Gulf Resources, Inc.

Good day, ladies and gentlemen, and welcome to the Gulf Resources 2021 Second Quarter Earnings Conference. At this time, all participants have been placed on the listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Helen Zhu, IR Director at Gulf Resources. Helen, the floor is yours.

Yes. Good morning. Good morning. Good morning, ladies and gentlemen, and good evening to all of you for joining us from China and U.S. We like to welcome all of you to CoffeeSource's second quarter 2021 conference call. I'm Helen Xu, the AI Director. Our CEO of the company, Mr. Xiaobin Liu, will also join us this call today. I'd like to remind you to all of our listeners that in this call, certain amendments during the call will contain for looking information about the golf resources and its subsidiary business and the products within the meaning of Rule 175 under Securities Act of 1933 and Rule 3B-6 under the SEC Act of 1934 and are subject to the safe harbor created by those rules. Actual results may differ from those discussed today, taking into account a number of risk factors, including but not limited to the general economic and business conditions in the PRC, the risks associated with COVID-19, pandemic outbreak, future products development and production capabilities, shipment to end-customers, market acceptance of new and existing products, additional competition from existing and new competition from the bromine and the other oil fields and the power production chemicals, changing technology, the ability to make future bromine assets and the various other factors beyond the company's control. Overlooking statements are expressly qualified in this entirety by this cautionary statement and the risk factors detailed with the company's report filed with the SEC. Gulf Resources assumes no obligation to revise or update any forelooking statements to reflect events or circumstances after the date of this call. Accordingly, our company believes expectations reflecting in those forelooking statements are reasonable and that there can be no assurance of such will prove to be correct. Any reference to the company's future performance replacement management estimates as of today, the 16th of August 2021. For those of you unable to listen to the entire call at this time, a replay will be available at the company's website. The call is also accessible through the webcast and the link accessible through our website, so please locate our press release issued early for the details. And at this moment, I just want to say that due to the company website issue and the webcasting we issued early in our press release has been updated and the company already issued a new webcasting link and the PR is on its way. So I think it will be issued very soon in five or ten minutes before the call, supposed to be before the call. It's on the way now. So now let's turn the call back to Mr. Liu now.

Hello, everyone.

I am Liu Xiaobin, the CEO of the company. First of all, I would like to welcome everyone to participate in the second quarter of Taiwan Telephone Conference in 2021. In this quarter, the company's auditor, Morrison, has resigned. The company will soon hire a new auditor, WWC. and reported the financial report of the second quarter of 2021 very timely. The company has an optimistic attitude towards the second quarter of 2021, because the second quarter's output losses may be compensated in the third quarter. The price of embroidery is still very high. According to the current production level, our embroidery products should be profitable. The employees of the company in 2021 We believe that in the near future, the company will have one or more currently closed repair factories and get government approval. In 2022, the company's chemical factories may start to generate income, and it is expected that Thank you, Helen. I'm Xiaobin Liu, the CEO of the company. First of all, I'd like to welcome all of you to the GovResources earnings call, second quarter of year 2021.

