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 unaudited
financial results for the second quarter 2021.
Second Quarter 2021 Financial Results
Balance Sheet
Our balance sheet remains extremely strong. Despite continuing
to invest in our new chemical factory, we have over $97 million in
cash. Our current book value per share is $26.56. Based on our
current stock price, Gulf continues to sell at a discount to its
cash, net net cash, and working capital.
Balance Sheet Highlights |
|
|
Total |
Cash |
$97,058,027 |
Net Net Cash |
$78,735,522 |
Current Assets |
$104,955,195 |
Working Capital |
$95,745,220 |
Book Value |
$278,102,555 |
Income Statement
- Net Revenues for Q2 2021 increased 108% to $11,148,008 compared
to previous year.
- Gross margins increased for Q2 2021 by 1157% from $336,587 to
$4,232,234 compared to the same period of previous year.
- As a percentage of revenues, gross margin for Q2 2021 was 38.0%
compared to 6.3% in the previous year.
- Direct labor and factory overheads for Q2 2021 incurred during
plant shutdown decreased 19.7%. As a percentage of sales, they were
12.5% versus 32.4%.
- G&A expenses for Q2 2021 increased $3,662,999 compared to
the previous year. However, $3,133,140 of the increase was
attributable to the one-time stock awards.
- Net loss before taxes for Q2 2021 declined 19.6% to $2,346,740
compared to previous year.
- Taxes were $(356,408) for Q2 2021 versus a benefit of $672,633
for Q2 2020.
- The Net Loss after Taxes was $2,703,200 for Q2 2021 versus
$2,244,619 for Q2 2020.
- The company had a comprehensive net gain for Q2 2021 of
$2,631,016 versus a net loss of $2,022,750 for Q2 2020.
Cash Flow For the six months, we had cash flow
from operations of $7,025,775. We spent $5,806,435 on property
plant and equipment for our chemical factory. Even with these
expenditures and the interruption in our production for Chinese New
Year in the first quarter, we were still able to generate positive
free cash flow for the six months and the quarter, enabling us to
increase our cash by almost $3 million compared to year-end
levels.
Segment Reporting Bromine
- Bromine revenues for Q2 2021 increased by 123% to $10,025,438
from 4,487,017 in Q2 2020.
- Gross profits in bromine for Q2 2021 increased by 1953% to
$4,471,945 from $217,778 for Q2 2020.
- As a percentage of sales, gross profits in bromine were 45% for
Q2 2021 compared to 5% for Q2 2020.
- Bromine made a profit of $2,682,233 in Q2 2021 compared to a
loss of $1,479,084 in Q2 2020.
- Production of bromine in tonnes increased by 48% to 1,805 in Q2
2021.
- The average selling price increased 51.3% to $5,554 for Q2
2021.
- Bromine prices have continued at a high level. At the end of
Q1, bromine was RMB 35,044. At the end of Q2, it had risen to
record highs of RMB 45,950. Since the end of the quarter, it has
declined slightly to RMB 43,063, still very close to its record
highs. The company expects bromine pricing to remain near its
current levels for the foreseeable future.
Crude Salt
- Net revenue for the crude salt for
Q2 2021 increased 29% to $1,122,570.
- Gross margins for Q2 2021 were loss
21% compared to profit 14% in previous year.
- The loss from operations for Q2
2021 was $578,435 compared to loss from operations of $611,472 in
the same period in 2020.
Chemicals The chemical segment incurred a
loss from operations of $741,312 for the three-month period ended
June 30, 2021, compared to loss from operations of $654,652 in the
same period in 2020.
Natural Gas Loss from operations from our
natural gas segment was $62,850 for the three-month period ended
June 30, 2021, compared to a loss of $53,270 in the same period in
2020.
UPDATE ON OPERATIONS
Factories #2, #8, and #10 The company
expects to receive approvals to reopen factories #2, #8, and #10.
