financial Condition. |
On May 20, 2020, Gulf Resources, Inc. (the “Company”), issued a press release announcing its first quarter of 2020 ended March 31, 2020 financial results and business updates. 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 May 20, 2020.
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: May 21, 2020
Exhibit 99.1
Gulf Resources Announced First Quarter 2020 Results and Provided Business Update on Post Quarter Events
SHOUGUANG, China, May 20, 2020 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (NASDAQ:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt, specialty chemical products, and natural gas in China today announced results for the first quarter ended March 31, 2020 and provided a business update on events occurring after the end of the first quarter 2020.
Because of pollution issues, Chinese New Year, and circumstances related to the COVID-19 pandemic outbreak, the Company’s bromine facilities were closed for most time of the first quarter 2020.
| · | On Nov. 25, 2019, the government of Shouguang City issued a notice
ordering all bromine facilities in Shouguang City to temporarily stop production from December 16, 2019 to February 10, 2020 for
environmental reasons. |
| · | Due to the COVID-19 outbreak, the Company received an approval dated
on February 27, 2020 allowing the Company to resume its bromine production issued by Shouguang Comprehensive Coordination Group
for Epidemic Prevention and Control. |
| · | In January 2020, the Company obtained an environmental protection
assessment approval issued by the government of Shouguang City, Shandong Province for the proposed new Yuxin chemical factory. |
| · | On January 27, 2020, the Company completed a 1-for-5 reverse stock
split of its issued and outstanding shares of common stock, which was effective for trading purposes as of the commencement of
trading on January 28, 2020. |
| · | On February 12, 2020, the Company announced that it received a notice from The Nasdaq Stock Market LLC ("Nasdaq") on February 11, 2020 indicating that the Company has regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Select Market. |
| · | On March 5, 2020, the Company received a governmental approval allowing
the Company to resume production at bromine factories #1, #4, #7, and #9. |
| · | In the mid-March 2020, the Company began trial production at bromine factories #1 and #7. |
Since the Company’s factories were closed for most time of the first quarter 2020, the Company generated relatively little revenue and sustained operating losses. For the first quarter 2020, ending March 31, 2020, Gulf Resources reported net revenue of $557,670 up from $38,570 in the same quarter of the previous year. The loss from operations was $4,835,429 compared to $6,396,030 in the same quarter of the previous year. The net loss after tax was $3,539,758 compared to $4,904,138 in the same quarter of the previous year. The net loss per share was $0.37 compared to $0.52 in the same quarter of the previous year.
Despite the closure of its facilities for 30 months in the past, the Company’s balance sheet for the first quarter 2020 remains strong. As of March 31, 2020,
| · | The Company had cash of $93,632,690; |
| · | Cash per share was $9.84*; |
| · | Current assets were $96,207,226; and current liabilities were $2,476,301; |
| · | Working capital per share was $9.85; |
| · | Shareholder’s equity was $255,051,983; and |
| · | Book value per share was $26.80*. |
Since the end of the first quarter 2020, the Company has made substantial progress in reopening its businesses.
| · | Bromine factories #1 and #7 commenced commercial production on April 3, 2020. |
| · | Bromine factories #4 and #9 commenced commercial production on May
6, 2020. Because these two factories were not operational in 2019, their ramping up will be slower than that of factories #1 and
#7. |
| · | The Company has been in discussions with the local government for
the opening of bromine factories #2, #8, and #10. The Company is optimistic that it will receive approvals and will be able to
open these factories by 2020. |
| · | The Company believes its bromine business will grow strong. To the
Company’s knowledge, some of the bromine factories in China are still closed, and some of them may be closed permanently
due to the strict measures being taken by the Chinese government in an effort to battle against environmental pollutions. The
Company expects the demand and pricing for bromine to increase. While sales of some downstream products are down, bromine is increasingly
being used as a disinfectant for humans and animals as well as in pharmaceutical intermediate products. The Company expects this
trend will lead to increasing demand and strong pricing for bromine. |
| · | The Company is planning to begin construction of its new Yuxin Chemical
factory in the second quarter 2020. Construction is expected to take approximately one year. It is expected that it will take additional
6 months to complete equipment installation and testing. The Company expects to begin trial production at the beginning of 2022.
This factory will be expected to focus more on the higher margin pharmaceutical intermediate products. While this factory will
be smaller than the combined two old factories, the Company expects it to make higher net profit margin. |
| · | On May 7, 2020, Petro China, the largest oil and gas producer and
distributor in China, announced that it has discovered a huge natural gas belt found in China with an estimated reserve of over
1 trillion cubic meters. According to Petro China and news reported in major media, such as Xinhua Net and China.org.cn, this natural
gas belt is located in Tianbao Township of Daying County (http://www.xinhuanet.com/english/2020-05/07/c_139038228.htm). This newly
discovered natural gas belt is close to the Company’s current natural gas well site as well as its two additional registered
sites. Gulf Resources believes this discovery could have a material positive impact on the Company. The Company believes that the
government will more focus on finalizing the exploration planning for the township and the county. |
| · | On May 1, 2020, 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 (the “Opinions”), came into effect. Pursuant to the Opinions, privately owned enterprises are allowed to participate in the oil and gas exploration and production. The Company believes its natural gas business will benefit from the Opinions. |
Mr. Liu Xiaobin, the CEO of Gulf Resources, stated, “The past 30 months have been long and very difficult for our company as we had to close all of our facilities for the reasons outlined above. During this difficult time, we were hit by one of the most destructive typhoons in the history of China. When we were getting production back, we were adversely impacted by the coronavirus pandemic. Now, however, we can see real signs of progress.”
