Gulf Resources(GURE) - 2023 Q4 - Annual Report

Corporate Structure and Acquisitions - Gulf Resources owns 100% of Upper Class Group Limited, which in turn owns 100% of Hong Kong Jiaxing, SCHC, and SYCI, reflecting a linear corporate structure[13] - On February 4, 2015, Gulf Resources issued 7,268,011 shares at a closing market price of $1.84 per share to acquire SCRC, a leading manufacturer of antibiotic materials in China[14] - The acquisition of SCRC was based on a valuation of $10.00 per share, representing a 73% premium at the time of the agreement[16] - On June 26, 2024, Gulf Resources' subsidiary SHSI agreed to purchase 2,380,000 square meters of crude salt field for a total price of RMB129,472,000, at RMB54.40 per square meter[19] - SHSI entered into four additional acquisition agreements on June 27, 2024, for a total transfer price of RMB151,300,000 for various crude salt fields[20] Regulatory Compliance and Challenges - The Company received a notice from Nasdaq on April 18, 2024, for failing to timely file its Annual Report, impacting compliance with listing requirements[21] - Nasdaq granted an exception on June 26, 2024, allowing the Company until October 14, 2024, to file delinquent reports to regain compliance[22] - The Company believes it is not required to fulfill filing procedures with the CSRC for its overseas listings as of the date of the annual report[29] - Recent regulatory developments in China may impact the Company's operations, but it does not believe it is directly subject to the new regulations[28] - The company may face challenges in remitting foreign currency for dividend payments due to PRC capital controls and regulations[36] Financial Performance and Dividends - The company does not expect to pay any cash dividends for the foreseeable future, as no cash or asset transfers have occurred among its subsidiaries[33] - PRC regulations require subsidiaries to pay dividends only from accumulated profits and to set aside at least 10% of after-tax profits for statutory reserves until they reach 50% of registered capital[34] - The company incurred a loss of $18,644,473 from the write-off of property, plant, and equipment due to the closure of three bromine factories in 2018[43] - The company has incurred relocation costs of approximately $45,584,344 for its new chemical factory, with total estimated costs for the relocation process around $69 million[48] Production and Operations - The company anticipates that the upcoming chemical factory could generate sales and profits, especially as many competitors may have reduced production capacity[50] - The company is exploring acquisition opportunities in the bromine sector due to potential attractive prospects following the closure of smaller producers[46] - The company is awaiting governmental approval for its Factories No. 2 and No. 10, which may be delayed due to ongoing regulatory requirements[51] - The company has received verbal notification to resume production at Factory No. 8, which began contributing revenue in Q4 2022[45] - The company is engaged in discussions with the government regarding a joint venture for the exploration and production of natural gas and brine products in Sichuan[49] Sales and Market Position - The company reported that sales to its three largest bromine customers in 2023 totaled $10,866,228, accounting for approximately 40.36% of total net revenue from bromine sales[66] - The annual production capacity of chemical products at Shouguang Yuxin Chemical Industry Company Limited was over 26,000 tons for oil and gas field exploration products and over 5,000 tons for papermaking-related chemical products[64] - The company’s chemical products segment reported net revenue of $0 for both 2023 and 2022, indicating no sales activity in this area[67] - The company holds a license for bromine extraction in Shandong Province and plans to acquire smaller unlicensed producers to expand downstream chemical operations[55] - The company’s production of crude salt is derived from the evaporation of wastewater after bromine production, which is widely used in various industries[61] Employee and Operational Management - The company has a total of 7 in-house sales staff who manage customer orders based on production schedules and inventory[65] - The company has approximately 380 full-time employees as of December 31, 2023, with 29% in management and 4% in sales and procurement[88] - The company incurred approximately $681,540 in expenses related to social insurance for its employees in fiscal year 2023[89] Environmental and Safety Regulations - The company is subject to stringent environmental regulations, leading to the closure or relocation of non-compliant facilities[85] - The company has implemented health and safety programs for employees, including flexible health benefits and measures in response to the COVID-19 pandemic[91] Strategic Planning and Future Considerations - The company is considering repurposing its chemical factory for Sodium-Ion battery production if economic weakness in China persists[81] - Construction of the new chemical facilities at Bohai Marine Fine Chemical Industrial Park began in June 2020, with civil engineering works completed by the end of June 2021, but equipment delivery and installation faced delays due to supply chain issues and electricity restrictions[81] - The company has been working on expanding production capacity by exploring new underground brine water resources in Sichuan Province, with trial production at its first natural gas well commencing in January 2019[71] - The company incurred $16,243,677 in rectification and improvements of plant and equipment for bromine and crude salt factories during the fiscal year ended December 31, 2018, with a cumulative total of $34,182,329 as of December 31, 2018[75]