To its knowledge, the government is currently completing its
planning process for all mining areas including that for prevention
of flood. As a result, the Company may be required to make some
modifications to our current wells and aqueducts prior to
commencement of operations of these factories to satisfy the local
government's requirements.
Chemical SegmentThe Company began the
construction on its new chemical facilities located at Bohai Marine
Fine Chemical Industrial Park in June 2020 and basically completed
the civil works by end of June 2021. Equipment installation and
testing is expected to take 6 months or somewhat longer if issues
occur. Trial production should take another six months. The Company
will continue to post photographs on the company website showing
the progress of the construction and installation of equipment.
Natural GasThe Company is continuing to work
with the governments of Tianbao Town, Daying County, and Sichuan
Province on getting approval for our natural gas and brine
projects. We continue to maintain a staff in Sichuan Province and
senior management continues to meet with government officials.
While timing is still uncertain, the Company remains optimistic
that it will be able to proceed with these projects.
Recent DevelopmentsAs disclosed in the
Company’s Current Report on Form 8-K filed with the Securities
Exchange Commission (the “SEC”) on July 7, 2021, the Company’s
former auditors Morrison Cogen LLP (MC) resigned effective June 30,
2021. On July 1, 2021, the Company engaged WWC, P.C. Certified
Public Accountants (“WWC”) to serve as its independent auditor.
Business Outlook“The company is optimistic
about the second half of year 2021. Production lost in the second
quarter is likely to be recouped in the third quarter. Bromine
price remains high. At current levels of production, our bromine
business should be profitable. We have expensed our all of our
annual stock grants, so overhead will be reduced. We believe we
could receive approvals for one or more of our closed factories in
near future. In 2022, we may begin to generate revenues from our
chemical factory. We expect that our chemical business could be
profitable in 2023. We continue to believe that we may be able to
produce both natural gas and bromine products in Sichuan if we are
able to obtain requisite governmental approvals,” said Mr. Xiaobin
Liu, CEO of the Company.
Conference Call
Gulf Resources management will host a conference call on Monday,
August 16, 2021 at 08:00 AM Eastern Time to discuss its Second
Quarter 2021 results ended June 30, 2021.
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
(888) 506-0062 five to ten minutes prior to the scheduled
conference call time. International callers should dial +1 (973)
528-0011.The Entry Code is 592817.
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 08/16/2021 11:00 AM ET - 09/15
/2021 11:00 AM ET. To access the replay, call +1 (877) 481-4010.
International callers should call +1 (919) 882-2331. The Replay
Passcode is 42535.
About Gulf Resources, Inc.Gulf Resources, Inc. operates through
three wholly-owned subsidiaries, Shouguang City Haoyuan Chemical
Company Limited ("SCHC"), ShouguangYuxin 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 http://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 ongoing impact
of COVID-19 pandemic, uncertainties associated with obtaining
governmental approvals, 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
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Expressed in U.S.