“We have four of our bromine facilities in commercial production,” Mr. Liu continued. “We are optimistic about the remaining three bromine factories. We have drilled more new wells and bought all new equipment. Now, we are about to start construction of our new chemical factory, which is being planned to focus more on higher margin pharmaceutical intermediate products, and Petro China has discovered one of the biggest natural gas belts in Chinese history in the same town that our existing natural gas well and two additional registered sites are located.”
“Despite the fact that all of our facilities closed for most time of the past 30 months and the cost of buying all new equipment and drilling more new wells, we are still in a strong financial position with $93.6 million in cash,” Mr. Liu continued. “We have enough capital to build our new chemical factory, reopen our remaining bromine and crude salt facilities, and drill our wells in Sichuan.”
“We look forward to returning to profitability in the near future,” Mr. Liu concluded. “We appreciate the support of our shareholders. Once we start construction on our chemical factory and get a better sense of timing for the approval of our remaining bromine factories, we will provide investors with further updates on our three-year plan for growth and profits. We are very optimistic about our future.”
(*These calculations are not audited and based on the number of shares outstanding of 9,517,427 shares as of March 31, 2020)
Conference Call
Gulf Resources management will host a conference call on Thursday, May 21, 2020 at 08:30 AM Eastern Time to discuss its financial results for the First quarter 2020 ended March 31, 2020.
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 +1 (877) 407-8031 five to ten minutes prior to the scheduled conference call time. International callers should dial +1 (201)689-8031, and please reference to “Gulf Resources” while dial in.
The webcasting is also available then, just simply click on the link below: http://www.gulfresourcesinc.com/events.html
A replay of the conference call will be available two hours
after the call's completion during 05/21/2020 11:30 ET - 05/28/2020 11:30 ET. To access the replay, call +1 (877) 481-4010. International
callers should call +1 (919) 882-2331. The Replay Passcode is 34940.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through three wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"),
Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"), and Daying County Haoyuan Chemical Company Limited (“DCHC”).
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. 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.
CONTACT: Gulf Resources, Inc.
| Web: | http://www.gulfresourcesinc.com |
| Director of Investor Relations | |
| Helen Xu (Haiyan Xu) | |
| beishengrong@vip.163.com |
| GULF RESOURCES, INC. | ||||||||
| AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE INCOME(LOSS) | ||||||||
| (Expressed in U.S. dollars) | ||||||||
| (UNAUDITED) | ||||||||
| Three-Month Period Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| NET REVENUE | ||||||||
| Net revenue | $ | 557,670 | $ | 38,570 | ||||
| OPERATING EXPENSE | ||||||||
| Cost of net revenue | (921,320 | ) | (36,407 | ) | ||||
| Sales, marketing and other operating expenses | (2,243 | ) | — | |||||
| Direct labor and factory overheads incurred during plant shutdown | (3,610,423 | ) | (4,293,022 | ) | ||||
| General and administrative expenses | (843,337 | ) | (2,105,171 | ) | ||||
| Other operating income (loss) | (15,776 | ) | — | |||||
| (5,393,099 | ) | (6,434,600 | ) | |||||
| LOSS FROM OPERATIONS | (4,835,429 | ) | (6,396,030 | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest expense | (35,428 | ) | (38,824 | ) | ||||
| Interest income | 74,656 | 135,579 | ||||||
| LOSS BEFORE TAXES | (4,796,201 | ) | (6,299,275 | ) | ||||
| INCOME TAX BENEFIT | 1,256,443 | 1,395,137 | ||||||
| NET LOSS | $ | (3,539,758 | ) | $ | (4,904,138 | ) | ||
| COMPREHENSIVE LOSS: | ||||||||
| NET LOSS | $ | (3,539,758 | ) | $ | (4,904,138 | ) | ||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| - Foreign currency translation adjustments | (4,515,359 | ) | 6,166,350 | |||||
| COMPREHENSIVE INCOME (LOSS) | $ | (8,055,117 | ) | $ | 1,262,212 | |||
| LOSS PER SHARE: | ||||||||
| BASIC | $ | (0.37 | ) | $ | (0.52 | ) | ||
| DILUTED | $ | (0.37 | ) | $ | (0.52 | ) | ||
| WEIGHTED AVERAGE NUMBER OF SHARES: | ||||||||
| BASIC | 9,517,427 | 9,377,312 | ||||||
| DILUTED | 9,517,427 | 9,377,312 | ||||||
| GULF RESOURCES, INC. | ||||||||
| AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Expressed in U.S. dollars) | ||||||||