In this quarter, the company's former auditor Morgan Cogan resigned and the company engaged WWC to serve as independent auditor very quickly and then be able to file its 2021 second quarter 10-Q report on time. The company is optimistic about the second half of year 2021. Production loss in the second quarter is likely to be recapped in the third quarter, and bromine prices remain high. At current levels of production, our bromine business should be profitable. We have expensed all of our annual stock grants, so overhead will be reduced. We believe that we could receive approvals for one or more of our closed bromine facilities in the near future. In year 2022, we may begin to generate revenues from our chemical factory. We expect that our chemical business could be profitable in year 2023. We continue to believe that we may be able to produce both natural gas and brine products in Sichuan if we are able to obtain required government approvals. So now I will turn the call back to Helen. Now I would like to discuss with our investors and shareholders about the company's financial results and some questions we received from our investors. So I assume most of you have seen our press release. It contains our income statement, balance sheet, and the cash flow, as well as a review of events in the quarter and future expectations. Because there is much to be So we will go quickly with reviewing the price list, major parts, and focus on questions we have already received from investors. Then we will open the call to questions for those on the phone now. So now let's look at the balance sheet first, ended by June 30, 2021. The cash balance is approximately $97.1 million. And the current asset is approximately $105 million. Working capital worth approximately $95.7 million. Book value is approximately $278.1 million. Now look at the income statement. Net revenues for the second quarter of 2021 increased 108% to approximately $11.1 million compared to previous year's same period. Growth margins increased for second quarter 2015, 1,157% from $336.5 thousand to $4 million. compared to the same period of previous year. As the percentage of revenues gross margin for second quarter year 2021 were 38 percentage compared to 6.3 percentage in the previous year. Direct labor and the factory overhead for second quarter 2021 incur during planned shutdown decreased 19%. As a percentage of sales, they were 12.5% against 32.4%. GA expenses for second quarter 2021 increased approximately $3.7 million compared to the previous year. However, there was approximately $3.1 million of the increase was attributable to the one-time stock awards. Net loss before taxes for second quarter 2021 declined 19.6% compared to the previous year same period. Taxes were a loss of $356,000 for second quarter 2021 and against the benefits of $672.6 million for the second quarter year 2020. a net loss after taxes worth $2.7 million for second quarter 2021 versus the $2.2 million for second quarter year 2020. The company had a comprehensive net gain for second quarter year 2021 of approximately $2.6 million versus a net loss of $2 million for second quarter 2020. So now we will read the questions we have received and then provide answers. Each question can be answered by user Helen, by me or Mr. Liu later on the Q&A section. Firstly, now let's look at the questions regarding company auditors. The first question relates to the change in auditors. The questions are, while Morrison Corgan said there were no reportable reasons for their resignation, such a resignation always makes investors nervous. Can the company provide an understanding of why they resigned? The answer, we do not know why Morrison Corgan resigned, but it did not have any conflict with the company while it resigned. And question, why did you select WWC? So the answer is this. WWC came highly recommended by other Chinese firms. We see several advantages to using WWC. WWC has an extensive Chinese speaking staff. If an auditor is going to be effective, a staff has to be able to speak to people and understand the answers. has offices in Beijing, Guangzhou, Hong Kong. So we can discuss matters with them on our time. WWC is also an approved registrant of the PCAOB in the US, the CPAB in Canada, and the HKICPA in Hong Kong. Given some of the issues that are currently occurring between the U.S. and China, we believe it was important to have an auditing partner that was approved in Hong Kong and had offices in China. WWC committed to filing our 10-Q in a timely manner. We did not want to disappoint investors and file late. We like to Thank WWC for working so hard that we could get our 10-Q filed on time. Question, I know you filed an 8-K, but why did not you issue a press release? Changing auditor is an important issue. Some investors may have missed the 8-K. We agree completely, but we were advised by our counsel that the 8-K filing was sufficient based on related policies. and requirements that time. So in the future, we will be more assertive to make sure we file a press release as well. Did the changing auditor have any adverse impacts on the company? The answer, changing auditor was a major distract. Morrison Coggan has been our auditor for nearly 10 years. We'd never contemplated having to find a new auditor. on a short notice. When we received letters from Morrison program, we talked to them a lot. We also started calling other companies to get recommendations. We rushed to interview and conduct due diligence on potential auditors. During this time period, a number of issues that we probably should have addressed fell through the cracks. We would like you to understand this created greater stress, great stress for us. Question, can you explain the stock awards in the second quarter and their impact on earnings? First of all, during the quarter, we issued shares of stock to company management, directors, a consultant, and employees. Our auditors determined they should be priced at the around approximately $6.61 based on when they were issued. Had them been issued at the end of the quarter when the closing price was approximately $5, the charge would have been much lower. These are annual grants in lieu of other compensation. In coming quarters, our SG&A should be lower because we have paid people in shares. Why are you giving this stock grant? This is a very important element of our investor relations strategy. Shareholders keep asking about the low price of our stock and often seem to think management does not care. We do care about the price and we wish we could do more at this time. However, by giving our team stock instead of cash compensation, we are aligning their interests with that of you, our shareholders. As these people increase their holdings in our stock, they become increasingly focused on its price. By giving these stock grants in lieu of salary, we are making sure management has a vested interest in seeing the price of the stock go up. Financial statements. Question. You normally provide balance sheet per share valuation. To save us the trouble of doing the calculation, can you provide these numbers? Answer, yes. Based on $10,469,477 shares outstanding at the end of the second quarter, cash per share worth $9.27 net net cash, which is cash minus all liabilities worth $7.52 working capital worth $9.15 and the book value worth $26.56. As you can see, our stock continues to sell at a discount to all of these measures.

