Gulf Resources, Inc. (Nasdaq:GURE) ("Gulf Resources" or the
"Company"), a leading manufacturer of bromine, crude salt and
specialty chemical products in China, today announced its unaudited
and preliminary financial results for the first quarter of 2019 and
provided updates on its recent developments.
Financial Results
- On April 2, 2019 Gulf Resources received governmental
approval to open bromine factory #7 (a combination of factories #5
and #7) and sub-factory #1 (now called factory #4). These factories
have begun operation in April,
2019.
- During the first quarter 2019, Gulf commenced trial
production at its natural gas well in Sichuan
Province.
- Despite the lack of operations for most of the past 18
months and the substantial investment in new facilities, Gulf ended
the quarter with: ° Cash of
$179,653,141 or $3.83* per share ° Net
Net Cash (Cash minus all liabilities) of $163,810,739 or $3.49* per
share° Working capital of $176,057,345
or $3.75* per share° Shareholders’
equity of $295,137,216 or $6.29* per share.
“The past 18 months were extremely difficult for us,”
stated Liu Xiaobin, the CEO of Gulf Resources, “now we are
beginning to get our major facilities back in operation and are
very excited about the potentials of our business.”
Update on Bromine and Crude Salt
During the first quarter of 2019, Gulf Resources made progress
in moving to reopen its bromine and crude salt facilities. On April
2, shortly after the end of this quarter, we received an approval
to open bromine factories #7 (a combination of factories #5 and #7)
and subdivision of factory #1 (which will now be called factory
#4). During April, we began production and testing our new
equipment. Because these factories have been rectified completely,
we are during both testing and initial production stage. Once we
are satisfied with the operations, we will begin full
production.
We also received approvals for the inside rectification of
factories #1 and #9 and are now focusing on the outside
rectification. We currently expect to receive approvals for these
factories by the end of Q2 2019 or early Q3 2019. Upon receipt of
all required approval, we will follow the same processes we are
using with our existing factories.
The remaining three factories #2, 8, and 10 are going through
rectification. Most of these rectifications are related to the
planning approval and the land use rights approval. As previously
noted, we entered into a contract with a third party to allow the
Company to use the land adjacent to factory #10 for waste water
discharge and have invested $1.0 million to build an aqueduct to
discharge the waste water.
Because of the factory closure issue and RMB weakness, the price
of bromine has been exceptionally high, at about RMB 35,000 Yuan
per tonne. At these levels, we believe our business can be
profitable.
Because of our strong cash position, we will consider about
potential acquisitions. We believe our strong relations with the
local government and our experience in rectifying our facilities
and receiving approvals, should enable us to acquire bromine assets
from smaller, struggling competitors at attractive valuations.
UPDATE ON CHEMICALS
We are still awaiting final approval for our new chemical
facilities. We have already spent $10.9 million on the land and the
plans for the factory that will be located in the Bohai Marine Fine
Chemical Industrial Park. We expect to receive the required
approvals before we can begin construction. We expect our chemical
factory to be operational before the end of 2020.
In addition, because the Shandong provincial government has
announced the permanent closing of more than 600 chemical factories
in Shandong Province, we expect our chemical factory, when it
finally opens, to face less competition.
UPDATE ON NATURAL GAS
Trial production at our first well in Daying County, Sichuan
Province started 4 months ago. We believe our trial production is
on track. During the first quarter we sold $38,570 of natural gas.
While the revenue from natural gas is nominal, we consider it to be
substantial progress. We expect trial production to last for
another three to four months, after which we expect to move to
commercial production stage.
As we enter commercial production, we expect to increase
production gradually. Our mid-term production goal is approximately
20,000 cubic meters per day.
We are in the process of applying for related certificates to
drill more gas wells. With years of knowledge building for our
personal and equipped facility we expect to expand our natural gas
business.
Management Commentary
“We greatly appreciate the support of our investors,” Mr. Liu
Xiaobin stated. “We know how frustrating it has been for you, and
for us. Now, however, we are increasingly optimistic.”
“To meet the new environmental rules,” Mr. Liu continued, “the
government has forced the closing of a lot of bromine, crude salt,
and chemical facilities in Shandong Province. We believe this could
mean less competition, higher prices, more opportunities and
greater profitability to players in our industry. In addition, new
regulations are expected to greater demand for clean burning fuels
like natural gas.”
“We have worked diligently to satisfy the new government
regulations,” Mr. Liu concluded. “Now we expect to be entering a
period where we can reap the benefits of our hard work and provide
our patient shareholders with long-term rewards.”