| March 31, 2020 Unaudited | December 31, 2019 Audited | |||||||
| Current Assets | ||||||||
| Cash | $ | 93,632,690 | $ | 100,301,986 | ||||
| Accounts receivable | 620,669 | 4,877,106 | ||||||
| Inventories, net | 674,978 | 690,087 | ||||||
| Prepayments and deposits | 1,278,330 | 1,332,970 | ||||||
| Other receivable | 559 | 559 | ||||||
| Total Current Assets | 96,207,226 | 107,202,708 | ||||||
| Non-Current Assets | ||||||||
| Property, plant and equipment, net | 136,032,828 | 137,994,949 | ||||||
| Finance lease right-of use assets | 175,463 | 179,526 | ||||||
| Operating lease right-of –use assets | 8,551,066 | 8,817,884 | ||||||
| Prepaid land leases, net of current portion | 9,342,440 | 9,115,276 | ||||||
| Deferred tax assets | 16,804,875 | 15,940,642 | ||||||
| Total non-current assets | 170,906,672 | 172,048,277 | ||||||
| Total Assets | $ | 267,113,898 | $ | 279,250,985 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts and other payable and accrued expenses | $ | 1,054,101 | $ | 1,106,048 | ||||
| Retention payable | — | 3,805,483 | ||||||
| Taxes payable-current | 767,656 | 779,623 | ||||||
| Finance lease liability, current portion | 230,190 | 198,506 | ||||||
| Operating lease liabilities, current portion | 424,354 | 416,604 | ||||||
| Total Current Liabilities | 2,476,301 | 6,306,264 | ||||||
| Non-Current Liabilities | ||||||||
| Finance lease liability, net of current portion | 1,876,522 | 1,905,772 | ||||||
| Operating lease liabilities, net of current portion | 7,709,092 | 7,931,849 | ||||||
| Total Non-Current Liabilities | 9,585,614 | 9,837,621 | ||||||
| Total Liabilities | $ | 12,061,915 | $ | 16,143,885 | ||||
| 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; 9,563,257 and 9,563,257 shares issued; and 9,517,427 and 9,517,427 shares outstanding as of March 31, 2020 and December 31, 2019, respectively | 23,904 | 23,904 | ||||||
| Treasury stock; 45,830 and 45,830 shares as of March 31, 2020 and December 31, 2019 at cost | (510,329 | ) | (510,329 | ) | ||||
| Additional paid-in capital | 95,043,388 | 95,043,388 | ||||||
| Retained earnings unappropriated | 156,268,642 | 159,808,400 | ||||||
| Retained earnings appropriated | 24,233,544 | 24,233,544 | ||||||
| Accumulated other comprehensive loss | (20,007,166 | ) | (15,491,807 | ) | ||||
| Total Stockholders’ Equity | 255,051,983 | 263,107,100 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 267,113,898 | $ | 279,250,985 | ||||
| GULF RESOURCES, INC. | ||||||||
| AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Expressed in U.S. dollars) | ||||||||
| (UNAUDITED) | ||||||||
| Three-Month Period Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (3,539,758 | ) | $ | (4,904,138 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Interest on capital lease obligation | 35,272 | 38,659 | ||||||
| Depreciation and amortization | 3,454,891 | 3,377,249 | ||||||
| Unrealized exchange (gain) loss on translation of inter-company balances | (400,449 | ) | 503,228 | |||||
| Deferred tax asset | (1,256,443 | ) | (1,395,137 | ) | ||||
| Common stock issued for services | — | 21,600 | ||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | 4,245,576 | (20,469 | ) | |||||
| Inventories | 523 | — | ||||||
| Prepayments and deposits | 54,350 | (35,157 | ) | |||||
| Other receivables | — | 1,631 | ||||||
| Accounts and Other payable and accrued expenses | (41,562 | ) | 2,509,573 | |||||
| Retention payable | — | (39,027 | ) | |||||
| Taxes payable | (18,999 | ) | (377,581 | ) | ||||
| Prepaid land leases | (369,066 | ) | — | |||||
| Operating leases | 38,022 | 55,843 | ||||||
| Net cash provided by(used in) operating activities | 2,202,357 | (263,726 | ) | |||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | ||||||||
| Purchase of property, plant and equipment | (7,416,211 | ) | (2,528,111 | ) | ||||
| Net cash used in investing activities | (7, 416,211 | ) | (2,528,111 | ) | ||||
| EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(1,455,442 | ) | 3,446,043 | |||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (6,669,296 | ) | 654,206 | |||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 100,301,986 | 178,998,935 | ||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 93,632,690 | $ | 179,653,141 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | — | $ | — | ||||
| Operating right-of-use assets obtained in exchange for lease obligations | $ | — | $ | 8,241,818 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Par value of common stock issued upon cashless exercise of options | $ | — | $ | 48 | ||||