Operations.

The next set of questions related to the operations. Now, firstly, let's look at the questions regarding Browning business segment. You have been optimistic about the reopening of factories number two, number eight, and number 10, but these factories are still not open. What is happening with these factories? Why is it taking so long to get open? As we disclosed in our 10Q, To the company's 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 this factory to satisfy the local government's requirements. Because when Gulf Resources acquired these facilities, it was able to use its corporate mining license. But now, government is requiring that each factory have its own license. The major issue with these factories relate to the processing of crude salt and waste water. These factories are located in farming areas. However, the presence of halogen water means the soil content is not rich. The economic value for this land from the production of bromine and crude salt is much higher than the economic value from crops. To finalize the license for these three properties, the company is working to reach agreements with the village government. We are optimistic about receiving approval, but as part of the process, we may have to modify our crude salt fields and aqueducts. So question, what can we expect from Bromine in the third and fourth quarter in terms of pricing and production? Before we deal with the third and fourth quarter, I want to stress that even with the disruption caused by the inspection, Bromine had an excellent quarter. Revenues increased 123% Gross profit increased 1.953%. As a percentage of sales, gross profits were 45% compared to 5%. During the quarter, bromine made a profit of approximately 2.7 million compared to a loss of approximately 1.5 million. Production in tons increased 48% to 1,805 tons. while the average selling price increased 51.3% to 5,554 per ton. As we indicated, we expect no further inspections for the remaining of the year. This means that production should be at least 25% higher in coming quarters. Warming prices have continued at a very high level. At the end of Q1, Bromine was RMB around 35,000. In the middle of the quarter, it was at RMB 41,000 RMB. At the end of Q2, it had risen to recording highs of RMB 45,950 RMB. Since the end of the quarter, it has declined slightly to RMB 43,000. still very close to its required highs and well above the average for the second quarter. The company expects bromine price to remain near its current level for the foreseeable future. This irks well for our profitability in the third quarter and fourth quarter. So now let's look at the chemical segments question. The first question, I was confused by the photographs on your website and hope you can label them with the future. How many buildings are there in the chemical factory? And are they all complete? How many square meters are there in total? So, answer, we have 11 major buildings, including workshop and warehouses, and a number of smaller supporting facilities. We will label our photographs in the future. Can you explain the timing for installing equipment and the various parts of the production? We are starting to install equipment. This should take a few more months. Then we will begin test the equipment. If everything works well, we could start trial production early next year. However, since this is all new and modern equipment, we do not know what problems will occur. Trial production in which we produce small amounts of products on a trial basis should take approximately six months. Assuming things work as planned, we could begin commercial production around the middle of year 2022, but we cannot assure. We expect full production in year 2023. However, since this is a major new project with new equipment, there is no guarantee. How much will this factory cost and how much has been spent to date? We originally estimated $60 million. Inflation has raised the cost somewhat. We are now expecting cost around $67 million. We have already spent $41.4 million, including $5.8 million in the second quarter. Question, what can we expect in revenues and profits once the factory is at full production. Why are you focusing on pharmaceutical intermediaries and not other products? Because we will have more than equipment and focus on pharmaceutical intermediaries products and its byproducts, the margin will be higher. There are two primary reasons for focusing on the pharmaceutical products. They are much profitable and that they are less polluting. Given the focus on green energy and more difficult government approvals, we did not want to produce products like oil and gas additives, which had traditionally been our largest product segment. The third question regarding Sichuan natural gas projects. Question, what is happening in Sichuan province? Are we ever going to be able to drill gas or mine bombing there? Answer, we remain optimistic about the opportunities in Sichuan. We continue to maintain a staff in Sichuan, and the senior management always continues travel to province to meet with government officials. We know investors are frustrated, but creating environmental plans for province of 84 million people in a complex undertaking. We believe we will receive government feedback regarding this matter by the first half of next year, 2021. This concludes our answer to some of the questions we have received directly from our shareholders. We'd like now to offer those of you on the call to ask questions on your own. So operator, can we open up the call for the Q&A session?

Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. And your first question is coming from Max Waring. Max, your line is live. Please announce your affiliation and pose your question.

Okay. Hi, this is Max Waring. I was just wondering what's the annual production capacity of these four factories? This quarter we did about 1,800. I thought maybe we could do about 2,500 tons. What's about the maximum these four factories can do in one quarter?

OK. Mr. Liu, the first investor is from Max. His first question is, he wants to know, if all four factories in the company are open, how much will be the maximum production? One year, the whole year? Because he saw that this quarter is 1,800 tons. If all four factories are open,

um so okay so for this whole year for the full roaming facilities if they are operating

Considering normally we have one month holiday and like a stop of production at around the end of the year. The whole year production would be around $8,000 to $8,500 for this fall.

Okay, for this year, but like what's maximum capacity? Like what's full production?

Oh, do you mean this year? Yeah. You mean this year or like?

No, not this year.

Just make it ever.

Just, I mean, what's like, what's full capacity for, is that full capacity for any year? 8,500 or can we do more?

8,000 to 8,500. The maximum production, like the normal production.

Okay. Thank you. And then I have one more question. Is that okay?

Yes.

Okay, this question has to do with, I think we get every quarter but share repurchases. That would bring a huge shareholder value. Is there any chance to get that next year once we get the cash flows going, or is that still longer than that?

Okay. Max's second question is... Everyone knows that if the stock is repurchased, it will definitely give the investor more confidence in the company. The company's stock price will also get a better valuation. Then Max is curious if the company's cash will start to grow next year. When the cash flow becomes better, is there a plan? Or when will there be such a repurchase plan? Under what circumstances?

Well, first of all, we don't have a plan yet, because the company's funds are mainly used to complete our current projects, to ensure the normal operation and operation of our projects, and to look for some possible purchase opportunities. That is to say, we don't have a plan for this stock return yet. But we do not rule out that when our current business projects have been produced normally and can produce better cash flow, we can consider to strengthen the trust of shareholders in the form of return on stock.

Hi Max, so currently the company management did not think about this share buyback yet because you know that we need cash for put back companies or business operation back on track. And secondly, because company was always looking for if there is any good acquisition target. But when all of our business operations back on track and when they can produce a good cash flow and revenues, company management company will consider about this buyback.

Okay, thank you. Appreciate it. Harold would love a buyback, but thank you. That's all my questions.

Okay, thank you. You're welcome.

Thank you. And the next question is coming from John Rawls. John, please answer your affiliation and pose your question. Yes, I'm John Rawls, a private investor.

So my summary is that the company managed to lose money in an extremely strong market for your main product, bromine. And that leads me to two questions and then one comment. One question is that the average price you receive for bromine was much lower than the market price throughout the second quarter. How did that come about, and what are the prospects for the future? Are you now selling bromine at close to the market price?

Okay.

Mr. Liu, the second investor is like this. His first question is about the company's sales price. The second quarter is an average of $5,500. He thinks this price is significantly lower than the market price. Why is that? Also, is the current sales price of the company's repair products closer to the market price? Because the price of the second quarter is gradually rising.

This is what the director said, and that is to say that we have a lot of contracts that use this price in the first quarter, so its average price is a little lower than the market average price at the end of the second quarter. This is also a normal one, but in the second quarter, the price of the third quarter we executed will exceed the second quarter. Okay. Okay.

So, because, firstly, the second quarter, brownie market price were increased steadily. So, our data is the average selling price. And because some of our bombing were sold based on our first quarter agreements with our customers. These are two major reasons. But in the third quarter, the selling price will come up because we use some second quarter agreements to sell our third quarter bombing products. The third quarter, the price will be more close to market price.

Okay, thank you. The second question is that you spent a considerable amount of money during your shutdown to add wells, and it was stated that this would increase capacity utilization. Instead, your bromine capacity utilization did not go up in quarter two, but as according to my calculations, actually went down somewhat. Why did that happen?