(* All calculations have not been audited and per share
have been calculated based on 46,920,760
shares of common stock issued and outstanding
as shown on the balance sheet in the Form
10-Q for the period ended March 31,
2019.)
Conference Call
Gulf Resources' management will host a conference call on
Tuesday, May 14, 2019 at 8:30 am Eastern Time to discuss its
financial results for the First quarter 2019 results ended March
31, 2019.
Mr. Xiaobin Liu, CEO of Gulf Resources, will be hosting the
call. The Company's management team will be available for investor
questions following the prepared remarks.
To participate in this live conference call, please dial +1
(877) 275-8968 five to ten minutes prior to the scheduled
conference call time. International callers should dial +1 (706)
643-1666. The conference participant pass code is
6058885.
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 05/14/2019 11:30 EST -
06/13/2019 23:59 EST. To access the replay, call +1 (855)
859-2056. International callers should call +1 (404) 537-3406. The
conference ID is 6058885.
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, 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
beishengrong@vip.163.com
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Expressed in U.S. dollars) |
|
|
March 31, 2019 Unaudited |
|
December 31, 2018 Audited |
Current Assets |
|
|
|
|
|
|
|
Cash |
$ |
179,653,141 |
|
|
$ |
178,998,935 |
|
Accounts receivable |
|
20,508 |
|
|
|
— |
|
Inventories, net |
|
— |
|
|
|
— |
|
Prepayments and deposits |
|
1,383,052 |
|
|
|
8,096,636 |
|
Prepaid land leases |
|
186,888 |
|
|
|
235,459 |
|
Other receivable |
|
11,103 |
|
|
|
12,506 |
|
Total Current Assets |
|
181,254,692 |
|
|
|
187,343,536 |
|
Non-Current Assets |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
89,963,658 |
|
|
|
82,282,630 |
|
Finance lease right-of use assets |
|
190,128 |
|
|
|
250,757 |
|
Operating lease right-of –use assets |
|
9,520,317 |
|
|
|
— |
|
Prepaid land leases, net of current portion |
|
9,255,159 |
|
|
|
9,639,009 |
|
Deferred tax assets |
|
20,795,664 |
|
|
|
19,030,858 |
|
Total non-current assets |
|
129,724,926 |
|
|
|
111,203,254 |
|
Total Assets |
$ |
310,979,618 |
|
|
$ |
298,546,790 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
Other payable and accrued expenses |
$ |
3,433,204 |
|
|
$ |
905,258 |
|
Retention payable |
|
299,724 |
|
|
|
332,416 |
|
Taxes payable-current |
|
807,742 |
|
|
|
1,188,687 |
|
Finance lease liability, current portion |
|
240,021 |
|
|
|
197,480 |
|
Operating lease liabilities, current portion |
|
416,656 |
|
|
|
— |
|
Total Current Liabilities |
|
5,197,347 |
|
|
|
2,623,841 |
|
Non-Current Liabilities |
|
|
|
|
|
|
|
Finance lease liability, net of current portion |
|
2,109,459 |
|
|
|
2,069,545 |
|
Operating lease liabilities, net of current portion |
|
8,535,596 |
|
|
|
— |
|
Total Non-Current Liabilities |
|
10,645,055 |
|
|
|
2,069,545 |
|
Total Liabilities |
$ |
15,842,402 |
|
|
$ |
4,693,386 |
|
|
|
|
|
|
|
|
|
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; 47,149,909 and 47,502,940
shares issued; and 46,920,760 and 46,803,791 shares outstanding as
of March 31, 2019 and December 31, 2018, respectively |
|
23,573 |
|
|
|
23,525 |
|
Treasury stock; 229,149 and 249,149 shares as of March 31,
2019 and December 31, 2018 at cost |
|
(510,329 |
) |
|
|
(554,870 |
) |
Additional paid-in capital |
|
94,997,819 |
|
|
|
95,020,808 |
|
Retained earnings unappropriated |
|
180,704,307 |
|
|
|
185,608,445 |
|
Retained earnings appropriated |
|
24,233,544 |
|
|
|
24,233,544 |
|
Accumulated other comprehensive loss |
|
(4,311,698 |
) |
|
|
(10,478,048 |
) |
Total Stockholders’ Equity |
|
295,137,216 |
|
|
|
293,853,404 |
|
Total Liabilities and Stockholders’ Equity |
$ |
310,979,618 |
|
|
$ |
298,546,790 |
|
|
|
|
|
|
|
|
|
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE
INCOME |
(Expressed in U.S. dollars) |
(UNAUDITED) |
|
|
Three-Month Period Ended March 31, |
|
2019 |
|
2018 |
|
|
|
|
NET REVENUE |
|
|
|
|
|
|
|
Net revenue |
$ |
38,570 |
|
|
$ |
2,247,267 |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSE |
|
|
|
|
|
|
|
Cost of net revenue |
|
(36,407 |
) |
|
|
(1,241,809 |
) |
Sales, marketing and other operating expenses |
|
— |
|
|
|
(34,974 |
) |
Direct labor and factory overheads incurred during plant
shutdown |
|
(4,293,022 |
) |
|
|
(5,695,519 |
) |
General and administrative expenses |
|
(2,105,171 |
) |
|
|
(3,571,945 |
) |
|
|
(6,434,600 |
) |
|
|
(10,544,247 |
) |
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
(6,396,030 |
) |
|
|
(8,296,980 |
) |
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
Interest expense |
|
(38,824 |
) |
|
|
(43,344 |
) |
Interest income |
|
135,579 |
|
|
|
169,478 |
|
LOSS BEFORE TAXES |
|
(6,299,275 |
) |
|
|
(8,170,846 |
) |
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT |
|
1,395,137 |
|
|
|
1,193,746 |
|
|
|
|
|
|
|
|
|
NET LOSS |
$ |
(4,904,138 |
) |
|
$ |
(6,977,100 |
) |
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS: |
|
|
|
|
|
|
|
NET LOSS |
$ |
(4,904,138 |
) |
|
$ |
(6,977,100 |
) |
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
- Foreign currency translation adjustments |
|
6,166,350 |
|
|
|
15,948,911 |
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME |
$ |
1,262,212 |
|
|
$ |
8,971,811 |
|
|
|
|
|
|
|
|
|
LOSS PER SHARE: |
|
|
|
|
|
|
|
BASIC |
$ |
(0.10 |
) |
|
$ |
(0.15 |
) |
DILUTED |
$ |
(0.10 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC |
|
46,886,558 |
|
|
|
46,803,791 |
|
DILUTED |
|
46,886,558 |
|
|
|
48,826,388 |
|
|
|
|
|
|
|
|
|
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Expressed in U.S. dollars) |
(UNAUDITED) |
|
|
Three-Month Period Ended March 31, |
|
2019 |
|
2018 |
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
Net loss |
$ |
(4,904,138 |
) |
|
$ |
(6,977,100 |
) |
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: |
|
|
|
|
|
|
|
Interest on capital lease obligation |
|
38,659 |
|
|
|
41,797 |
|
Amortization of prepaid land leases |
|
— |
|
|
|
144,097 |
|
Depreciation and amortization |
|
3,377,249 |
|
|
|
4,757,530 |
|
Unrealized exchange loss on translation of inter-company
balances |
|
503,228 |
|
|
|
1,058,852 |
|
Deferred tax asset |
|
(1,395,137 |
) |
|
|
(1,193,746 |
) |
Common stock issued for services |
|
21,600 |
|
|
|
— |
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
Accounts receivable |
|
(20,469 |
) |
|
|
20,442,483 |
|
Inventories |
|
— |
|
|
|
1,039,959 |
|
Prepayments and deposits |
|
(35,157 |
) |
|
|
(81,635 |
) |
Other receivables |
|
1,631 |
|
|
|
— |
|
Other payable and accrued expenses |
|
2,509,573 |
|
|
|
(68,833 |
) |
Retention payable |
|
(39,027 |
) |
|
|
— |
|
Taxes payable |
|
(377,581 |
) |
|
|
735,426 |
|
Operating lease |
|
55,843 |
|
|
|
— |
|
Net cash (used in)
provided by operating activities |
|
(263,726 |
) |
|
|
19,898,830 |
|
|
|
|
|
|
|
|
|
CASH FLOWS USED IN INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Additions of prepaid land leases |
|
— |
|
|
|
(367,143 |
) |
Purchase of property, plant and equipment |
|
(2,528,111 |
) |
|
|
(121,710 |
) |
Net cash used in investing activities |
|
(2,528,111 |
) |
|
|
(488,853 |
) |
|
|
|
|
|
|
|
|
EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
3,446,043 |
|
|
|
8,404,233 |
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
654,206 |
|
|
|
27,814,210 |
|
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD |
|
178,998,935 |
|
|
|
208,906,759 |
|
CASH AND CASH EQUIVALENTS - END OF PERIOD |
$ |
179,653,141 |
|
|
$ |
236,720,969 |
|
|
|
|
|
|
|
|
|
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 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
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