dollars)
|
|
June 30, 2021Unaudited |
|
December 31, 2020 Audited |
Current Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
97,058,027 |
|
|
$ |
94,222,538 |
|
Accounts receivable |
|
|
4,741,259 |
|
|
|
6,521,798 |
|
Inventories, net |
|
|
677,418 |
|
|
|
419,609 |
|
Prepayments and deposits |
|
|
2,476,867 |
|
|
|
6,146,461 |
|
Other receivable |
|
|
1,624 |
|
|
|
559 |
|
Total Current Assets |
|
|
104,955,195 |
|
|
|
107,310,965 |
|
Non-Current Assets |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
153,288,493 |
|
|
|
148,947,689 |
|
Finance lease right-of use assets |
|
|
185,276 |
|
|
|
186,272 |
|
Operating lease right-of –use assets |
|
|
8,507,190 |
|
|
|
8,868,661 |
|
Prepaid land leases, net of current portion |
|
|
10,234,582 |
|
|
|
10,134,004 |
|
Deferred tax assets |
|
|
19,254,324 |
|
|
|
18,590,227 |
|
Total non-current assets |
|
|
191,469,865 |
|
|
|
186,726,853 |
|
Total Assets |
|
$ |
296,425,060 |
|
|
$ |
294,037,818 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts, other payable and accrued expenses |
|
$ |
7,071,707 |
|
|
$ |
5,081,701 |
|
Taxes payable-current |
|
|
1,506,771 |
|
|
|
1,326,179 |
|
Finance lease liability, current portion |
|
|
160,498 |
|
|
|
217,070 |
|
Operating lease liabilities, current portion |
|
|
470,999 |
|
|
|
477,350 |
|
Total Current Liabilities |
|
|
9,209,975 |
|
|
|
7,102,300 |
|
Non-Current Liabilities |
|
|
|
|
|
|
|
|
Finance lease liability, net of current portion |
|
|
1,747,385 |
|
|
|
1,888,903 |
|
Operating lease liabilities, net of current portion |
|
|
7,365,145 |
|
|
|
8,022,342 |
|
Total Non-Current Liabilities |
|
|
9,112,530 |
|
|
|
9,911,245 |
|
Total Liabilities |
|
$ |
18,322,505 |
|
|
$ |
17,013,545 |
|
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; 10,515,307 and 10,043,307
shares issued; 10,469,477 and 9,997,477 shares outstanding as of
June 30, 2021 and December 31, 2020, respectively |
|
|
24,375 |
|
|
|
24,139 |
|
Treasury stock; 45,830 and 45,830 shares as of June 30, 2021
and December 31, 2020 at cost |
|
|
(510,329 |
) |
|
|
(510,329 |
) |
Additional paid-in capital |
|
|
100,569,160 |
|
|
|
97,435,316 |
|
Retained earnings unappropriated |
|
|
146,183,012 |
|
|
|
151,388,356 |
|
Retained earnings appropriated |
|
|
24,233,544 |
|
|
|
24,233,544 |
|
Accumulated other comprehensive loss |
|
|
7,602,793 |
|
|
|
4,453,247 |
|
Total Stockholders’ Equity |
|
|
278,102,555 |
|
|
|
277,024,273 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
296,425,060 |
|
|
$ |
294,037,818 |
|
See accompanying notes to the condensed consolidated financial
statements
GULF RESOURCES, INC.AND SUBSIDIARIESCONDENSED
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, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
NET REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
11,148,008 |
|
|
$ |
5,359,483 |
|
|
$ |
16,407,251 |
|
|
$ |
5,917,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
(EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenue |
|
|
(6,915,774 |
) |
|
|
(5,022,896 |
) |
|
|
(11,097,163 |
) |
|
|
(5,944,216 |
) |
Sales, marketing and other operating expenses |
|
|
(15,625 |
) |
|
|
(10,838 |
) |
|
|
(25,170 |
) |
|
|
(13,081 |
) |
Direct labor and factory overheads incurred during plant
shutdown |
|
|
(1,394,717 |
) |
|
|
(1,737,599 |
) |
|
|
(4,008,200 |
) |
|
|
(5,348,022 |
) |
General and administrative expenses |
|
|
(5,204,701 |
) |
|
|
(1,541,702 |
) |
|
|
(6,940,951 |
) |
|
|
(2,385,039 |
) |
Other operating income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15,776 |
) |
|
|
|
(13,530,817 |
) |
|
|
(8,313,035 |
) |
|
|
(22,071,484 |
) |
|
|
(13,706,134 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(2,382,809 |
) |
|
|
(2,953,552 |
) |
|
|
(5,664,233 |
) |
|
|
(7,788,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(39,368 |