Okay. The second question is that We spent a large amount of money on the maintenance and cost of the well and area. But it should increase the productivity rate, but there is no increase, there is a decline, and there is a decline in the case of no increase. How did this happen? This is mainly due to our previous well and area.

He has a life expectancy. After some years, he needs to come back to the original situation. He needs to pay the tax and then come back to the situation. It's the same in the area. But the cost of paying the tax now and the cost of the previous period are far different. um so firstly that because you know the wells and the aqueducts we have the useful lags

So in order to extend their useful lives, we have to do a lot of maintenance. And even though in order to keep the utilization rate not going down so much. Secondly, because after some wells and aqueducts, they are useful lives and they write off them. Then now the cost to build new wells and aqueducts also increased a lot.

Okay, then I'd like to close with just one comment that I agree that stock grants are a sensible way of rewarding management, but it's almost always linked to good performance. In my view, performance in this quarter was not good. You had lower volume sales than you had yourself predicted, a lower price than the market price, your auditor quit, there was no progress on the continuing issues of shutdown factories or natural gas, and the stock price has not improved, yet you rewarded management for the second time in a year. I recommend that you look at future grants as rewards for good performance.

OK, thank you. Mr. Liu, the last thing he wants to say is about the company sending shares to employees and executives. He thinks this should be linked to the performance of the work and the performance of the company. But in this quarter, first of all, Shen Yushi resigned, and the sales of the company did not meet his expectations. and the price response is not very good. So he thinks that the company should be cautious in this regard, so that these companies can perform well.

First of all, it is true that the company has encountered certain difficulties this quarter, which has led to our loss. and income have not reached the goal of the epidemic. The main reason is that China's national environmental survey team has to go to Shandong for environmental survey. Because everyone knows that the Chinese government is very strict with environmental protection. Because the central government wants to audit, so they put a lot of pressure on the local government. Before that, the local government We often go to the company to do some research and make some small changes. This affects the output of our second quarter. Sometimes it will temporarily check, and then we have to stop for a day or two. So it affects our output, causing our second quarter to have no output and income, and we have not achieved our expected goal. Another thing is that I have to remember that Mr. Shen's resignation also has some impact on the company's confidence. The company considered that in this situation, in order to improve the confidence of the management team, it is said to be a year-long stock. Of course, we are also very grateful to the investors for their suggestions. In the future, we will consider sending this to our employees. It won't happen again.

Okay, thank you. So, thanks for your comments that Mr. Liu explained that, yes, the company's first of all its revenue and income decreased this quarter. under its expectation because that this quarter the National Environmental Protection inspection team came to Shandong province. I think this news we can see on the news on any public medias because they came to Shandong and the local governments become very nervous and they always come to like the company have access for unexpected and unplanned intermittent inspection or ask the company to temporarily stop production for one or two days and do some for their work preparation. So this quarter the company's production was intermittent affected by this issue. That's why its production volume decreased this quarter under the company's expectation and this matter was unexpected. Secondly, because company's auditor resigned this quarter and the company staff and management were depressed at that time. In order to increase the staff's confidence and to make them more motivated that's why this stock compensation was granted that time then and the later on company will consider about your comments of course will not issue like this much to stuff and will make their performance connected to stocks and the company performance as well in the future

Thank you. Thank you.

The next question is coming from Matthew. Matthew, your line is live. Please announce your affiliation and pose your question. Hello?

I just want to make a comment.

Why don't I think that one thing One problem that the company has is about communication. So I really appreciate if you think to invest like, for example, $1 million in order to do these three things. The first one, hire a professional investor relator so that you can start to participate to conference with investment bank and make sure that GULF resources will be known in the financial community. make like a presentation of your company like a PDF. Another topic that according to me would be very important is to hire a professional communication firm so that you can start to give, for example, one month update. So each month you need to write like a press release giving an update to investors So they are informed of what happens because we will have 12 updates during the year. And the third part is like that I really think that you should hire also like a professional web service because as of today I am just on your website. He told that this site is temporarily unavailable. It's very important as of today that website provides a lot of information to investors. It works well. It's full of information. It is not acceptable that your website is unavailable today because otherwise people have a bad reputation of your company if the website doesn't work.

Okay. Okay. Thank you. Maximo. Mr. Liu, this question is from Massimo. He has sent an email to the company before and has been contacting them. His suggestion is that the company should hire a professional IR company to help the company do this every week. First of all, the representative of the company should communicate with the investment bank, communicate with the investors, communicate with them about the company's financial data better. The second point is After hiring a new IR company, we update the company's PPP every time, and then we do the monitoring to increase the communication and transparency with investors. The third point is that there are at least one to two new announcements every month, which increases the communication with investors. The fourth is about the website of the company, because there is a little problem with the company's website, which I mentioned at the beginning. He thinks there should be a professional R&R company to do this, and because the company's website is very important.

Thank you very much for his suggestion. We have also been paying attention to this problem. A few years ago, the factory of the company was closed by the government. So on this side, the company has no income. On the other side, the company wants to wait for the recovery of production and then do this thing. But this year is because of the impact of the epidemic. We have some communication with some investors in the United States, including IR, some communication with IR companies, which is not so smooth. It's not very convenient for them to come to China or to the United States. So this thing is also delayed. But this thing has already... We will actively consider his suggestion. We believe that in the near future, we will find a more professional AI company. It will also carry out some thorough

uh okay thank you hi massimo so here's a response from miss leo he said thanks very much for your comment we did consider about your question and we did receive your email already because previously you know For previous past years, the company had no income because all our facilities were shut down at that time. We don't have any income. And this year, due to COVID-19, our discussion with U.S. professional air company was not so smoothly. And due to this COVID-19, they cannot easily travel to China, and the company also cannot easily travel to U.S. as well. So this created the difficulties for companies to hire a new IR. But we will consider your comments and we will hire a professional IR firm in the near future. And we will also consider to redo the company website again based on your comments. Thanks.

Okay. For me, as I mentioned before, communication is very important. So please consider also to make a lot of press releases in order to get investors informed. I want to do another question that was partially already done, but I want to put it on another angle. In the last two, three years, the number of shares has passed from 9.5 million to to $10.5 million, primarily for stock grants. Your company has $100 million of cash. I understand that you want to invest this cash to rebuild the company factors and also to make acquisitions, but I really ask you, probably I would be your first international shareholder because I have a huge stack of to do at least a share back-back of one million shares. That is the number of shares of stock granted in the last two years. So, basically, if you do like this one, it would be really appreciated. All the stocks granted to management for incentive scheme should come from back-back of the company and not from issue of new shares. This is something very useful and something very common in Europe and the United States. The stock grants are not done to the shareholder, but the stock grants are done with share-back-backs. So if you do one million share-back-backs, you basically do the share-back-backs to cover the stock granted in the last two years. I would really be happy if you can accept like this one, not huge share buybacks, but just share buybacks to cover the stock grants, so you give a signal to the market that one million shares to stock buybacks is just $5 million, you have more than $90 million.

Okay. So... Okay. about Massimo, he said that he hopes that the company will publish more news announcements in the future, that is, one or two per month, to try to increase and communicate with investors more. Then the second question is about the stock repurchase. He said that it is not necessary to use too much money to do the repurchase, because considering that the company has enough cash on the account, but the company also considers operation and acquisition, But if you take it out, do you mean $1 million buyback or $1 million share buyback?

$1 million shareback, that is $5 million, because three years ago the company had 9.5 million shares. As of today, you have 10.5 million shares. So there were usually around 1 million shares for stock grants to management. I think that would be right for shareholders if you announced today like $1 million shareback. shareback with $5 million that is to cover all the stock grants that were issued in the last year.

Okay, thank you. Yes, thanks for your comments and we'll consider it very carefully.

Okay, thanks. I hope that you would also put into practice because I think that would be a good choice.

Yes, it will. Just email me anytime when you have questions.

Thank you. And the next question is coming from Randy Leggett. Randy, your line is live. Please announce your affiliation and pose your question.

Hey, Helen. This is Randy. I hope you're doing well.

Yeah, I'm well. Thank you. How are you? Good.