) |
|
|
(34,888 |
) |
|
|
(76,230 |
) |
|
|
(70,316 |
) |
Interest income |
|
|
75,437 |
|
|
|
71,188 |
|
|
|
147,890 |
|
|
|
145,844 |
|
LOSS BEFORE TAXES |
|
|
(2,346,740 |
) |
|
|
(2,917,252 |
) |
|
|
(5,592,573 |
) |
|
|
(7,713,453 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT |
|
|
(356,480 |
) |
|
|
672,633 |
|
|
|
387,229 |
|
|
|
1,929,076 |
|
NET LOSS |
|
$ |
(2,703,220 |
) |
|
$ |
(2,244,619 |
) |
|
$ |
(5,205,344 |
) |
|
$ |
(5,784,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(2,703,220 |
) |
|
$ |
(2,244,619 |
) |
|
$ |
(5,205,344 |
) |
|
$ |
(5,784,377 |
) |
OTHER COMPREHENSIVE LOSS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Foreign currency translation adjustments |
|
|
5,334,236 |
|
|
|
221,869 |
|
|
|
3,149,546 |
|
|
|
(4,293,490 |
) |
COMPREHENSIVE LOSS |
|
$ |
2,631,016 |
|
|
$ |
(2,022,750 |
) |
|
$ |
(2,055,798 |
) |
|
$ |
(10,077,867 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED |
|
$ |
(0.26 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.50 |
) |
|
$ |
(0.61 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF
SHARES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED |
|
|
10,469,477 |
|
|
|
9,517,427 |
|
|
|
10,469,477 |
|
|
|
9,517,427 |
|
See accompanying notes to the condensed consolidated financial
statements.
GULF RESOURCES, INC.AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in U.S.
dollars)(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Six-Month Period Ended June 30, |
|
|
2021 |
|
2020 |
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
Net loss |
|
$ |
(5,205,344 |
) |
|
$ |
(5,784,377 |
) |
Adjustments to reconcile net
loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Interest on finance lease obligation |
|
|
71,197 |
|
|
|
70,009 |
|
Depreciation and amortization |
|
|
8,224,864 |
|
|
|
7,559,224 |
|
Unrealized exchange gain on translation of inter-company
balances |
|
|
594,150 |
|
|
|
(382,331 |
) |
Deferred tax asset |
|
|
(387,230 |
) |
|
|
(1,929,553 |
) |
Common stock issued for services |
|
|
3,134,080 |
|
|
|
— |
|
Issuance of stock options to employee |
|
|
— |
|
|
|
— |
|
Changes in assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
1,839,939 |
|
|
|
1,807,547 |
|
Inventories |
|
|
(252,995 |
) |
|
|
152,369 |
|
Prepayments and deposits |
|
|
(98,992 |
) |
|
|
32,807 |
|
Other receivables |
|
|
— |
|
|
|
— |
|
Accounts and Other payable and accrued expenses |
|
|
(785,889 |
) |
|
|
(9,284 |
) |
Retention payable |
|
|
— |
|
|
|
— |
|
Taxes payable |
|
|
190,892 |
|
|
|
298,599 |
|
Prepaid land leases |
|
|
— |
|
|
|
(369,066 |
) |
Operating lease |
|
|
(298,897 |
) |
|
|
(268,192 |
) |
Net cash provided by (used in)
by operating activities |
|
|
7,025,775 |
|
|
|
1,177,752 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS USED IN INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of property, plant
and equipment |
|
|
(5,806,435 |
) |
|
|
(9,860,142 |
) |
Net cash used in investing
activities |
|
|
(5,806,435 |
) |
|
|
(9,860,142 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS USED IN FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
Repayment of finance lease
obligation |
|
|
(296,597 |
) |
|
|
(264,976 |
) |
Net cash used in financing
activities |
|
|
(296,597 |
) |
|
|
(264,976 |
) |
|
|
|
|
|
|
|
|
|
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS |
|
|
1,912,746 |
|
|
|
(1,382,029 |
) |
NET DECREASE IN CASH AND CASH
EQUIVALENTS |
|
|
2,835,489 |
|
|
|
(10,329,395 |
) |
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD |
|
|
94,222,538 |
|
|
|
100,301,986 |
|
CASH AND CASH EQUIVALENTS -
END OF PERIOD |
|
$ |
97,058,027 |
|
|
$ |
89,972,591 |
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial
statements.
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