Everything fine? I'm glad. We're doing good. Talk to you every quarter here, Helen. No, just to reiterate what the fellow said beforehand, you know, it's kind of like hiding the, you know, I know you're not hiding and don't take that the wrong way, but it's kind of like the accounting thing and then not telling us about, you know, the inspection because all of us are looking at the price of bromine, so there's no way they can't hit that guidance. And then we either find out on a conference call. It just seems to happen every quarter. And, you know, I think that I totally agree. We've talked about this and talked about it, about hiring a professional PR firm. You can't do it all. I know that. But, you know, I mean, just not telling me. I mean, it just doesn't look good. I mean, let's face that fact. And, you know, any company that I've ever invested in, if they didn't do that, they'd get creamed in the market. And, you know, it's just kind of frustrating. And on top of that, is there any government regulation? I know we have a problem with dividends because we don't have, you know, an overseas subsidiary. And that's been talked about for years too. But is there anything holding us back from doing a buyback from a government regulation standpoint? That's my question, really. Yeah. I mean, you know. Okay. You just can't. We should have said something about the accounting firm, and we should have said something about the inspection. I mean, before the quarterly call. I mean, you know, and the CEO should know that. And I don't really know what else to say. It's just kind of frustrating. I mean, you've got so much going on for you, and nobody really knows about you except for us on the conference call. And that's what I find kind of just sad. I mean, y'all could be making tons of money. We just get the thing out somewhere. side but you know I'm getting back but is that a government regulation on the buyback or or is that just something y'all decided just I know we've held off on because we had all these expenses but is there any government do they prohibit that yes I will check I'll double-check week for you thank you okay thank you no worries you want to be a typical range of Randy had the one he goes what he gone

First of all, the previous investor mentioned the IR and the stock repurchase. Yes, everyone is talking about this every quarter. He also thinks that the company should seriously consider it. He said that the stock repurchase has no restrictions on the government policy.

Wait.

Helen, please hold the line. We just lost Jebin's line. I'm going to dial out to him one moment. Please hold the line.

Okay. Thank you.

How's everything over there, Helen, by the way? Y'all doing okay?

I'm here. Yeah, I'm fine. I'm glad.

Yeah, and also, we should let investors know a week beforehand when we're doing an investor call, too. I mean, that's just, those are just simple things that, you know, the management can get straightened out on their own, I think. You know, I just, I think I'm talking to myself right at the moment, Helen. I'm joking.

Okay, okay, it's okay. I understand.

And Sherbin's line has reconnected.

Okay.

Haiyan, can you talk about the last question? Yes.

His question is about the return on the stock. Does the government have any restrictive policies? The government has not said anything.

The key is that now China's capital needs to be transferred abroad. is very, very difficult. It has to be approved by the government. Every time, including all the expenses we pay now, it has to be approved by the government every time. So it's very difficult to save money. OK. From the point of view of money control, if you can't save money, you can't have a bank account.

Okay. Hi, Zandy. So actually there is no government restrictions on the share buyback.

Okay.

But, you know, now Chinese government has very strict policy on wiring funds to overseas. So this is a problem. If we want to wire funds to overseas, it's very difficult. We have to submit application, everything get approval. Even company paying invoices, you know, we have to provide a lot of documentation.

Yeah. Yeah, I mean, I guess I understand that. But, you know, there again, the other thing was, I mean, it's just really simple to tell investors, hey, put out a press release until we hire a PR firm. Hey, this is what happened with the accounting firm. Hey, we had an inspection this week. We're two weeks behind. I mean, people would understand that if you just tell us. It just, you know, concerns shareholders when we don't tell everybody, people. And, you know, I think he should know that. So just please tell him that. Thank you, Helen.

Okay, no worries. Have a good day. Thank you. Okay. OK, we got you. OK, we got you. Thank you. No worries. Have a good day.

The next question is coming from Tegan Winswich. Tegan, your line is live. Please announce your affiliation and pose your question.

Hi, Helen. This is Tegan Winswich. I'm a private investor. My question is actually one that was submitted earlier around the chemical factory. I think someone had asked what the projected revenues and profits or profit margins were expected to be. I know this is really hard to predict this far in advance, but are there any ranges that you guys are thinking or considering?

Okay. Mr. Liu, this question is for Tegan. Her question is about chemical products. She knows that currently, if you ask about chemical products, for example, the interest rate and sales income, how much will it be? It's quite difficult. um um um um um

Okay, so we cannot provide it right now but

We try our best. The next time while company going to issue a guidance, we try to estimate the growth margin as a revenue for our chemical segments and products.

Hey, that would be fantastic.

We will provide it publicly.

Yeah, I think that'd be great. And then I know it'll probably have to ramp, so maybe... you know, by quarter or by half year would be helpful because I know it will take some time to ramp up. But, you know, people like me are holding this just because that will be coming in the future. It will be helpful to know how much, you know, revenue it will bring in. So that's all for me. Thanks, Helen.

You're welcome.

Thank you. And the next question is coming from Peter Cyrus. Peter, your line is long. Please answer your affiliation and pose your question.

I'm a private investor. Hello, Helen Luzon. Hi, Peter. I have two questions. Just so I understand, when you gave guidance in the first quarter for $14 million in... And I just want to understand what happened with the inspections. You mentioned the inspections a couple of times. These were unplanned inspections and it caused you to stop and start your production. Is that correct?

Yes, you are right. It's unexpected.

And had you expected these inspections in a different quarter?

Sorry?

Had you expected to have these inspections in a different quarter, like the third quarter or the fourth quarter? Or this was just a new inspection?

Oh, exactly. This production loss in the second quarter will be recapped in the third quarter.

Okay. And if the inspections had not happened, would you have made your guidance? Think you would have made your guidance?

Sorry, the line was not clear. I cannot hear you really. Will we issue a new guidance?

No. If there had been no inspection, do you think that you would have made your original guidance?

Okay. Yes, we will. This question is from Peter. So if the government doesn't come here unexpectedly, will the company be able to meet its requirements? Yes. This is absolutely not a problem. This is because they and the National Security Investigation Service came to Samson to check, so all the governments are very nervous.

Yes, definitely. Because due to this national environmental protection protection team, they came from Shandong Province.

Every level of government agencies, they become very nervous. So because they become nervous, they can, every level comes to company and they say, okay, you had to stop for one or two days, wait for the inspection. But then later we stop and start our production, you know, continually for one or two days. Beginning because this is not planned and it's totally unexpected every time. So we cannot predict this issue. and we were not able to issue a press release saying, okay, this government expectation team going to come because we do not know when and how long or anytime they come just without any notice or plan. So by the end of the quarter, then our production results come out. We did not achieve our quarterly guidance. But without this issue, definitely we can meet our guidance in terms of revenue and net income.

Okay. And I just make a comment. I agree with the earlier comments. I understand you were working very hard on getting new auditors. But the next time this happens, you could issue a press release about it. The second thing I'd like to ask is actually a comment. Dispatchers keep asking about stock buybacks. And I understand there is a problem of getting money out of China to do stock buybacks. Is that correct?

Sorry? Sorry?

I understand there is a problem of getting money out to stock buybacks. Is that correct?

Yes. Yes. Yes, it is.

Okay. Here is something I would like the company to consider. Okay?

Okay.

Okay. If now the stock grant is given to executives, the executives now own stock in the company in the United States. Is that correct?

Yes.

If the company could buy back, could buy stock from the executives, pay the executives in R&D, the company would then have stocks and money in the United States, which it could be the stock buyback. Do you understand me?

Yes, I got your idea.

So the stock issues to executives could provide over the long term a way for the company to get money out of China to do the things that investors want.

Okay. President Liu, Peter has a suggestion about the stock repurchase. Because the company has now sold the stock to the employees, is it possible to get the US dollars from the employees and then do the stock repurchase?

Yeah, okay. Hi, Peter. Yeah, okay. We will discuss with the management and staff to see how to do it and the possibilities of this way.

Thank you.

It is applicable. You are welcome.

Thank you. And there were no other questions. Helen, if there are any closing remarks, I'll pass the call back to you.

No, I think if there is no more questions, we can close the call for today. Thank you. Thank you all. Have a good day. Thank you. Have a good day and for those, have a good night in China.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Thank you, Paul. Have a good day. Bye-bye.